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TMI Blog2011 (7) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30-3-1990. 5. Thereafter, a notice under section 148 of Act was issued to the assessee. In this proceeding, the following order was passed on 19-7-1990: "The taxable income of the assessee was assessed to be Rs. 30,56,56. On this income, statutory interest as per rules was charged; and the penalty proceeding under sections 271(1)(c) and 273(2)(a) were initiated against the assessee." The statutory interest meant interest under section 215 read with section 217 of the Act up to the date of the aforesaid order. 6. The assessee filed an application under section 154 of the Act for correction of the order. This application was rejected on 1-4-1990. It was held that the order dated 19-7-1990 was the regular assessment and interest was to be charged up to that date and not up to 29-2-1988, the date of order under section 143(1)(a) of the Act. 7. The assessee filed an appeal. The appeal was allowed by the Commissioner (Appeals). It was held that : The assessment order dated 29-2-1988 under section 143(1)(a) was the regular assessment; and The interest could be charged up to this date. 8. The Income-tax Department (the Department) filed an appeal before the Income-tax Appellate T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. Section 2 is definition clause. Section 2(40) of the Act defined the words 'regular assessment'. At the relevant time it meant assessment under section 143 or 144. This indicates that an order under section 143 whether under section 143(1) or 143(3) or under 144 of the Act was to be treated as a regular assessment. 18. Section 2(40) has been amended with effect from 1-4-1989. It now means assessment order under sub-section (3) of section 143 or 144 of the Act. At present, it undoubtedly exclude the order passed under section 143(1) of the Act. 19. Section 143(1) at the relevant time used the words 'make an assessment'. The aforesaid definition of the words 'regular assessment' changed with effect from 1-4-1989. This indicates that the assessment under section 143(1) was included in the ambit of the words 'regular assessment' in the relevant year. 20. However, the counsel for the Department submitted that, (i) A mere use of the word assessment in a section is not conclusive but it has to be seen in its context; (ii) The assessment under section 147 of the Act is the regular assessment; (iii) The amendment in section 2(40) is clarificatory and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw; In fact assessment under section 143(1)(a) was never the regular assessment. 27. In support of his submission, he also brought to our notice the object and reasons of the Finance Act, 1990 in respect of amendment under section 2(40). It is as follows: "The proposed amendment, vide sub-clause (ii), seeks to amend the definition of the expression 'regular assessment' given in clause (40) of that section so as to clarify that it would mean an assessment made only under sub-section (3) of section 143 or section 144." 28. Section 143(1) as applicable in the assessment year 1987-88 (see Appendix-1) provided that the Income-tax Officer could make assessment of the total income or loss of the assessee after making adjustments without requiring the presence of the assessee or production by him of any evidence in support of the return. He could determine the sum payable or refundable by or to the assessee on the basis of such assessment. 29. Under section 143(1)(a) as it existed in assessment year 1987-88, the Assessing Officer (the Assessing Officer) was to prima facie examine the return filed by an assessee. He could adjust the obvious mistake and determine the sum payable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. 35. The position after 1-4-1989 was also explained in the Circular number 549, dated 31-10-1989 (the 1989 Circular). Its relevant part is Appendix-4. Its clause 5.1 explains the reason for amending the law namely, the increase in number of income-tax assessees and need to reduce the department's workload by greater reliance on voluntary compliance by the assessees. It was for this reason that the entirely new scheme of assessment was introduced. 36 In our opinion, the aforesaid circulars correctly portray the position of law. 37. This was also so held by the Division Bench of Delhi High Court in Apogee International Ltd. v. Union of India [1996] 220 ITR 2482. The court observed : "The prime reason for amendment of sub-clause (i) of section 143(1)(a) of the Act is that earlier under section 143(1)(a), as it stood prior to its substitution in the present form by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989, the Assessing Officer had to pass an assessment order if he decided to accept the return but under the new section, the requirement of passing an assessment order in all cases, where returns of income are filed, has been dispensed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 15th June, 1982 accepting return by the Assessing Officer is an order of assessment." 