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TMI Blog2006 (11) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... to his notice that any important point is pending for decision in the matter which requires to be decided by a larger Bench. If the President acting on such information and in bona fide exercise of his powers constitutes a larger Bench or a Special Bench for deciding a matter it cannot be said that he Acts ultra vires his functions entrusted to him by the Legislature u/s 255(1) read with section 255(3) of the Income-tax Act, 1961. Notice u/s 143 - We are of the view that the principle laid down by Hon ble Jurisdictional M.P. High Court in the case of Kamal Textiles [ 1990 (12) TMI 56 - MADHYA PRADESH HIGH COURT] would squarely apply to the case, where refund is granted by the Assessing Officer after processing of the return u/s 143(1)(a)(ii). Accordingly, the decision of the Hon ble Delhi High Court in the case of Apogee International [ 1996 (3) TMI 119 - DELHI HIGH COURT] and the decision of Hon ble Supreme Court in the case of Gujarat Electricity Board[ 2002 (10) TMI 5 - SUPREME COURT] , also fortify our opinion on the said legal proposition. Considering above legal proposition, we may revert back to the first decision of the ITAT, Indore Bench in the case of Arihant Builders, D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll work out the profit accordingly. As a result, this ground of appeal of the assessee is in IT Appeal is partly allowed. Accordingly, we answer the question referred to the Special Bench in favour of the Revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... , no notice could be issued under section 143(2), because of absence of the words 'Without prejudice to the provisions of sub-section (2)'". The Division Bench of the ITAT, Indore Bench vide order dated 19-7-1994, held that the Assessing Officer had exceeded his jurisdiction in issuing the notice under section 143(2) of the Act and the assessment completed in pursuance thereof is null and void. 6. The Division Bench of ITAT, Indore Bench in the case of Agarwal Warehousing and Leasing Limited, Indore, in IT Appeal No. 952/Ind/1994 considered the same issue relating to the jurisdiction of the Assessing Officer to issue notice under section 143(2) of the Act, after granting refund under section 143(1)(a)(ii) of the Act. The assessee's counsel referred to the earlier decision of the ITAT Indore Bench dated 19-7-1994, passed in IT Appeal No. 1014/Ind/1993 in the case of M/s. Arihant Builders, Developers & Investors Private Limited and submitted that since the point in issue has already been decided in favour of the assessee, therefore, the Assessing Officer should not have issued notice under section 143(2) after refund has been granted to the assessee under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal also referred to in its order that the reference made in M.C.C. No. 103 of 1985 in the case of M/s. Arihant Builders, Developers & Investors Private Limited for earlier assessment year 1991-92, the reference was dismissed due to non-appearance of the applicant Revenue and, therefore, the Hon'ble High Court had declined to answer the question referred by the Tribunal. The Appellate Tribunal, therefore, considered that the order on question of law cannot be said to be the view taken by the Tribunal has been upheld by the High Court. This issue was accordingly decided against the assessee vide order dated 22-8-1997. On merits, the Tribunal decided that authorities below are justified in invoking the provisions of section 145(2) of the Act for rejection of the books of account of the assessee. However, it was directed that the net profit rate, in this case, is to be applied @ 10 per cent instead of 12.5 per cent applied by the Assessing Officer. The appeal of the assessee was accordingly partly allowed. This order dated 22-8-1997, was challenged before the Hon'ble M.P. High Court in Writ Petition No. 1739 of 1997 and the Hon'ble High Court vide its order dated 17-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own by the Hon'ble Supreme Court of India in the case of ITAT v. Dy. CIT [1996] 218 ITR 275, wherein their Lordships have dealt with the issue and regarding powers of the President to constitute a Special Bench. It was, accordingly, submitted that the matter may be sent back to the Division Bench directing them to maintain judicial consistency and to accept order of ITAT in IT Appeal No. 1014 of 1993 in assessment year 1991-92, which have become final because of rejection of the reference by the High Court. 10. On the other hand, the ld. Departmental Representative submitted that the Hon'ble President of ITAT has discretion to constitute Special Bench consisting of three or more Members under section 255(3) of the Act. The ld. Departmental Representative further submitted that the powers of the Hon'ble President of the Appellate Tribunal are administrative functions and are plenary, which cannot be challenged in the aforesaid Forum. The ld. Departmental Representative further submitted that even if the assessee has made a request for withdrawal of the appeal in IT Appeal No. 952 of 1994 would not make any difference, because on mere request of withdrawal of the appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of India in the case of Pradip Chandra Parijia v. Pramod Chandra Patnaik [2002] 254 ITR 99, in which it was held that if the, Bench of Two Judges concludes that if an earlier judgment of a Bench is so very incorrect that in no circumstances can it be