1998 (9) TMI 76 - HC - Income Tax

Court sets aside orders demanding income tax for 1992-93, ruling on jurisdiction and assessment procedures.

Makum Tea Company (India) Limited And Another Versus Deputy Commissioner Of Income-Tax And Another

The court set aside the challenged orders demanding income tax and additional tax for the assessment year 1992-93 under the Income-tax Act, 1961. It ruled ... Power To Make Adjustments Issues:Challenge to order demanding income tax and additional tax for assessment year 1992-93 under Income-tax Act, 1961. Refusal to rectify mistakes regarding interest on deposit and loan. Jurisdiction of respondent No. 1 in adding income. Prima facie adjustment of income under section 143(1)(a) challenged. Availability of alternative remedies.Analysis:The petitioner, a limited company, challenged an order demanding income tax and additional tax for the assessment year 1992-93 under the Income-tax Act, 1961. The petitioner submitted its return of income showing a total income of Rs. 75,61,610, with total tax payable amounting to Rs. 39,13,134. An additional sum was payable on account of interest under sections 234B and 234C. The first respondent added certain income and determined the total income at Rs. 1,34,47,568, leading to a net amount payable by the petitioner. The petitioner filed a petition for rectification under section 154, pointing out double taxation due to a mistake in the addition made by the respondent. The petition was disposed of, rectifying certain mistakes but not regarding interest on deposit and loan. The petitioner challenged the jurisdiction of the respondent in adding income beyond its scope.The petitioner argued that the respondent acted beyond jurisdiction by adding interest on deposit and loan, which were not income from other sources. The exercise of powers under section 143(1)(a) was questioned as no deduction or relief was claimed in the return, ruling out prima facie adjustment of income. The respondent's powers under section 143(1)(a) were deemed inapplicable as per the provisions of the Act. The respondent contended that an appeal provision existed against orders under section 154, making the petition under article 226 of the Constitution not maintainable. Reference was made to previous judgments emphasizing the hierarchy of authorities for challenging assessments under the Act.In light of the Supreme Court judgments cited by the respondent, the petitioner relied on Bombay High Court decisions to support the argument that the remedy under article 226 of the Constitution was not barred in cases where the Assessing Officer exceeded the scope of powers under section 143(1)(a). The petitioner contended that the adjustments made were beyond the officer's jurisdiction. The court opined that the addition of interest on loan and deposit was unjustified, suggesting that final assessment procedures should have been followed to resolve disputes. The impugned orders under sections 143(1)(a) and 154 were set aside, allowing the respondents to utilize other provisions of the Act.In conclusion, the court disposed of the petition, directing the parties to bear their own costs while setting aside the challenged orders. The judgment highlighted the importance of following statutory procedures and ensuring proper assessment practices under the Income-tax Act, 1961.