1997 (3) TMI 130 - AT - Income Tax

Summary

Issues:
1. Validity of assessment order under section 143(1)(a) without invoking section 44AC.
2. Interpretation of provisions of section 44AC and 206C.
3. Consideration of relief provided by sections 28 to 43C to trades specified in section 44AC.
4. Justification of the direction to recompute taxable income based on section 44AC and sections 28 to 43C.

Detailed Analysis:
1. The appeal was against the order of the CIT, Jalandhar under section 263 of the Income-tax Act, challenging the assessment completed under section 143(1)(a) without invoking section 44AC. The CIT found the assessment prejudicial to revenue's interests due to non-application of section 44AC, leading to a show-cause notice and subsequent direction to modify the assessment order.

2. The assessee argued that the provisions of section 44AC and 206C aimed to facilitate tax collection from specific trades at the inception stage, similar to advance tax. It was contended that these provisions were machinery provisions and did not replace the regular assessment procedure under sections 28 to 43C. The Hon'ble Supreme Court upheld the validity of sections 44AC and 206C but highlighted the denial of reliefs under sections 28 to 43C to trades specified in section 44AC as unreasonable.

3. The Hon'ble Supreme Court emphasized that denying reliefs available under sections 28 to 43C to businesses specified in section 44AC lacked a rational basis and was arbitrary. They clarified that section 44AC did not eliminate the need for regular assessment under sections 28 to 43C. The judgment supported the CIT's direction to recompute taxable income considering section 44AC along with sections 28 to 43C.

4. The Tribunal confirmed the CIT's order, stating that the assessment under section 143(1)(a) did not qualify as a regular assessment as per the amended definition. The Explanation under section 143 clarified that an intimation under sub-section (1) shall be deemed an order for appeal purposes. Therefore, the CIT's decision to recompute taxable income based on section 44AC and sections 28 to 43C was upheld, leading to the dismissal of the assessee's appeal.