followed, the proper course for the Bench of two Judges to adopt is to refer the matter before it to a Bench of Three Judges. Another decision of Gujarat High Court in the case of Sayaji Iron & Engg. Co. v. CIT [2002] 253 ITR 749, is also referred to deal with the almost similar situation laying down the guidelines by holding that if a different view is to be taken by the Bench then matter should be referred to the President of the Tribunal, so that he could have referred the matter to the Bench consisting of three or more Members. The Hon'ble M.P. High Court in the background of the aforesaid decision held in para 11 of the impugned order that the requisite provision is contained in sub-section (3) of section 255, where the President of the Tribunal is authorized to constitute Special Bench of Three or More Members in the instant case also. The learned Members of the Indore Bench of the Tribunal instead of reviewing own earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer processed the return under section 143(1)(a) of the Act and the refund was granted to the assessee. Subsequently, the Assessing Officer issued notice under section 143(2) of the Act requiring the assessee to appear before him on the date fixed in the notice, he wanted to have some further information in respect of particulars furnished in the return of income. The assessee objected to the issue of the notice under section 143(2) on the ground that on acceptance of the return filed by the assessee and on granting the refund under section 143(1)(a)(ii), the assessment becomes final and the Assessing Officer has no jurisdiction to issue notice under section 143(2). In support, the assessee has filed order of ITAT, Indore Bench dated 19-7-1994, for assessment year 1991-92 in the case of Arihant Builders, Developers & Investors (P.) Ltd. The contention of the assessee was not accepted by the Assessing Officer on the reasons that only condition laid by sub-section (2) of section 143 is that a notice under this section shall be served before the expiry of 12 months from the end of the month in which return is furnished. The assessee challenged the order of the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Legislature omitted particular phrase in the statute, then the Court should not fill the gap in the same. He has submitted that Statute has to be understood in the sense in which it prescribed the rule without adding or substituting any words. The ld. counsel for the assessee submitted that the decision of Hon'ble Madhya Pradesh High Court in the case of Kamal Textiles, deals with the proposition laid down in section 143(1)(a)(i) of the Income-tax Act, 1961, and as such it cannot be applied in the case of the assessee on the referred question, which falls in different categories of provision of section 143(1)(a)(ii) of the Income-tax Act, 1961. The ld. counsel for the assessee submitted that both the provisions of section 143(1)(a)(i) and 143(1)(a)(ii) are on different propositions of law. The ld. counsel for the assessee apart from referring to certain decisions also briefly referred to the text book for the purpose of stressing as to how the language of the statute should be read. He has submitted that intention of the Legislature is primarily to be gathered from the language used, which means the attention should be paid to what has been said as also to what has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt must give effect to them as they stand and cannot demur on the ground that the Legislature must have intended otherwise. (IV) Gaurav Distributors (P.) Ltd. v. Commissioner of Customs [2004] 3 RC 200, in which Hon'ble Supreme Court held in the head note that Interpretation of the Statutes - Statute Clear and Unambiguous effect to be given. (V) Vam Organic Chemicals Ltd. v. State of U.P. [2003] 2 STJ 9 (All.), in which it was held where the language of a provision is plain, Courts cannot ordinarily concern with the policy behind the provisions. It was further held that it is a corollary to the literal rule of interpretation that omissions in a statute are not to be inferred. If there is any defect or omission in the phraseology used by the Legislature it is not for the Court to make good the deficiency. (VI) Ganga Enterprises v. Commissioner of Sales Tax [2004] 4 STJ 422 (MP), in which in the head note, Hon'ble High Court of Madhya Pradesh at Jabalpur held that it is a trite law that a taxing statute has to be construed strictly - an Explanation has to be strictly construed in the context in which it appears and it cannot be imported or it cannot be read in other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained under section 143(1)(a) have been inserted in the Income-tax Act, because it was not possible to scrutinize all the returns. The Assessing Officer can make, prima facie, adjustment as having provided under section 143(1)(a) and according to sub-section (1), the Assessing Officer can issue demand notice raising a demand of tax or interest, which is payable by assessee and according to the sub-clause (ii), the refund is to be issued after processing is done under section 143(1)(a) of the Act. The ld. Departmental Representative further submitted that the word "And" has been used in between section 143(1)(a)(i) and sub-clause (ii), which shows that both sub-clauses (i) & (ii) have to be read together. The ld. Departmental Representative submitted that the provisions contained in section 143(1)(a) have to be read together for the purpose of processing the return. The ld. Departmental