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TMI Blog2003 (4) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... years 1990-91, 1992 93, 1993-94 and 1994-95 are under challenge in this writ petition. The facts of the case briefly stated are as follows: The petitioner, CESC Ltd., filed income-tax returns under section 139 of the Income-tax Act, 1961, claiming deduction on account of appropriation to contingency reserve. On this basis returns were filed for the assessment years 1990-91, 1992-93, 1993-94, 1994-95 and 1995-96. The Assessing Officer duly accepted the returns and issued intimation under section 143(1)(a) up to the assessment year 1994-95 issuing refund orders from time to time from out of the tax deducted at source because in each of the aforesaid years the assessee had suffered losses. Besides that there was carry forward loss. In respect of each of the aforesaid assessment years notices under section 143(2) of the Income-tax Act were issued and regular assessment under section 143(3) of the Income-tax Act disallowing the appropriation to contingency reserve was made for the assessment years 1990-91 and 1992-93 against which appeals preferred by the petitioner are pending. In respect of the assessment year 1993-94 notice under section 143(2) of the Income-tax Act (hereinafter re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed decision as above, I therefore propose to rectify the intimation under section 143(1)(a) dated March 2, 1995, under section 154(1)(b). In this connection you are requested to show cause to the undersigned by March 26, 1996, as to why the proposed action should not be taken." Dr. Pal, learned senior advocate appearing in support of the petition, contended that notices under section 154 of the said Act have been issued on the ground of a mistake apparent from the record and the alleged mistake apparent from the record is based on a judgment of the Supreme Court in the case of Associated Power Co. Ltd. v. CIT [1996] 218 ITR 195, wherein the apex court held that appropriation to contingency reserve account is not an allowable business expenditure. The said judgment was delivered on November 28, 1995, whereas the intimations under section 143(1)(a) were issued long prior thereto. He submitted that the question is "whether it is open to the Department to seek to rectify a regular assessment or a summary assessment on the ground of mistake apparent from the record based on a subsequent decision of the court?" He submitted that in an unreported judgment delivered by me in Matter N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich I have already discussed in Geo Miller and Co. Ltd.'s case [2003] 262 ITR 237 (Cal). I, therefore, need not reiterate the same. Lastly, Mr. Saha relied on a Division Bench judgment of this court in the case reported in Indo Asahi Glass Co. v. ITO [1996] 222 ITR 534, wherein it was held that a writ is not maintainable challenging a notice under section 154 and that the assessee should take all his points before the Department itself. But that was a case in which the jurisdiction to issue the notices under section 154 was not under challenge. The relevant portion of the judgment is as follows: "This is not a case where the jurisdiction of the Income-tax Officer to issue the show cause notice is under challenge. It is not disputed by any one that the Income-tax Officer did have the jurisdiction to issue the show cause notice. What is disputed by the appellant is their liability to pay tax, on the basis of the facts alleged in the notice." In the case of Geo Miller and Co. Ltd. [2003] 262 ITR 237 (Cal), regular assessment made under section 143(3) of the said Act was sought to be rectified on the basis of a subsequent decision alleging that it was a mistake apparent from the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissing appeals under section,260A of the Income-tax Act, 1961, on the ground that no substantial question of law arose in the appeals. The High Court relied on its own earlier judgment in Gujarat Poly-Avx Electronics Ltd. v. Deputy CIT [1996] 222 ITR 140 and also on the fact that a similar view has been taken by other High Courts. The short question which arises in these appeals is whether it is open to the Revenue to issue intimation under section 143(1)(a) of the Income-tax Act, after notice for regular assessment has been issued under section 143(2) of the Income-tax Act, 1961. As far as the Gujarat High Court was concerned, the question was not res integra as it had before it the judgment in Gujarat Poly-AVX Electronics Ltd. v. Deputy CIT [1996] 222 ITR 140 and, therefore, the High Court was right in holding that a substantial question of law did not arise for determination. Mr. T.L.V. Iyer, learned senior counsel for the appellant submits that the question needs to be decided by this court. Learned counsel appearing for the respondents have pointed out that in a number of judgments several High Courts have consistently taken the view that once regular assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als therefrom are pending. A fur ther question therefore arises whether "summary assessment or the provisional assessment or to be more precise, the assessment made on the basis of the return itself under section 143(1)(a) of the Act accepting appropriation to contingency reserve as an allowable expenditure merged in the order passed under section 143(3) of the Act wherein the aforesaid appropriation to contingency reserve was disallowed?" What was accepted in the intimation has been reversed in the regular assessment and the assessee has preferred an appeal which is pending. I am firmly of the view that this is a case where the theory of merger is bound to apply because the intimation issued under section 143(1)(a) is no longer operative in respect of the assessment years 1990-91 and 1992-93. The only order which is effective and operative is the one passed under section 143(3) of the Act. The order passed under section 143(1)(a) ceased to be operative and merged in the final order. I am supported in my view by the following judgments. In the case of CIT v. Amritlal Bhogilal and Co. [1958] 34 ITR 130 (SC), their Lordships stated the law with regard to merger as follows: "There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in the case of Coates of India Ltd. v. Deputy CIT (No. 1) [1995] 214 ITR 498, wherein the following observations were made: "As far as the first issue is concerned, in my view, an order under section 143(1)(a) may or may not be followed by a regular assessment under section 143(3). The option is with the Assessing Officer. The jurisdiction under section 143(1)(a) is limited to the obvious and also to that which is deducible from the return as filed and only when there is no doubt or debate: See judgment of this court dated April 27, 1994 (March 7, 1994 ?) in Matter No. 4101 of 1992 : Modern Fibotex India Ltd. v. Deputy CIT [1995] 212 ITR 496. In such circumstances, the order becomes final in the sense that it is effective for the purposes of raising a demand on the assessee or obliging the Department to make a refund to the assessee. Where, however, the order under section 143(1)(a) is followed by a regular assessment under section 143(3), the order under section 143(1)(a) in so far as it is contrary to the regular assessment under section 143(3), ceases to be executable and becomes ineffective." It follows that the effective and operative order is the one under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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