2019 (8) TMI 1060 - HC - Income Tax

Intimations /= Demands: Court Clarifies Tax Due Dates

The court held that an acknowledgment or intimation under Section 143(1)(a) does not constitute an order giving rise to a demand for Rule 68B purposes. It ... Recovery proceedings - Sale of the attached property - the meaning of phrase “order giving rise to a demand” in Rule 68B, order u/s 143(1) OR 143(3) - period of limitation - department putting the attached properties for sale by issue of proclamation for the purpose of recovery of the tax amount due and payable by the Company, in which, the writ applicant is one of the Directors - Whether an acknowledgment or an intimation u/s 143(1)(a) can be treated as an order giving rise to a demand for the purpose of the applicability of Rule 68B in the Second Schedule of the Act? - intimation u/s 143(1) to be deemed to be a notice of demand of tax u/s 156 - Whether an intimation u/s 143(1) (a) can be equated with an assessment framed u/s 143(3)? - Whether the phrase “order giving rise to a demand” in Rule 68B of the Second Schedule in the Act should be construed as a final assessment order u/s 143(3)? HELD THAT:- The proviso to Rule 68B (1) provides for extension of one more year in certain cases where the sale falls through.If the sale held within the period of three years could not be completed for some reason set out therein, then, under the proviso to rule 68B(1) extension of one more year is available for effecting the sale. Rule 68B(2) provides for exclusion of the period during which the demand is stayed by any Court. The period of limitation under Rule 68B(1) for sale of the attached property commences from the date on which the demand of any tax interest, fine, penalty or any other sum for the recovery of which the immovable property has been attached has become conclusive under the provisions of section 245 I or under the provisions of Chapter XX of the I.T. Act. We find it extremely difficult to take the view that the intimation or an acknowledgment u/s 143(1) should be construed as an order giving rise to a demand for the purpose of the applicability of Rule 68B. Under the Income Tax Act, the tax, as such, becomes due and payable only when an assessment order is passed and a liability is created followed with a demand notice u/s 156 The phrase “order giving rise to a demand” in Rule 68B should be construed as the final assessment order, determining the tax liability of the assessee with interest, fine, penalty or any other sum. With the commencement of the proceedings u/s 143(2), the intimation u/s 143(1)(a), which in the absence of the proceedings u/s 143(2) r.w.s 143(3) would have taken the shape of regular assessment. But once the proceedings commenced under Section 143(3), the intimation u/s 143(1)(a) remains an intimation only of self-assessment with prima facie adjustments, if any, made by the Assessing Officer and becomes adjustable as per the regular assessment. The initial intimation u/s 143(1), which according to the learned counsel appearing for the assessee, should be understood as an order giving rise to a demand for the purpose of Rule 68B merges into the regular assessment and once the proceedings for the regular assessment u/s 143(3) is commenced, there cannot be any recourse to bring into existence any order u/s 143(1)(a). See UDAIPUR DISTILLERY CO. LTD. (NO. 1). [2003 (4) TMI 17 - RAJASTHAN HIGH COURT] We hold that the phrase “order giving rise to a demand” in Rule 68B to the Second Schedule of the Act should be read as the assessment order under Section 143(3) and not merely an acknowledgment or an intimation u/s 143(1). Computation of limitation - Period of limitation will have to be counted accordingly. It is not in dispute that against the final order of assessment u/s 143(3), an appeal was preferred by the writ applicant before the Commissioner (Appeals), which came to be dismissed and, as on date, an appeal is pending before the Income Tax Appellate Tribunal. In such circumstances, it cannot be said that the order became conclusive. The period of limitation would reckon only from the date, the order becomes conclusive. - both the writ applications fail and are hereby rejected Issues Involved:1. Whether an acknowledgment or an intimation under Section 143(1)(a) can be treated as an order giving rise to a demand for the purpose of the applicability of Rule 68B in the Second Schedule of the ActRs.2. Whether an intimation under Section 143(1) of the Act is deemed to be a notice of demand of tax under Section 156 of the ActRs.3. Whether an intimation under Section 143(1)(a) of the Act can be equated with an assessment framed under Section 143(3) of the ActRs.4. Whether the phrase “order giving rise to a demand” in Rule 68B of the Second Schedule in the Act should be construed as a final assessment order under Section 143(3) of the ActRs.Issue-wise Detailed Analysis:Issue 1: Whether an acknowledgment or an intimation under Section 143(1)(a) can be treated as an order giving rise to a demand for the purpose of the applicability of Rule 68B in the Second Schedule of the ActRs.The court held that an acknowledgment or an intimation under Section 143(1)(a) should not be construed as an order giving rise to a demand for the purpose of Rule 68B. The tax becomes due and payable only when an assessment order is passed, creating a liability followed by a demand notice under Section 156. The court referenced the Supreme Court's decision in *Kalyankumar Ray vs. CIT*, which clarified that 'assessment' involves both the determination of total income and the net sum payable, requiring a written order and subsequent demand notice.Issue 2: Whether an intimation under Section 143(1) of the Act is deemed to be a notice of demand of tax under Section 156 of the ActRs.The court noted that while an intimation under Section 143(1)(a) is deemed to be a notice of demand under Section 156, this does not equate it to an assessment order. The Supreme Court in *Rajesh Jhaveri Stock Brokers Private Ltd* emphasized that an intimation under Section 143(1)(a) is not an assessment order but a mechanism to facilitate the recovery of tax indicated as payable in the intimation.Issue 3: Whether an intimation under Section 143(1)(a) of the Act can be equated with an assessment framed under Section 143(3) of the ActRs.The court determined that an intimation under Section 143(1)(a) cannot be equated with an assessment under Section 143(3). The Supreme Court in *Rajesh Jhaveri* and the Delhi High Court in *Apogi International Limited* clarified that an intimation is not an assessment order but a preliminary step, and the assessment process is complete only with an order under Section 143(3).Issue 4: Whether the phrase “order giving rise to a demand” in Rule 68B of the Second Schedule in the Act should be construed as a final assessment order under Section 143(3) of the ActRs.The court concluded that the phrase 'order giving rise to a demand' in Rule 68B should be interpreted as the final assessment order under Section 143(3). The court reasoned that once proceedings under Section 143(2) commence, the intimation under Section 143(1)(a) remains preliminary and merges into the final assessment under Section 143(3). This interpretation aligns with the decisions in *Kamal Textiles* and *CIT vs. Himgiri Foods Ltd.*, which distinguished between intimation and final assessment.Conclusion:The court rejected the writ applications, holding that the period of limitation for the sale of attached properties should be counted from the date the final assessment order under Section 143(3) becomes conclusive. Since the appeal against the final assessment order is still pending before the Income Tax Appellate Tribunal, the order has not yet become conclusive, and thus, the period of limitation has not commenced. The court emphasized that the intimation under Section 143(1)(a) cannot be treated as an order giving rise to a demand for the purposes of Rule 68B.