Representative submitted that the provisions of section 143(1)(a) would be used only for a limited purpose, so that the tax payable by the assessee are paid through the demand notice and that refund is granted in case the same is due to the assessee. The ld. Departmental Representative subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... logical conclusion. Such being the limited purpose of the fiction, it is difficult to accept the contention that on issuance of such intimation, the assessment proceedings can be reopened only in terms of section 147 and the authority is not entitled to proceed under sub-section (2) of section 143. The assessment made in proceedings under section 143(2) shall, for purposes of an assessment, be an assessment of tax made under section 143(3) and, in that event, shall be applicable under section 246(1)(a). Therefore, the notice issued under section 143(2) after issuing intimation under section 143(1)(a)(i) is valid." (b) CIT v. Gujarat Electricity Board [2003] 260 ITR 84, in which Hon'ble Supreme Court held- "Even otherwise, the view taken by the Gujarat High Court seems to be correct on principle. There is no dispute that section 143(1)(a) of the Act enacts a summary procedure for quick collection of tax and quick refunds. Under the scheme if there is a serious objection to any of the orders made by the Assessing Officer determining the income, it is open to the assessee to ask for rectification under section 154. Apart therefrom, the provisions of section 143(1)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der under section 143(1) of the Act but he has to make assessment in accordance with law, i.e., under section 143(3) of the Act." 18. The ld. Departmental Representative further submitted that phrase 'Without prejudice" is used in section 143(1)(a) for abandoned precautions, otherwise meaning of the Act and section is very clear. Therefore, the Assessing Officer has power to proceed for regular assessment under section 143(3) by issuing notice under section 143(2) even after intimation is issued on the processing of the return. 19. We have considered the rival submissions and material available on record. In order to appreciate the contention advanced by the ld. Representatives of both the parties, it would be relevant to reproduce the relevant provisions attracted in this case, which are relevant to the assessment year in question. "143. (1)(a) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue and against the assessee. This decision is reproduced above in this order. The same view is taken by Hon'ble Delhi High Court in the case of Apogee International Ltd. Hon'ble Supreme Court, in the case of Gujarat Electricity Board while dealing with the slightly different proposition has decided the proposition in favour of the Revenue. We may mention that Hon'ble Jurisdictional M.P. High Court in the case of Kamal Textiles gone to the extent of saying that it is difficult to accept the contention that on the issuance of such intimation, the assessment proceedings can be reopened only in terms of section 147 and the authorities are not entitled to proceed under sub-section (2) of section 143. The above principle laid down in the aforesaid decision would make it clear that after issue of an intimation under section 143(1)(a)(i), the Assessing Officer has jurisdiction to issue notice under section 143(2). In the aforesaid decision, the point whether after grant of refund under section 143(1)(a)(ii) of the Act, the Assessing Officer has authority to issue a notice under section 143(2) of the Act was not directly involved. However, we noticed that in between sub-claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, if any refund is due to the assessee on the basis of such return, it shall be granted to the assessee. Therefore, such an intimation can be sent to the assessee only on the basis of the return." Hon'ble Delhi High Court in the case of Mahanagar Telephone Nigam Ltd v. CBDT [2000] 246 ITR 173, has observed as under:- "On thing further to be noticed is that intimation under section 143(1)(a) is given without prejudice to the provisions of section 143(2). Though technically the intimation issued was deemed to be a demand notice issued under section 156, that did not per se preclude the right of the Assessing Officer to proceed under section 143(2). That right is preserved and is not taken away. Between the period from 1-4-1989 to 31-3-1998, the second proviso to section 143(1)(b), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from 1-4-1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till 1-6-1999. The requirement was that an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at different points of time. Under section 143(1)(a) as it stood prior to 1-4-1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e. to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us D.K. Jain, J. in the case of Apogee International Limited v. Union of India [1996] 220 ITR 248 by this Court. It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole along with other relevant provisions for giving it proper meaning and put it in operation. In other words clause (ii) is part of clause (i) dealing with separate situation applicable where refund is found to be due to the assessee. The said clause cannot be taken as an independent clause and separately read and considered in isolation. Otherwise it leads to an absurdity and cannot operate. The fact that it is part and parcel of clause (i) is made abundantly clear by the Legislature by use of word "and" in the sub-section. Two clauses only govern two situations one where tax etc. is found to be payable and other where refund is found to be due to the assessee. However, issuance of "intimation", consideration of advance tax, TDS and "without prejudice to provision of sub-section (2)" is to be considered for both the clauses treating them as integrated and not as independent clauses. There is no scope to argue that words "without prejudice to sub-section (2)" should have again been provided in clause (ii). Other reason why contention of the assessee cannot be accepted is that sub-section (1) and sub-section (2) govern different situations a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (i) as discussed above. In our opinion words "without prejudice to the provision of sub-section (2)" are used for both the clauses. Further power to make a regular assessment by issuing notice under section 143(2) is separate and independent of power to issue "intimation" and grant of refund to the assessee under sub-section (1) of section 143. In our considered opinion, the Assessing Officer could exercise power under sub-section (2) even if words "without prejudice to the provision of sub-section (2)" were not there in sub-section (1). Above words have been used by Legislature out of abundant caution. Having regard to clear language of sub-section (2) it is not possible to infer that Assessing Officer cannot issue notice under the said provision even where he considered it necessary and expedient to ensure that the assessee has not understated income etc. Having regard to other statutory provisions and scheme of the Act as a whole, it is not possible to hold that Assessing Officer cannot make a regular assessment by issuing notice under section 143(2) merely because, he had issued a refund to the assessee under section 143(1)(ii) of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the intimation issued under section 143(1)(a) does not amount to assessment. He has also conceded before us that the same proposition is held by Hon'ble M.P. High Court in the case of Om Prakash Bagria, which is argued by the ld. counsel for the assessee before the High Court. The said decision is referred to above. Hon'ble Delhi High Court in the case of Mahanagar Telephone Nigam Ltd. also held that intimation under section 143(1)(a) does not amount to assessment. Considering above legal proposition, we may revert back to the first decision of the ITAT, Indore Bench in the case of Arihant Builders, Developers & Investors (P.) Ltd., Indore dated 19-7-1994, in IT Appeal No. 1014 of 1993 for assessment year 1991-92, in which the Tribunal decided the referred question in favour of the assessee, which is heavily relied upon by the ld. counsel for the assessee. The D.B. of ITAT, Indore Bench in IT Appeal No. 1014 of 1993 decided the issue in favour of the assessee on the premise that processing under section 143(1)(a) is an assessment and, therefore, once refund is granted, no fresh assessment proceedings could begin by issue of notice under section 143(2). The same contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85/- for the work completed on contract. The net profit on such receipt shown by the assessee is only Rs. 12,951/- i.e. 0.48 per cent of the total receipt, which was found to be low in the line of the civil construction. During the course of the assessment, the Assessing Officer observed that the assessee has claimed to have paid labour charges in a sum of Rs. 8,20,863/- and cartage is claimed at Rs. 1,84,619/-. On verification of the account books and vouchers, the Assessing Officer found that the assessee has not maintained it in such a form to ascertain the correct expenses. The Assessing Officer noted certain defects in the maintenance of the books of account with reference to the claim made for the payment of labour charges and cartages. The assessee was found not to maintain muster roll depicting the name of the persons employed and for the particular work and the rate paid for them. The vouchers were also found self-printed upon which no revenue stamps were affixed. The payments were made in cash. Therefore, the Assessing Officer was of the view that the correctness of the claim of the vouchers cannot be verified. The same was the decision with regard to cartage expenses and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts of Rs. 26,74,885/- and the net profit declared was @ 0.48 per cent. Though it is a case of assessment year 1992-93, but we find that the provisions of section 44AD of the Income-tax Act, 1961, have been inserted into the Income-tax Act, 1961, with effect from 1-4-1994 provided in sub-section (1) special provision for computing profits and gains of business of civil construction. It provides that notwithstanding anything contained in sections 28 to 43C in the case of the assessee engaged in the business of civil construction a sum equal to 8 per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business or as the case may be, a sum higher than aforesaid sum declared by the assessee in his return of income, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and Gains of the business or profession". Provided that nothing contained in this sub-section shall apply in case the aforesaid gross receipt paid or payable exceed an amount of Rs. 40 lakhs. Though strictly these provisions are inserted in the Act with effect from 1-4-1994, but these provisions could be a guide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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