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TMI Blog1998 (9) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(a) stood automatically closed and no demand on account of these proceedings could be freshly raised by way of additional tax. 4. That the order of the Assessing Officer passed in pursuance to the direction given by the Tribunal is contrary to law as under section 143(1)(a), prima facie adjustment of IPRS receipt claimed by the assessee to be non-taxable could not have been made as the very nature of this receipt involved a debate and hence could not have been made the subject-matter of adjustment. 5. The learned Commissioner (Appeals) has erred in relying on the final accounts of the appellant as the view taken by an assessee is irrelevant in adjudicating tax matters." The following additional grounds were also raised, which were admitted by the Tribunal vide order dated29-6-1998:--- "1. The Ld. Assessing Officer having already passed an order dated 19-8-1994 by giving effect to Hon'ble ITAT order dated 13-7-1994, the impugned intimation under section 143(1)(a)/254 of the Income-tax Act, dated 7-3-1997 being without jurisdiction is null and void and consequently the same and also the levy of additional tax of Rs. 60,56,360 deserves to be cancelled/deleted. 2. That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancel the adjustment of Rs. 5,26,64,000 representing the amount received under IPRS for the reasons given in his abovementioned letter and explaining that the addition made by him was not a prima facie disallowance. Alongwith the application the assessee referred several case laws mentioned at pages 10 and 11 of the paper book. The Assessing Officer in his order under section 154 dated13-8-1993rejected the application by referring the provisions of section 28(iiib) of the Act. 4. Aggrieved by that order the assessee filed an appeal before the CIT(Appeals). The assessee raised the issue of adjustment of receipt on account of IPRS of Rs. 5,26,64,000. The plea of the assessee before the CIT(Appeals) was that it was capital in nature and that the reimbursement represented difference between the price prevailing in the national market and the international market and the amount so received under the Scheme was with a view to support the assessee. The CIT(Appeals) however, was of the view that the receipt under IPRS was very much revenue in nature. The assessee also raised the plea that intimation to be made under section 143(1)(a) permitted additions/disallowances only those which do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h orders must be stuck down as invalid and must be restored to the point in which the invalidity occurred. The Bombay High Court in Khatau Jankar observed that prima a facie adjustment does not include carrying out the adjustments which require further examination or evaluation. In effect anything which could be a controversial issue could not be brought within the ambit of prima facie adjustment. Considering the Supreme Court decision in the present circumstances of the case, we are of the view that the order of assessment and the impugned order of the CIT(Appeals) needs to be set aside and we hereby set aside this case with the direction that he shall afford sufficient opportunity to the assessee in regard to the nature of receipt of Rs. 5,26,64,000 bring on record such facts and re-do the assessment. The assessee shall place on record the entire scheme so that the Assessing Officer is in a position to appreciate and bring the real nature of the scheme before making fresh assessment as directed above." 6. It will be pertinent to mention here that the Reference Application No. 1025(Del)/94 was also rejected vide order dated 30-12-1994 and the department moved Misc. Application a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from business or profession'." 10. The assessee is aggrieved. 11. The learned counsel for the assessee very vehemently argued that the assessee received amount from the Government under "Scheme for Price Protection and Supply of Steel at International Price' formulated by the Government in August, 1981. Such Scheme, as explained by Shri Sapra, had to be brought in by the Government to enable the manufacturers of hand-tools, who were required to use special type of steel of which the prices inIndiawere higher as compared to international prices, so that such manufacturers could compete with such industries at the international level. According to Shri Sapra, such receipts were being claimed as Capital receipts by the assessee right from 1984-85 assessment year in its returns and never in the past, the Assessing Officer had added it back while issuing intimations under section 143(1)(a) of the Income-tax Act. It was for the first time that the Assessing Officer vide intimation under section 143(1)(a) added Rs. 5,26,64,000 towards the income of the assessee vide adjustment explanatory sheet attached to the intimation, copies placed at pages 2-3 of the paper book, and charged addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove. 11.3 Thereafter a letter dated 16/19/24th July, 1996 had been issued to the assessee requiring it to explain the nature of receipt of Rs. 5,26,64,000 claimed as exempt in the return, which was added to its income in the intimation under section 143(1)(a) dated 19-5-1993 and to produce documentary evidence in support of its reply. The appellant vide its letter dated 29-7-1996, copy placed at page 27-28 of the paper book, submitted before the Assessing Officer that the ITAT had allowed the appeal holding that controversial issue could not be brought within the ambit of prima facie adjustment and further fresh assessment order under section 143(3) had already been passed on 28-11-1994, in which the above issue had been discussed against which appeal before the Tribunal is pending and that issue about addition under section 143(1)(a) is already closed and does not call for any fresh action. It was further submitted that any action to the contrary in this regard will only be infructuous and unlawful. But the Assessing Officer vide order dated 7-3-1997 by describing it as "intimation under section 143(1)(a) of the Income-tax Act to give effect to orders of ITAT passed under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98] 146 CTR (M.P.) 187, Bank ofAmericaNT SA v. DIN,. CIT [1993] 200 ITR 739(Bom.), Adamas Gem Industries Ltd. v. Smt. Ltd. Neela Krishnan CIT [1993] 203 ITR 737 (Bom.) and Fag Precision Bearing Ltd. v. Dy. CIT [1993] 47 ITD 193 (Ahd.). 