2006 (2) TMI 86 - HC - Income Tax

Rectification - (1) Whether, Tribunal was right in holding that the intimation under section 143(1)(a) would survive after passing an order of assessment under section 143(3)? (2) Whether, Tribunal was right in holding that the intimation under section 143(1)(a) could be rectified after the order under section 143(3) was passed? (3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that there could be a levy of additional tax under section 143(1A) for the first time by an order under section 154? - additional income-tax under section 143(1A) could be levied in an order under section 154(1)(b) if the Assessing Officer has failed to levy at the first instance in the intimation issued under section 143(1)(a). - We find it difficult to accept the contention that under section 154 only a mistake in the quantification of income can be corrected and not a mistake in not levying additional income-tax. We are inclined to answer the questions in favour of the Revenue and against the assessee

Issues Involved:
1. Whether the intimation under section 143(1)(a) survives after passing an order of assessment under section 143(3) of the Income-tax Act, 1961.
2. Whether the intimation under section 143(1)(a) can be rectified after the order under section 143(3) is passed.
3. Whether additional tax under section 143(1A) can be levied for the first time by an order under section 154.

Detailed Analysis:

Issue 1: Survival of Intimation under Section 143(1)(a) after Section 143(3) Assessment
The court examined whether the intimation under section 143(1)(a) remains valid after a regular assessment order is passed under section 143(3). The court noted that the necessity of introducing section 143(1A) was to allow adjustments after filing the return without the need for passing an assessment order in all cases. The court referred to the Supreme Court's decision in CIT v. Gujarat Electricity Board, which emphasized that a summary proceeding under section 143(1)(a) is not needed once a regular assessment under section 143(3) has commenced. However, the Kerala High Court disagreed with the Calcutta, Gujarat, and Delhi High Courts' decisions, which opined that the intimation under section 143(1)(a) becomes ineffective after a section 143(3) assessment. The Kerala High Court held that the intimation under section 143(1)(a) survives after the passing of an order under section 143(3) due to the insertion of section 143(1A)(b) by the Finance Act, 1992, which allows for adjustments in additional tax based on subsequent orders.

Issue 2: Rectification of Intimation under Section 143(1)(a) after Section 143(3) Order
The court addressed whether rectification under section 154 could be applied to an intimation under section 143(1)(a) after a regular assessment under section 143(3) has been completed. The assessee argued that once a section 143(3) order is passed, the intimation under section 143(1)(a) does not survive and cannot be rectified. The court, however, found that the legislative intent behind section 143(1A)(b) was to allow for the survival of the intimation under section 143(1)(a) even after a section 143(3) order, enabling adjustments in additional tax. The court concluded that rectification of the intimation under section 143(1)(a) is permissible even after the completion of a regular assessment under section 143(3).

Issue 3: Levy of Additional Tax under Section 143(1A) by an Order under Section 154
The court considered whether additional tax under section 143(1A) could be levied for the first time through an order under section 154. The assessee contended that the Assessing Officer could not levy additional tax under section 143(1A) through rectification if it was not initially levied in the intimation under section 143(1)(a). The court disagreed, stating that section 143(1A)(b) allows for the adjustment of additional tax based on subsequent orders, including those under section 154. The court held that additional tax under section 143(1A) could be levied through an order under section 154 if it was not initially included in the intimation under section 143(1)(a).

Conclusion:
The court answered all three questions in favor of the Revenue and against the assessee, holding that:
1. The intimation under section 143(1)(a) survives after passing an order under section 143(3).
2. The intimation under section 143(1)(a) can be rectified after the order under section 143(3) is passed.
3. Additional tax under section 143(1A) can be levied for the first time by an order under section 154.

The judgment was communicated to the Registrar of the Income-tax Appellate Tribunal.

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