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TMI Blog1987 (6) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ------ 24,047 It was however found from the copy of the assessee s accounts in the firms that the drawings from the firms had been made only for personal purposes such as payment of Life Insurance Premium, purchase of furniture, purchase of air tickets, etc. As the withdrawals from these firms were for non-business purposes allowance of interest on such withdrawals was mistake apparent from the record. Further the withdrawals were utilised neither for making any investments nor for earning any income. A notice under section 154 was, therefore, issued to the assessee on 17-10-1981 calling for his objection, if any, for the revision of assessment disallowing the interest claim of Rs. 24,047. There has however been no response till date. The interest on borrowals is allowable, either if the borrowals are for business purposes or if these are for payment of income-tax. If the borrowals are for personal purposes this cannot be allowed under the statute. In the circumstances I modify the assessment as under section 154 withdrawing the interest of Rs. 24,047 originally allowed. . . 2. The assessee appealed and submitted be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to the record of the assessments, if any, of past years, and determine the sum payable by the assessee or refundable to him on the basis of such assessment. (b) In making an assessment of the total income or loss of the assessee under clause (a), the ITO shall make the following adjustments to the income or loss declared in the return, that is to say, he shall, (i) rectify any arithmetical errors in the return, accounts and documents referred to in clause (a) ; (ii) allow any deduction, allowance or relief which, on the basis of the information available in such return, accounts and documents, is, prima facie, admissible, but is not claimed in the return; (iii) disallow any deduction, allowance or relief claimed in the return which, on the basis of the information available in such return, accounts and documents, is, prima facie, inadmissible ; (iv) give due effect to the allowance referred to in sub-section (2) of section 32, the deduction referred to in clause (ii) of sub-section (3) of section 32A or clause (ii) of sub-section (2) of section 33 or clause (ii) of sub-section (2) of section 33A or clause (i) of sub- section (2) of section 35 or sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the ITO may require on specified points, and after taking into account all relevant material which he has gathered, (a) in a case where no assessment has been made under sub-section (1), the ITO shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment ; (b) in a case where an assessment has been made under sub section (1), if either such assessment has been objected to by the assessee by an application under clause (a) of sub-section (2) or the ITO is of opinion that such assessment is incorrect, inadequate or incomplete in any material respect, the ITO shall by an order in writing make a fresh assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment. Explanation : For the purposes of this section, (1) an assessment under sub-section (1) shall be deemed to be incorrect, inadequate or incomp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 143(1) the ITO could not have made adjustments which he purported to make u/s 154. If he did so since he would have exceeded his jurisdiction his order u/s 143(1) would have suffered from a mistake apparent from the records since it would have been contrary to law. 9. On reading the provisions of sec. 143(2)(b) it is clear that before the ITO made the assessment u/s 143(1), he had the option to adopt regular procedure u/s 143(2) and thereafter finalise the assessment u/s 143(3) and even after the assessment is made u/s 143(1) he could still adopt the procedure prescribed u/s 143(2) and then eventually make a fresh assessment u/s 143(3). In the present case the ITO has not taken recourse to either of such procedures. 10. We now come to the provisions of sec. 154. Sec. 154(1) vests powers in the ITO to pass an order with a view to rectifying any mistake apparent from the records . Where the ITO had an option of choosing to make the assessment u/s 143(1) or u/s 143(3) and he chose to make an assessment u/s 143(1), then his jurisdiction in making the adjustments was confined to such adjustments as were permitted under the provisions of sec. 143(1). Sec. 154(1) as it stood at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 154 was accordingly rightly annulled by the AAC though we have come to this conclusion by different reasons than those stated by the AAC. 11. Appeal of the revenue is accordingly dismissed. Per Shri D.S. Meenakshisundaram, Judicial Member - I have had the advantage of perusing the order of my learned brother, Shri George Cheriyan. With great respect to him, I find myself unable to agree with him. Since all the facts and the relevant provisions of law have been fully set out in the order of my learned brother, I would confine myself by stating the reasons in support of my conclusion. 2. It is an undisputed fact that an assessment has been made on 29-8-1978 by the Income-tax Officer under section 143(1) of the Income-tax Act, 1961 in the present case. Merely because the Income-tax Officer acted u/s 143(1) of the Act to complete the said assessment, it does not cease to be an order of assessment contemplated under the law. In fact, the provisions of sec. 143(1)(a) quoted in paragraph 5 of the order of my learned brother calls it an assessment only. It is further reiterated by the provisions contained in sec. 143(1)(b) also. If this is the correct position in law, then this asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction : The classic statement of Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners still holds the field. It reads: . . . In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. To this may be added a rider: in a case of reasonable doubt, the construction most beneficial to the subject is to be adopted. But even so, the fundamental rule of construction is the same for all statutes, whether fiscal or otherwise. The underlying principle is that the meaning and intention of a statute must be collected from the plain and unambiguous expression used therein rather than from any notions which may be entertained by the court as to what is just or expedient. The expressed intention must guide the court. 