11.6 The learned counsel also relied on the findings recorded by the Tribunal in its reference order dated 30-12-1994 vide para 6 in assessee's own case, reproduced supra, in which the Tribunal had held that IPPS receipt in question being controversial cannot fall within the scope of section 143(1)(a) and that its taxability is a controversial issue. Shri Sapra also drew our attention to the opinion of Sr. Advocate dated 13-11-1989, copy placed at pages 39-52 of the paper book, by which he had analysed the Scheme dated 9-2-1981 and then had given reasons and also the case law to come to the conclusion that IPRS receipt could not be regarded profits liable to tax under the Income-tax Act. Shri Sapra also submitted that even the Tribunal in its order dated 13-7-1994 had mentioned by relying on Bombay High Court judgment in Khatau Jankar Ltd.'s case that prima facie adjustment does not include carrying out the adjustment which require further examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll (200 ITR St.pages 161-162) while levying the additional tax where loss stood reduced as a result of prima facie adjustment it was stated that such additional tax was being levied so that the assessee could avoid committing intentional mistake while filing the returns. Certainly, the receipt of IPRS claimed by the appellant as capital receipt was not a mistake, what to speak of an international mistake, because it was so claimed on the basis of legal advice. It was also held to be debatable and controversial issue by ITAT in appellant's own case as mentioned above. Shri Sapra submitted that if the additional tax is to be levied on bona fide claims on controversial/debatable/doubtful issue then how could an assessee make a legitimate claim in its return which it fervently believes to be nontaxable if the mere making of such claim is to fasten the assessee with additional tax which is akin to penalty even though the assessee did not enjoy any taxable income till date. By relying on the Supreme Court judgments in CIT v. J.H. Gotla [1985]156 ITR 323-324/23 Taxman 14J and Saroj Aggarwal v. CIT [1985] 156 ITR 497/23 Taxman 76 it is submitted by the learned counsel that Equity and Taxat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82 ITR 363, reference to book entries as made by the CIT(Appeals) in his order regarding IPRS receipts was irrelevant. 11.9 On the additional grounds of appeal, the submissions of the learned counsel are reproduced below, from the written arguments as filed before us. On additional ground No. 1, the learned Assessing Officer having already passed an order dated 19-8-1994, by giving effect to Tribunal order dated 13-7-1994, the impugned intimation under section 143(1)(a)/ 254, dated 7-3-1997 is without jurisdiction and consequently the same is null and void. Therefore, levy of additional tax of Rs. 50,56,360 deserves to be deleted. It is trite law that two orders cannot be passed to give effect to the order of the Tribunal. The second impugned order dated7-3-1997is, therefore, clearly without jurisdiction, non-est and beyond the provisions of the Income-tax Act. 11. 10 On additional ground No. 2, it is submitted that third proviso below sections 143(1)(a), (b) (c) clearly shows that section 143(1) is a self-contained code for the purpose of limitation. Third proviso below section 143(1)(a) reads as under :--- "Provided also that an intimation for any tax or interest due unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of section 153 of the Act. Therefore, it is submitted, in the context of limitation provided under section 143(1)(a) etc., the impugned intimation dated 7-3-1997 under section 143(1)(a)/254 of the Income-tax Act is barred by limitation. The Assessing Officer appears to be under misconception of the legal position as if he could send a fresh intimation within two years from the expiry of the year in which the Tribunal had delivered its judgment dated 17-7-1994. The fresh intimation, if at all could be issued, though according to the appellant the same could not be legally issued, till 31-3-1995 i.e., two years from the end of the assessment year viz., 1992-93 as provided in the 3rd proviso below section 143(1)(a). 11.13 On additional ground No. 3, it was submitted that even vide intimation dated7-3-1997, the Assessing Officer had reduced the income to Nil. Section 143(1)(a) in terms did not apply because as a result of the adjustment made by the Assessing Officer neither the income declared by the assessee had been increased nor the loss declared by the appellant in the statement of total income, as filed, was converted into income. Therefore, the additional tax @ 20% was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessity of passing assessment orders in all cases did not contain any deterrent provision against filing of incorrect return to show lesser tax liabilities. Consequently the new scheme of assessment was liable to be misused by unscrupulous taxpayers, who might return lesser income by making obvious mistakes or by claiming obviously incorrect deductions and taking a change that if the same are detected by the Department, they would have to pay the correct tax only. Besides the deterrent effect, the purpose of this levy is also to persuade all taxpayers to file their returns of income carefully to avoid mistakes. It is, thus, a sort of negligence tax on the assessee and compensates the department for the effort involved in detecting obvious mistakes committed by the taxpayers on their returns of income or loss." In this case, the appellant had not been negligent while filing the return nor it had committed any intentional mistake nor it was an unscrupulous taxpayer. 