Section 143(1A) cannot be invoked when Section 143(1)(a) intimation is set aside and scrutiny assessment follows

The HC held that Section 143(1A) applies only when adjustments are made under Section 143(1)(a), not under scrutiny assessment under Section 143(3). When the intimation issued under Section 143(1)(a) was set aside by CIT(A) and the AO subsequently initiated scrutiny assessment under Section 143(3), the basis for invoking Section 143(1A) was destroyed. The court emphasized that only one assessment order can exist per assessment year, and the subsequent Section 143(3) assessment subsumed the earlier Section 143(1)(a) intimation, making it unenforceable for additional tax demand. Decision favoured the assessee against revenue.

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Issues Involved:
1. Validity of levying additional tax with reference to the loss shown in the original return after a revised return was filed.
2. Correctness of the Tribunal's inference about the assessee's bona fide in filing the revised return and upholding the levy of additional tax u/s 143(1A).

Summary:

Issue 1: Validity of Levying Additional Tax with Reference to the Original Return

The appeal questions the validity of the additional tax levied u/s 143(1A) of the Income Tax Act, 1961, based on the original return, which was revised later. The court noted that the original intimation dated 28.02.1996 under Section 143(1)(a) was set aside by the CIT (Appeals) on 16.07.1996, and the matter was remitted for fresh proceedings. Consequently, the original return became pending, and the assessee filed a revised return on 06.09.1996. The revised return was not rejected, and scrutiny assessment proceedings u/s 143(3) were initiated, leading to a regular assessment order on 06.03.1998. The court found that once the original intimation was set aside, any adjustments made under Section 143(1)(a) did not survive, and thus, the basis to invoke Section 143(1A) was destroyed.

Issue 2: Correctness of Tribunal's Inference and Levy of Additional Tax

The Tribunal had drawn an adverse inference about the assessee's bona fide in filing the revised return and upheld the levy of additional tax u/s 143(1A). The court clarified that Section 143(1A) applies only to adjustments made under Section 143(1)(a) and not to scrutiny assessments under Section 143(3). The court emphasized that once an assessment order is passed u/s 143(3), it subsumes any prior intimation issued under Section 143(1)(a). Therefore, the additional tax levied based on the original return's exaggerated loss claim could not be sustained after the scrutiny assessment concluded.

Conclusion:

The court answered both questions in favor of the assessee and against the revenue, allowing the appeal and setting aside the additional tax demand.

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