2008 (10) TMI 293 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Section 263 to intimation under Section 143(1).
2. Whether the intimation under Section 143(1) constitutes an assessment order.
3. Validity of the CIT's direction to reassess under Section 143(1).
4. Impact of CBDT Circulars on the applicability of Section 263.

Detailed Analysis:

1. Applicability of Section 263 to Intimation under Section 143(1):
The primary issue is whether the Commissioner of Income-tax (CIT) can invoke Section 263 to revise an intimation issued under Section 143(1). The assessee argued that the intimation under Section 143(1) is not an assessment order and, therefore, cannot be revised under Section 263. The CIT, however, believed that the intimation is an assessment and thus subject to revision.

2. Whether the Intimation under Section 143(1) Constitutes an Assessment Order:
The assessee cited judgments from various High Courts, including the Allahabad High Court in *Smt. Prakashwanti* and *Smt. Brijbala*, arguing that an intimation under Section 143(1) is not an assessment order. The CIT relied on judgments from the Bombay and Madras High Courts, such as *Rajkumar Deepchand Phade* and *Anderson Marine & Sons (P.) Ltd.*, which held that an intimation under Section 143(1) can be treated as an assessment order for the purpose of Section 263.

The Tribunal noted that the Calcutta High Court in *Hilltop Holdings India Ltd.* held that an intimation under Section 143(1) is not an assessment order and cannot be revised under Section 263. This view was supported by the Delhi High Court in *Punjab National Bank* and the Kerala High Court in *K.V. Mankaram & Co.*.

3. Validity of the CIT's Direction to Reassess under Section 143(1):
The CIT directed the Assessing Officer (AO) to reassess the case de novo under Section 143(1), citing failures to investigate low net profit, capital contributions, and cash credits. The Tribunal found that since Section 143(1) does not empower the AO to make such inquiries, the CIT's direction was invalid. The Tribunal emphasized that under Section 143(1), the AO's role is ministerial, involving only arithmetical corrections and adjustments.

4. Impact of CBDT Circulars on the Applicability of Section 263:
The assessee argued that CBDT Circular Nos. 4 and 176, which state that no remedial action is necessary for summary assessments, are binding on the tax authorities. The CIT did not address whether these circulars were still in force. The Tribunal noted that these circulars were considered in the Allahabad High Court's judgments and found that they supported the assessee's position.

Conclusion:
The Tribunal concluded that the intimation under Section 143(1) is not an assessment order and cannot be revised under Section 263. The CIT's direction to reassess under Section 143(1) was invalid as it exceeded the scope of the AO's powers under that section. The Tribunal also acknowledged the binding nature of the CBDT circulars, which supported the assessee's position.

Result:
The appeal of the assessee was allowed, and the order of the CIT was set aside.