1997 (7) TMI 193 - AT - Income Tax

Summary

Issues:
Challenge to order under section 263 of the Income-tax Act based on acceptance of return under section 143(1)(a). Interpretation of whether intimation under section 143(1)(a) constitutes an order for the purposes of section 263 of the Act.

Detailed Analysis:

1. The appeal was filed challenging the order of the Commissioner of Income-tax under section 263 of the Income-tax Act, based on the acceptance of the return under section 143(1)(a). The Commissioner held that the action of the Income-tax Officer in accepting the return was erroneous and prejudicial to the revenue's interests. The issue revolved around whether the intimation issued under section 143(1)(a) constituted an order that could be cancelled under section 263 of the Act. The appellant argued that the intimation did not constitute an order as per the Finance Acts of 1991 and 1994, which deemed intimation as an order only for specific purposes under sections 246 and 264, excluding section 263.

2. The Tribunal examined the provisions of section 143 of the Act for the relevant assessment year, emphasizing the distinction between intimation and order. While an intimation is issued under section 143(1), it does not have the legal implications of an order issued under section 143(3) of the Act. The Tribunal highlighted that the intimation serves to inform the taxpayer and determine tax or interest based on the return filed, but it does not conclude the assessment process. The Assessing Officer retains the authority to issue a notice under section 143(2) for further examination. The Tribunal noted that the provisions of section 143(1) do not make intimation equivalent to an order, and the subsequent sections mentioned in clause (b) of section 143(1) refer to specific orders passed under different sections.

3. The Tribunal further explained that the scheme of assessment under section 143 aims for voluntary compliance by the taxpayer and imposes additional tax for filing an incorrect return. The absence of a formal assessment order and the issuance of only an acknowledgment or intimation indicate that the determination of tax is not final at this stage. The Tribunal clarified that the provisions of section 263 of the Act do not align with situations where the return is accepted with or without adjustments under section 143(1)(a). The insertion of an Explanation in the Act reinforced the view that an intimation is not subject to section 263, as it is deemed an order only for specific purposes under sections 246 and 264.

4. Based on the above analysis, the Tribunal concluded that the Commissioner was not justified in applying the provisions of section 263 to the intimation issued under section 143(1)(a) of the Act. Consequently, the order passed by the Commissioner under section 263 was quashed, and the appeal was allowed in favor of the appellant.