2008 (2) TMI 377 - HC - Income Tax

Whether rectification proceedings can be initiated by AO u/s 154 when notice u/s 143(2) had already been issued addition tax levied under section 143 (1A) as in the meanwhile notice under section 143(2) of the Act had already been initiated held that no action under section 154 could be initiated once notice under section 143(2) of the Act was issued to the assessee

Summary

Issues:
Challenge to correctness, propriety, and legality of the order passed by the Income-tax Appellate Tribunal for the assessment year 1993-94.

Analysis:
The Revenue challenged the order passed by the Income-tax Appellate Tribunal for the assessment year 1993-94, against the order passed by the Commissioner of Income-tax (Appeals) dated November 28, 1997. The substantial question of law revolved around the rectification of an intimation dated September 26, 1994, and the additional tax levied under section 143(1A) of the Act, considering the initiation of a notice under section 143(2) of the Act dated November 18, 1993. The assessee had filed a return of income declaring a loss of Rs. 2,39,87,765 for the assessment year 1993-94. The Assessing Officer processed the return under section 143(1)(a) of the Act on September 26, 1994, and later proposed rectification due to a mistake in allowing the loss on account of share income from a partnership concern. The rectification order was passed on December 22, 1995, levying additional tax. The Commissioner of Income-tax (Appeals) canceled the rectification order, stating that no action under section 154 of the Act could be initiated once a notice under section 143(2) of the Act was issued. The Income-tax Appellate Tribunal also held that rectification could not have been made after the issuance of a notice under section 143(2) of the Act, concurring with the Commissioner's findings.

The High Court, after considering the arguments and perusing the records, relied on the judgment of the Supreme Court in the case of CIT v. Gujarat Electricity Board [2003] 260 ITR 84 to resolve the issue. The Supreme Court's observations highlighted that under section 143(1)(a) of the Act, a summary procedure is provided for quick tax collection and refunds. It was clarified that where a regular assessment proceeding has commenced under section 143(2), there is no need for a summary proceeding under section 143(1)(a). The Court, in line with the Supreme Court's judgment, held in favor of the assessee and against the Revenue, concluding that the rectification of the intimation could not be made after the initiation of a notice under section 143(2) of the Act. Consequently, the appeal was finally disposed of in favor of the assessee based on the legal principles established by the Supreme Court.

This detailed analysis of the judgment highlights the key legal issues, factual background, arguments presented, and the court's decision based on relevant legal precedents and statutory provisions.