5. When we examine the provisions of section 143(1) and section 154(1)(a) of the Act as it stood at the relevant time, I find no warrant or justification for Placing any restraint or constraint on the jurisdiction of the Income-tax Officer under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the ITO, I consider it Just, fair and reasonable to set aside the order of the AAC and restore the matter to his file for fresh disposal in accordance with law after giving an opportunity both to the assessee and the Income-tax Officer to substantiate their contentions. For statistical purposes, I would treat the appeal filed by the department as partly allowed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 Per Shri George Cheriyan, Vice President (WZ) - The appeal in the present case relates to the assessment year 1977-78. The assessment for this year was completed under the provisions of section 143(1) of the Income-tax Act, 1961 on 29-8-1978. Subsequently, on 26-8-1982 the Income-tax Officer passed an order under sec. 154. In the aforesaid order he made certain adjustments and additions to the income and modified the assessment as originally made. The specific details have been set out in the order of the Accountant Member. The assessee appealed and the Appellate Asstt. Commissioner quashed the order u/s 154 on the ground that more than two opinions were possible and the mistake could not be treated as one apparent from the records. 2. The Revenue appealed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year under appeal, the assessee filed the return claiming the deduction of interest paid to these firms. In the statement of total income that was filed along with the return of income, under the head Other Sources , the assessee has shown dividends and interest income received from the aggregate of which the interest of Rs. 24,047 was deducted and the resultant loss of Rs. 16,397 was shown. 4. The Income-tax Officer completed the assessment under section 143(1) adopting the share income from the two firms provisionally at nil and adopting Rs. 21,929 from the third firm as determined in the assessment of that firm. 5. Subsequently, it appears that the ITO came to note from the copies of the assessee s accounts in the abovesaid three firms that the drawings made from those firms were used only for the purposes of payment of life insurance premium, purchase of furniture, purchase of air tickets etc. As the withdrawals from those firms were for non-business purposes, he came to the view that the allowance of interest on such withdrawals as a deduction in computing the income was a mistake apparent from the record. On the view that this mistake could be rectified under sec. 154 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 154, there must be a mistake apparent from the record and this mistake which the ITO had now sought to rectify was not such a mistake apparent from record because none of those documents accompanied the return. Even if the ITO collected this information from the records of the firm, still that could not be said to be an information available with the ITO at the time of making the assessment under sec. 143(1) and, therefore, that information which he states he had collated from the firms records, could not be regarded as information available with the ITO while making the assessment. 9. Hence the difference of opinion between the learned Members and the following point of difference was referred by the learned Members to the President who nominated me as Third Member: Whether, on the facts and circumstances of the case, the assessment having been made under section 143(1) of the Income-tax Act, 1961, the specific adjustments as made by the Income-tax Officer in the order under section 154 of the Act were valid and within his jurisdiction ? 10. I have heard at length both the learned Departmental Representative Shri K.L. Tilakchand and the learned representative for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n individual assessee does not necessarily mean the individual record of an asses see but also the record of the firms in which he happens to be a partner. By relying upon several decisions of the High Courts and Supreme Court on this issue, he submitted that the records of the firm also constituted records of the assessee and if the total record discloses a position where interest was wrongly allowed or was not to be allowed at all, that becomes a mistake apparent from record rectifiable under sec. 154. The learned Accountant Member was, therefore, not right in saying that the records of the firm do not constitute records of the assessee and should be totally eschewed. He commended for acceptance the view taken by the learned Judicial Member. 11. On the other hand, Shri Ramamani for the assessee, relying upon again the Supreme Court decisions in ITO v. S.K. Habibultah [1962], 44 ITR 809, Second Addl. ITO v. Atmala Nagarai [1962] 46 ITR 609, of the Delhi High Court decision in Swaran Yash v. CIT [1982] 138 ITR 734 and lastly the Madras High Court decision in E.M. Muthappa Chettiar v. CIT [1964] 53 ITR 642, submitted that record means the record of the assessee and not the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on before him and yet made this wrong allowance, assuming that the allowance was wrong. Since the information was not available to the ITO at that time, a subsequent discovery of this point from records which were not available with the ITO cannot perhaps be said to be a mistake apparent from record. The record must be the record available to the ITO while making the assessment in order that sec. 154 may apply. 13. That apart, there is a categorical finding recorded in the order of the AAC that most of the withdrawals were utilised for payment of income-tax. This finding not having been rebutted by the Department by filing necessary evidence, it is very difficult to say whether the withdrawals which needed an interest payment of Rs. 24,047 (i.e., the capital must be very huge) were employed only for the purpose of paying insurance premium, purchase of furniture and purchase of air-tickets. On the other hand, I find from the assessment order that relief for payment of insurance premium was made only on Rs. 1,357. This shows that the ITO s averment that withdrawals were made for payment of life insurance premium was not totally correct. I have also gone through the copy of the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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