2006 (2) TMI 226 - AT - Income Tax

Summary

Issues Involved:
1. Legality of prima facie adjustments made under Section 143(1)(a) when proceedings under Section 143(2) were set in motion.
2. Specific grounds of appeal regarding disallowances and adjustments under Section 143(1)(a).

Detailed Analysis:

1. Legality of Prima Facie Adjustments under Section 143(1)(a) When Proceedings under Section 143(2) Were Set in Motion:

The core issue in this case is whether the Assessing Officer (AO) was justified in issuing an intimation under Section 143(1)(a) of the Income Tax Act, 1961, when a notice under Section 143(2) was issued on the same date.

Appellant's Argument:
The appellant's counsel argued, based on the Supreme Court decision in CIT vs. Gujarat Electricity Board, that once regular assessment proceedings under Section 143(2) have commenced, there is no need for summary proceedings under Section 143(1)(a). The counsel pointed out that in this case, both the intimation under Section 143(1)(a) and the notice under Section 143(2) were issued on 24th Nov., 1998.

Department's Argument:
The Departmental Representative argued that the proceedings under Section 143(2) commenced after processing the return under Section 143(1)(a). The representative relied on the Tribunal's decision in Nav Bharat Ferro Alloys Ltd., where it was held that if the intimation under Section 143(1)(a) was processed first, the subsequent notice under Section 143(2) was valid.

Tribunal's Analysis:
The Tribunal carefully considered the rival submissions and the records. The Supreme Court in the Gujarat Electricity Board case observed that once regular assessment proceedings under Section 143(2) have commenced, there is no need for summary proceedings under Section 143(1)(a).

The Tribunal examined the order-sheet entries and noted that the AO decided to commence proceedings under Section 143(2) before signing the intimation under Section 143(1)(a). Thus, as per the Supreme Court's decision, the AO was not authorized to continue with the summary proceedings under Section 143(1)(a).

Conclusion:
The Tribunal set aside the AO's order and canceled the intimation dated 24th Nov., 1998, as being not valid in law. The appeal filed by the assessee was allowed.

2. Specific Grounds of Appeal Regarding Disallowances and Adjustments under Section 143(1)(a):

Grounds Raised by the Assessee:
The assessee raised several grounds of appeal, including disallowances under Section 43B, adjustments of TNGST payable, disallowance of interest accrued but not due, disallowance of provident fund payments, disallowance of deduction under Section 80HHC, and non-allowance of credit for TDS.

CIT(A)'s Decision:
The CIT(A) upheld the intimation under Section 143(1)(a) and the prima facie adjustments for disallowances under Section 43B, disallowance of deduction under Section 80HHC, and other adjustments. However, the CIT(A) directed the AO to verify the claim regarding provident fund payments.

Tribunal's Consideration:
The Judicial Member (JM) focused on the legality of the intimation under Section 143(1)(a) and concluded that it was not valid as it was issued after the decision to commence proceedings under Section 143(2). The Accountant Member (AM) disagreed, holding that the intimation was valid as it was issued prior to the notice under Section 143(2).

Third Member's Decision:
Due to the difference of opinion, the matter was referred to a third member. The third member examined the order-sheet entries and noted that both the intimation under Section 143(1)(a) and the notice under Section 143(2) were taken simultaneously on 24th Nov., 1998. The third member held that simultaneous proceedings under Sections 143(1)(a) and 143(2) are not permissible, citing the decisions of the Calcutta and Gujarat High Courts.

Final Conclusion:
The third member agreed with the JM's view that the intimation under Section 143(1)(a) was not valid. The appeal filed by the assessee was allowed, and the proceedings initiated under Section 143(1)(a) were quashed.

Summary:
The Tribunal concluded that the intimation under Section 143(1)(a) was not valid as it was issued after the decision to commence proceedings under Section 143(2). The appeal filed by the assessee was allowed, and the intimation dated 24th Nov., 1998, was canceled. The Tribunal also noted that simultaneous proceedings under Sections 143(1)(a) and 143(2) are not permissible, supporting the view with decisions from the Calcutta and Gujarat High Courts.