2004 (1) TMI 27 - HC - Income Tax

High Court dismisses appeal challenging Income-tax Act notices for rectifying summary assessments, upholds disallowance of contingency reserve fund deduction.

The High Court of CALCUTTA dismissed the appeal challenging notices under section 154 of the Income-tax Act for rectifying summary assessments made under ... Appropriation to contingency fund – the appeal fails and is hereby dismissed. The interim order granted is hereby discharged. All questions are kept open to be agitated in the appeal, if filed. The period spent in pursuing the remedy through this writ petition would be available to the appellants under section 14 of the Limitation Act in case the appellants prefer an appeal. Issues involved:Challenge to notices under section 154 of the Income-tax Act for rectifying summary assessments made under section 143(1)(a) for multiple assessment years, including the claim for allowable deduction in respect of the contingency reserve fund. Disallowance of appropriation to contingency reserve in regular assessments for certain years. Jurisdictional challenge to notices under section 154. Maintainability of the writ petition for assessment year 1995-96. Legal implications of law declared in Associated Power Co. Ltd. case on the assessment year 1995-96. Contention regarding the penal nature of the addition under section 143(1)(a). Interpretation of law applicable at the time of filing the return. Applicability of decisions in other cases cited by both parties.Analysis:The High Court of CALCUTTA heard an appeal challenging notices issued under section 154 of the Income-tax Act for rectifying summary assessments made under section 143(1)(a) for several assessment years, including a claim for deduction related to the contingency reserve fund. The court noted that the regular assessments disallowed the appropriation to the contingency reserve for specific years, while assessments for other years were pending. The main contention revolved around the jurisdiction of the Assessing Officer in disallowing the appropriation and the legality of the notices under section 154.The appeal also raised questions regarding the maintainability of the writ petition for the assessment year 1995-96, specifically concerning the disallowance of the appropriation to the contingency reserve fund. The appellants argued that the law applicable at the time of filing the return should govern the assessment. The court considered the legal implications of the law declared in the Associated Power Co. Ltd. case, emphasizing that the law becomes enforceable upon declaration, regardless of individual knowledge or publication dates.The court addressed the contention regarding the penal nature of the addition under section 143(1)(a), highlighting that the disallowance of the appropriation did not entail penal consequences. The judges analyzed various legal precedents cited by both parties, including the relevance of decisions in Associated Power Co. Ltd., Hindustan Electro Graphites Ltd., and other cases. The court emphasized the importance of assessing the law as existing at the time of filing the return and the binding nature of Supreme Court decisions.Ultimately, the court dismissed the appeal, upholding the decision that the appropriation to the contingency reserve fund was not allowable as a deduction for the assessment year 1995-96. The judgment highlighted the distinction between earlier years where the deduction was accepted and subsequent regular assessments where it was disallowed. The court concluded that the remedy through the writ petition did not warrant any costs, and parties were granted the option to pursue further remedies through an appeal.