12. As against this the learned DR, Shri Goel submitted that the use of the word "assessment" in the Tribunal order is of on consequence. In fact it is an intimation under-section 143(1)(a). According to section 28(ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 312 at page 321 (Bom.). According to the learned DR the impugned intimation as issued is not barred by limitation. Shri Goel further submitted that levy of additional tax was automatic as soon as an adjustment was made by the Assessing Officer while issuing the intimation and no one had any discretion not to levy it or even to reduce it. He further relied on Delhi High Court judgment reported in Apogee International Ltd. v. union of India [1996] 220 ITR 248 and Rakesh Aggarwal v. Asstt. CIT [1997] 225 ITR 496 which were followed in V.K. Paints (India) Ltd. v. Dy. CIT [1998] 66 ITD 450 (Delhi) for the proposition that even if a notice under section 143(2) had been issued, the Assessing Officer could still issue intimation under section 143(1)(a) of the Income-tax Act. According to the learned DR the observations of the Tribunal in para 6 of its reference order, are obiter and the Tribunal in its earlier order dated 13-7-1994 had not decided that the issue was controversial and, therefore, the observations in both the order of the Tribunal, as relied upon by the learned counsel for the assessee, were of no avail. The learned DR pointed out that in view of amended provision of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alks of Duty Drawback to any person against exports. Shri Sapra further submitted that after the Assessing Officer had passed an order dated19-8-1991giving effect to the Tribunal order dated13-7-1994, the Assessing Officer had lost his jurisdiction to issue the impugned intimation coupled with the fact that an assessment order dated28-11-1994had also been passed under section 143(3) of the Income-tax Act. The submission of Shri Sapra is that it was not an interim order as was canvassed by the Sr. Departmental Representative, and that the said order still holds the field. By drawing our attention to the letter dated 16th, 19th/24th July, 1996 as issued by the Assessing Officer, Shri Sapra contended that nowhere the Assessing Officer had called for the Scheme because it was already there on his record, nor be had analysed the same in the impugned intimation order, as alleged by the DR. Shri Sapra vehemently argued that if to find out the taxability of any item, we have to refer to a scheme and to the other provisions of the Income-tax Act, issue becomes controversial, debatable and at any rate not free from doubt and, therefore, IPRS could not make the matter of adjustment under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had received IPRS of Rs. 5,26,64,000. We have no hesitation in holding on the facts of this case that IPRS amount could not be made subject-matter of prima facie adjustment under section 143(1)(a) of the Income tax Act, as it was undoubtedly a controversial and a debatable issue, It has also been so held by the Tribunal vide its order dated 30-12-1994 vide para 6, reproduced above. We cannot lose sight of the fact that even in the earlier years, no such adjustment was made under-section 143(1)(a) by the revenue in respect of IPRS receipts though duly shown in it accounts by the assessee and claimed as capital receipt in its returns, notwithstanding the fact that section 28(iiib) of the Act, under which the Assessing Officer had added IPRS receipts and levied additional tax in this year was there on the statute. Moreover, as to whether IPRS receipts of all to be considered under section 28(iiib) of the Act or not, is itself a debatable and controversial issue, on which we will not like to express our opinion at this stage because the issue is pending in appeals before the Tribunal against the regular assessment orders since the assessment years 1984-85 till 1992-93, as was pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be made the subject-matter of prima facie adjustment under section 143(1)(a) and consequently, it upheld the view of the CIT (Appeals). 14.2 The Hon'ble Bombay High Court in the case of Bank of America NT and SA, where the assessee had not included in its return a sum of Rs. 2,30,11,855 towards interest on securities, as according to the assessee, such amount was not taxable has held as under : "That section 143(1)(a) provides for issuance of an intimation and the first proviso thereto specifically enumerates the circumstances under which such adjustments are permissible. The only relevant clause would be clause (iii) of the first proviso which provides that, in the event of there being any loss carried forward, deduction, allowance or relief claimed in the return which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, then such amount shall be disallowed. In the case of the petitioner, it was obvious that the amount of Rs. 2,30,11,856 was not an amount falling within any of the items enumerated under the first proviso to section 143(1)(a). The Assessing Officer, therefore, clearly had no jurisdiction to make any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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