2011 (7) TMI 2 - HC - Income Tax

Survey Undisclosed income Penalty - Rectification of mistakes - Question of law - Whether the assessment order, passed on 29-2-1986 for the assessment year (AY) 1987-88 under section 143(1)(a) of the Income-tax Act, 1961 (the Act), is a regular assessment within the meaning of section 215 read with section 217 of the Act or not - In case the conditions mentioned in sections 215 and 217 are satisfied, then an assessee is liable to pay the interest at the rate mentioned therein from 1st day of April next following the financial year up to the date of the regular assessment - This indicates that the assessment under section 143(1) was included in the ambit of the words regular assessment in the relevant year - If no assessment order is passed, as is the case after 1-4-1989, then sending intimation can never be a regular assessment Provided that, in a case where an assessment has been made under sub-section (1), the notice under this sub-section except where such notice is in pursuance of an application by the assessee under clause (a) shall not be issued by the Income-tax Officer unless the previous approval of the Inspecting Assistant Commissioner has been obtained to the issue of such notice if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly - The assessment made under the summary assessment scheme in the aforesaid manner is final except where the proceedings are initiated for making a fresh assessment It has been clarified by the issue of an Income-tax (Removal of Difficulties) Order, 1989, vide No. GSR 376(E), dated 23-3-1989 (refer to paras 11.2 and 11.3 of Part I of these Explanatory Notes), that the provisions of section 143, as they stood prior to the commencement of the Amending Act, 1987, shall apply in respect of the assessment year 1988-89 and earlier assessment years - It follows, therefore, that the provisions of the new section 143, as substituted by the Amending Act, 1987, would apply to the assessment year 1989-90 and subsequent assessment years

Summary

Issues Involved:
1. Whether the assessment order passed on 29-2-1988 under section 143(1)(a) of the Income-tax Act, 1961, is a regular assessment within the meaning of section 215 read with section 217 of the Act.

Issue-Wise Detailed Analysis:

1. Whether the assessment order passed on 29-2-1988 under section 143(1)(a) of the Income-tax Act, 1961, is a regular assessment within the meaning of section 215 read with section 217 of the Act:

Facts:
- The assessee filed a return on 31-7-1987 declaring an income of Rs. 54,560.
- An assessment order was passed on 29-2-1988 under section 143(1)(a) of the Act.
- A survey under section 133A of the Act was conducted at M/s Rajendra Tube Ltd., where the assessee was the Managing Director/Financial Surveyor.
- During the survey, the assessee surrendered Rs. 30 lakhs as undisclosed income.
- A notice under section 148 was issued, and an order was passed on 19-7-1990 assessing the taxable income to be Rs. 30,56,560 with statutory interest and penalty proceedings initiated.

Arguments and Legal Provisions:
- The main question was whether the assessment order dated 29-2-1988 under section 143(1)(a) was a regular assessment.
- Section 215 and section 217 of the Act provide for interest payable by an assessee from the 1st day of April following the financial year up to the date of the regular assessment.
- The definition of 'regular assessment' under section 2(40) at the relevant time included assessments under section 143 or 144.
- The amendment to section 2(40) effective from 1-4-1989 excluded orders under section 143(1) from being considered as regular assessments.

Decision:
- The court held that prior to 1-4-1989, an assessment order under section 143(1) was considered a regular assessment.
- The assessment order dated 29-2-1988 was deemed a regular assessment for the assessment year 1987-88.
- Interest under sections 215 and 217 could only be charged up to 29-2-1988, the date of the assessment order under section 143(1)(a).
- The amendment to section 2(40) was not retrospective and was intended to clarify the law post-1-4-1989.

Conclusion:
- The appeal was dismissed, affirming that the assessment order dated 29-2-1988 under section 143(1)(a) was a regular assessment, and interest could only be charged up to that date.
- The Tribunal's order upholding the Commissioner (Appeals)'s finding was correct.

Appendices:
- The judgment included detailed references to the relevant sections of the Income-tax Act, 1961, as they stood before and after the amendments, and departmental circulars clarifying the position of law.

Significance:
- The judgment clarified the interpretation of 'regular assessment' prior to and post the amendment of section 2(40) and its implications on the charging of interest under sections 215 and 217 of the Act.