41. Had section 2(40) not amended by clarifying the law then mere sending of the intimation might have been treated as a regular assessment. It is for this reason that section 2(40) was amended and in the objects and reasons it was mentioned that this amendment was being carried out to clarify the law. 42. In our opinion, the order dated 29-2-1988 under section 143(1)(a) of the Act was the regular assessment and interest could be charged up to that date only. CONCLUSION 43. Our conclusions are that : (a) Prior to 1-4-1989, the assessment order under section 143(1) of the Act was not merely an intimation but a regular assessment; (b) This case relates to assessment year 1987-88. The assessment order dated 29-2-1988 under section 143(1) of the Act was the regular assessment; (c) The interest under sections 215 and 217 could only be charged up to the date of assessment order under section 143(1)(a) namely 29-2-1988; (d) There is no mistake in the order of the Tribunal upholding the finding of the Commissioner (Appeals). 44. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the words "sub-section (1) of section 74" the words "sub-section (1) or sub-section (3) of section 74 are to be substituted. (2) Where a return has been made under section 139, and- (a) an assessment having been made under sub-section (1), the assessee makes within one month from the date of service of the notice of demand issued in consequence of such assessment, an application to the Income-tax Officer objecting to the assessment, or (b) whether or nor an assessment has been made under sub-section (1), the Income-tax Officer considers it necessary or expedient to verify the correctness and competence of the return by requiring the presence of the assessee or the production of evidence in this behalf, the Income-tax Officer shall serve on the assessee a notice requiring him, on a date to be therein specified, either to attend at the Income-tax Officer's office or to produce, or to cause to be there produced, any evidence on which the assessee may rely in support of the return : Provided that, in a case where an assessment has been made under sub-section (1), the notice under this sub-section except where such notice is in pursuance of an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed: Provided further that an intimation for any tax or interest due under this clause shall not be sent after the expiry of two years from the end of the assessment year in which income was first assessable. (b) Where as a result of an order made under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, or any order of settlement made under sub-section (4) of section 245D relating to any earlier assessment year and passed subsequent to the filing of the return referred to in clause (a), there is any variation in the carry forward loss, deduction, allowance or relief claimed in the return, and as a result of which, - (i) if any tax or intsrest is found due, an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly, and (ii) if any refund is due, it shall be granted to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return : Provided that no notice under this sub-section shall be served on the assessee after the expiry of the financial year in which the return is furnished or the expiry of six months from the end of the month in which the return is furnished, whichever is later. (3) On the day 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 Assessing Officer may require on specified points, and after taking into account all relevant material wnich he has gathered, the Assessing Officer 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 on the basis of such assessment. Appendix-3 Excerpts from Departmental Circular No. 281, dated 22-9-1980 27.1 Under section 143(1) of the Income-tax Act, an Income-tax Officer may make a regular assessment without requiring the presence of the assessee or the production by him of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the assessment by issuing the, necessary notice calling upon the assessee to produce the books of account and other evidence in support of the return. The Income-tax Officer is also empowered to issue a notice in cases where an assessment has been completed under section 143(1). However, the issue of a notice in such cases is subject to the requirement that prior approval of the Inspecting Assistant Commissioner has been obtained. The basis for the issue of such a notice is that the Income-tax Officer considers it necessary or expedient to verify the correctness and completeness of the return by requiring the presence of the assessee or the production of evidence in this behalf. Appendix-4 Excerpts from Departmental Circular No. 549, dated 31-10-1989 5.1 With the number of income-tax assessees continuously increasing, there was an urgent need to reduce the Department's work load by greater reliance on voluntary compliance by the assessees. The Amending Act, 1987, has, therefore, substituted a new section 143 in the Income-tax Act to introduce an entirely new scheme of assessment after a return of income has been filed. The main features of the new scheme are : (i)&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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