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TMI Blog1994 (1) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... represented the written down value of the assets rather than the depreciation admissible under the rules. The silly mistake in the statement accompanying the return which was reflected in the return went unnoticed and the Assessing Officer accepted the figure admitted in the return as such in what is purported to be an intimation dated 24-10-1991 under section 143(1)(a) of the Income-tax Act sent to the appellant. A copy of such intimation is found at page 13 of the paper book as follows: ANNEXURE V " INCOME TAX DEPARTMENT INTIMATION UNDER SECTION 143 (1)(A) OF THE INCOME TAX ACT, 1961 Pan Cy-5505 AO Code Acknowledgement No. Name The Kerala State Asst. Yr. 90-91 Address Coir Corporation Status Co. D CR No. Ltd., Alleppey Due Date of Return II(ii) 24 Return Filed on 91-92 Dear Sir/Madam Please refer to your return of income for the above assessment year. The total income, tax and interest payable thereon/refund due to you and the interest thereon have been determined in accordance with section 143(1) of the Income-Tax Act, 1961, as under: Rs. Taxes Rs. Returned total income/loss 79,66,386(-) Tax on total income nil Total income/loss after Surcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for the rectification. A notice under section 154/155 is enclosed herewith. Yours faithfully, Sd/-- (K. HARILAL NAICK) Deputy Commissioner of Income-tax (Asst.) Spl. Range, Kottayam." However, the assessment under section 143(3) was completed on 6-3-1993 adopting the correct figure of depreciation in a sum of Rs. 10,79,912 and making certain disallowance under rule 6D of the Income-tax Rules and the unpaid interest to Kerala Finance Corporation thus determining the total loss for the year at Rs. 20,55,035. Further to this, the Assessing Officer passed an order under section 154 dated 10-3-1993 whereby he withdrew the excess depreciation allowed in the intimation sent to the appellant under section 143(1)(a) and levied additional tax on the difference at 20% resulting in a demand of additional tax of Rs. 4,75,767. This rectification was in respect of the intimation dated 24-10-1991. The assessee appealed. It was contended that the rectification order passed under section 154 can be considered only as an "intimation" and when such rectification was made on 10-3-1993, the provisions of section 143(1A) as they stood then did not envisage levy of additional tax in cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel for the assessee contended that in such cases one has to consider what was the law then when the Assessing Officer processed the application under section 143(1)(a). At that time there was no provision in the statute for the levy of additional tax in a case where the loss admitted in the return was either disallowed or reduced, but not resulting in the conversion of the loss into an income. Though there was a mistake in the record, in that the assessee had claimed excess loss in the return, that would not result in the levy of additional tax on the amount of the excess claim of loss in terms of the provisions of section 143(1A) as it stood then, nor at the time when the Assessing Officer rectified the "intimation" dated 24-10-1991 by an order under section 154 on 10-3-1993, the retrospective amendment envisaged by the Finance Act, 1993, had received the assent of the H.E. the President of India. So even at that point of time there was no provision in section 143(1A) of the Income-tax Act to levy additional tax on the amount of loss disallowed in the rectification order. Therefore, at the time when the Assessing Officer passed the impugned order levying additional tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and in any case there was no scope for levy of additional tax on the amount of loss disallowed treating such amount as the income of the assessee. The substituted section 143(1A) providing for levy of additional tax even in case of disallowance of loss, treating the amount disallowed as the income of the assessee, was given retrospective effect from 1-4-1989 by the Finance Act, 1993, which received the assent of H.E. the President of India, only on 13-5-1993. The amended provision would, no doubt, give rise to a mistake (which will be) deemed to have occurred in the original intimation and continued right up to the time of rectification, but such a mistake was not apparent from record as the amended provision which was given assent on 13-5-1993 was not in existence at the time when the Assessing Officer rectified the order on 10-3-1993. The Calcutta High Court held that as a result of retrospective amendment. a mistake in the record may be deduced or presumed to be in existence, but its existence was not apparent from record. It is only mistakes apparent from record that can be rectified and not a mistake "deemed to be apparent" in the records. In this context we could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed an apparent mistake. In the case of Narayan Row [1965] 57 ITR 149 (SC), the Amending Act with retrospective effect was also in existence at the time when the Income-tax Officer proceeded to rectify the order and could determine whether the records disclosed an apparent mistake in the background of the amended Act. In the instant case the Amending Act came into existence long after the order sought to be rectified and the order of rectification. Therefore, at the relevant time, the mistake, though deemed, could not be apparent from the records. We do not propose to include the expression 'deemed to be apparent' in section 35 of the Act. We hold that though it could be deemed that there was a deemed mistake in the order at the relevant time yet there was no rectifiable mistake apparent on the face of the record." In this view of the matter, we hold that when the rectification order was passed there was no mistake apparent from record as a result of the retrospective amendment to section 143(1A) of the Income-tax Act and, therefore, the levy of additional tax is deleted. 5. For another reason, which is all the more important, the levy of additional tax is liable to be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer has the right to make certain specified adjustments and where such adjustments are made an "intimation" should be sent to the assessee even if nothing is found payable or refundable; (iii) The intimation cannot be sent after the expiry of two years from the end of the assessment year in which the income was first assessable. "From the above, it will be evident that the Act has not provided for sending an "intimation" In a case where the return has been accepted in toto without any modification or adjustment and no amount was found payable by or refundable to the assessee by way of tax or interest. Against the above principles, we proceed to analyse the facts of the case. This is a case where the assessee had returned a loss. In arriving at the loss returned, it had incorrectly taken the amount of depreciation at Rs. 54,72,243 instead at Rs. 10,79,912. This called for prima facie adjustments envisaged in the first proviso to section 143(1)(a) of the Act. These adjustments were not made by the Assessing Officer. Therefore, the Assessing Officer is not empowered to send an "intimation" to the assessee in terms of the second proviso to section 143(1)(a) which is to the effect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(1)(a) and recover the tax or interest due from the assessee or refund the excess payments within a period of two years from the end of the assessment year in which the income was first assessable, or (ii) he can make a regular assessment under section 143(3) within the said period of two years subject to the issue of notice under section 143(2) within 12 months from the end of the month in which the return is furnished or (iii) he can have a combination of both the options within the same two-year period to some extent. But these options are not unlimited options as they contain inherent restrictions, as for example, while the provisions of section 143(1)(a) are "without prejudice" to the provisions of section 143(2), such an expression is not found in section 143(2) in relation to section 143(1). Further, the provisions of section 143(2) are to be invoked within a period of 12 months from the end of the month in which the return is furnished and, therefore, a conscious decision had to be taken within that period whether a regular assessment should be made or not on the return furnished before the Assessing Officer. Therefore, from a comprehensive reading of section 143, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also, action under section 143(1)(a)(ii) for issue of a refund on the basis of a return of income or loss must be completed before an assessment order under section 143(3) is passed in that case, as otherwise the provisions of section 143(1)(a)(ii) and 143(3) would get mixed up and may create confusion and uncertainty. 5.16. From the above discussion, it follows that even in cases selected for scrutiny it is desirable that action under section 143(1) (a) for issue of an intimation for any sum due from the assessee or for issue of a refund due to the assessee on the basis of the return must be completed soon after the filing of the return and in any case before completion of assessment under section 143(3). In fact, it will be preferable if action under section 143(1)(a) is completed even before the issue of a notice under section 143(2) in such cases." In the instant case, we have already held that there was no valid "intimation" existing in terms of section 143(1)(a) of the Income-tax Act, read with the provisos thereto. Further, it is seen that the assessment proceedings under section 143(2) of the Act, which began on 26-10-1991 culminated in assessment order dated 6-3-1993. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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