2007 (3) TMI 289 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Assessing Officer was justified in rejecting the application of the assessee under section 154 of the Income-tax Act, 1961, on the ground that intimation issued under section 143(1)(a) cannot be rectified after the issue of notice under section 143(2).

Issue-wise Detailed Analysis:

1. Assessing Officer's Rejection of Application under Section 154:
The primary issue in this appeal is whether the Assessing Officer was justified in rejecting the assessee's application under section 154 of the Income-tax Act, 1961, based on the premise that intimation issued under section 143(1)(a) cannot be rectified after the issuance of notice under section 143(2). The Assessing Officer relied on the decisions of the Gujarat High Court in Lakhanpal National Ltd. v. Dy. CIT [1996] 222 ITR 151 and the Madhya Pradesh High Court in CIT v. Regional Soya bean Products Co-operative Union Ltd. [1999] 239 ITR 217 to support this rejection.

2. Facts and Proceedings:
The assessee filed its return of income for the relevant year, declaring a loss which was processed under section 143(1)(a) and resulted in adjustments reducing the declared loss. Subsequently, a notice under section 143(2) was issued. The assessee then applied for rectification under section 154, arguing that the adjustments made were incorrect. The Assessing Officer rejected this application, stating that rectification under section 154 is not possible after a notice under section 143(2) has been issued.

3. Appeal to CIT(A):
The assessee contended before the CIT(A) that the reliance on the aforementioned High Court decisions was misplaced as those cases did not involve situations where the original jurisdiction of the Assessing Officer was in question. The assessee argued that the original jurisdiction of the Assessing Officer was being challenged and that the decisions cited were not applicable. The CIT(A) accepted the assessee's contentions and directed the Assessing Officer to consider the application under section 154 after providing a reasonable opportunity for the assessee to be heard.

4. Tribunal's Consideration:
The Tribunal carefully considered the rival submissions and the legal background. It noted that the intimation under section 143(1)(a) falls within the scope of rectification under section 154, which can be initiated either suo motu by the Assessing Officer or on the application of the assessee. The Tribunal emphasized that an existing order/intimation can be rectified unless the context or legislative intent suggests otherwise.

5. Analysis of Relevant High Court Decisions:
The Tribunal distinguished the facts of the present case from those in the Regional Soya bean Products Co-operative Union Ltd. case, where the issue was whether an intimation under section 143(1)(a) could be issued after a notice under section 143(2). The Tribunal noted that in the present case, the intimation was issued before the notice under section 143(2).

Similarly, in Lakhanpal National Ltd., the Gujarat High Court held that notice under section 154 could not be issued after the issuance of notice under section 143(2). However, the Tribunal clarified that this judgment only restricted the Assessing Officer's suo motu powers under section 154 and did not curtail the assessee's right to seek rectification.

6. Legal Position on Rectification:
The Tribunal emphasized that the intimation under section 143(1)(a) is not nullified by the issuance of a notice under section 143(2) and remains in force unless quashed or cancelled by higher authorities. Therefore, such intimation can be rectified under section 154 if there is an apparent mistake. The Tribunal also highlighted that the scope of sections 143(1)(a) and 143(3) is different, and mistakes under section 143(1)(a) may not be curable under section 143(3).

7. Conclusion:
The Tribunal concluded that if the Assessing Officer made adjustments under section 143(1)(a) that were legally incorrect and prejudicial to the assessee, the assessee has the right to seek rectification under section 154. The Tribunal upheld the CIT(A)'s order directing the Assessing Officer to consider the assessee's application under section 154.

8. Final Judgment:
The appeal by the revenue was dismissed, and the order of the CIT(A) was upheld, allowing the assessee's application for rectification under section 154 to be considered.