Court rules on Assessing Officer's authority in tax assessments

The court held that once the Assessing Officer (AO) opts to proceed with a regular assessment under section 143(3) by issuing a notice under section 143(2), the AO forfeits the authority to act under section 143(1). Simultaneous proceedings under sections 143(1) and 143(2) are impermissible. The court quashed the intimation/order issued under section 143(1)(a) after the notice under section 143(2) and directed the AO to complete the assessment under section 143(3) in accordance with the law. The court did not address substantive issues but focused on procedural irregularities.

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Issues Involved:
1. Validity of the intimation/order u/s 143(1)(a) after issuance of notice u/s 143(2).
2. Whether simultaneous proceedings u/s 143(1) and 143(2) are permissible.

Summary:

1. Validity of the intimation/order u/s 143(1)(a) after issuance of notice u/s 143(2):

The assessee filed a return of loss for the assessment year 1993-94, claiming depreciation and setting off interest received against pre-operative expenditure. The Assessing Officer (AO) issued a notice u/s 143(2) to proceed with a regular assessment u/s 143(3). However, the AO later issued an intimation/order u/s 143(1)(a), rejecting the return and raising a demand of Rs. 1,30,83,741. The court held that once the AO opts to proceed u/s 143(3) by issuing a notice u/s 143(2), he forfeits the authority to act u/s 143(1). The AO must complete the assessment u/s 143(3) after issuing a notice u/s 143(2). The court quashed the intimation/order u/s 143(1)(a) and the demand raised.

2. Whether simultaneous proceedings u/s 143(1) and 143(2) are permissible:

The court examined the statutory provisions and concluded that simultaneous or parallel proceedings u/s 143(1) and 143(2) are not permissible. The issuance of a notice u/s 143(2) mandates the AO to proceed with a regular assessment u/s 143(3). The court referred to the Central Board of Direct Taxes (CBDT) Circular No. 549, which advises completing action u/s 143(1)(a) before issuing a notice u/s 143(2). The court emphasized that the AO must follow the procedure laid down in the Act and cannot revert to u/s 143(1) after initiating proceedings u/s 143(3).

Conclusion:

The court ruled that the AO could not issue an intimation/order u/s 143(1)(a) after issuing a notice u/s 143(2). The AO must complete the assessment u/s 143(3). The order and demand raised were quashed, and the AO was directed to proceed in accordance with the law. The court did not address other questions regarding depreciation and interest, focusing solely on the procedural issue. Rule made absolute to the extent discussed, with no order as to costs.

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