TaxTMI 
TaxTMI 
1993 (3) TMI 146
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....ucka, chewing tobacco and other shop materials. The previous year relevant to the assessment year 1990-91 ended on 31-3-1990. The appellant was maintaining on profit and loss account for all the activities carried on by him. He furnished a return of income under section 139(1) of the Act, admitting a total income of Rs. 3,91,230. In the return thus furnished he had specifically mentioned that he purchased " processed kendu leaves from various sales divisions - Sambalpur, Jarsaguda, Bhavanipatna - of the Orissa Forest Corporation Ltd. The purchases from Orissa Forest Corporation Ltd. during the year amounted to Rs. 92,39,965 on which income-tax and surcharge under section 44AC is deducted ". The Assessing Officer sent the intimation under se....
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....sections 44AC and 206C of the Act. As the assessee was purchasing the processed goods from the said Corporation, and subsequently selling it without any processing, the proviso to section 206C(1) would not be attracted. As regards the objections of the assessee that in an assessment under section 143(1)(a), adjustments under section 44AC cannot be made, the first appellate authority, relying on the decision of the Kerala High Court in P. Kunhammed Kutty Haji's case and T. K. Aboobacker's case held that there was no merit in the assessee's stand. The assessee is in further appeal. 4. We have heard rival submissions. This is an assessment under section 143(1)(a) of the Income-tax Act, 1961. The section as substituted by Direct Tax Laws (Amen....
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.... prima facie inadmissible shall be disallowed : [Provided further that where adjustments are made under the first proviso. an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after the said adjustments :] [(Provided also) that an intimation for any tax or interest due under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the income was first assessable.] " Thus, under section 143(1)(a) of the Income-tax Act, 1961, the tax or the interest is computed on the basis of the return and adjusted for Tax deducted at source, advance-tax paid and any other amount otherwise paid (for example self-assessment tax) and if the computation re....
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....djustments if any, he can make is only in respect of taxes paid and also the prima facie adjustments that are envisaged in the proviso. He can only travel " thus far and no farther ". Hence, the assessment made under section 143(1)(a) of the Income-tax Act, 1961, invoking the provisions of section 44AC is bad in law and cannot be sustained. 5. Even assuming that the Income-tax Officer is empowered to make adjustments as he liked by involving the provisions of section 44AC in an assessment under section 143(1)(a) of the Act, whether the assessee attracted the provisions of presumptive taxation in the purchase of processed kendu leaves from the Orissa Forest Corporation Ltd. is a matter which has to be enquired into, discussed and decided. I....
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...., it cannot be said that the intimation sent by the Income-tax Officer under section 143(1)(a) of the Act in the case of the assessee was on the basis of the return and tax or interest due thereon. Really, a regular assessment had been attempted by the Income-tax Officer in the guise of prima facie adjustment for roping in the provisions of section 44AC. This, the Income-tax Officer is not entitled to make if regard is had to the provisions of section 143(1)(a) read with proviso thereunder. Hence, we hold that the assessment suffers from prima facie errors capable of being rectified under section 154. 7. The Commissioner of Income-tax (Appeals) relied on the decisions of the Kerala High Court in P. Kunhammed Kutty Haji's case and T. K. Abo....
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....sion as under :-- " (i) Parliament was perfectly competent to enact sections 44AC and 206C ; (ii) Section 206C does not suffer from any constitutional infirmity and is perfectly valid ; (iii) Section 44AC is not an independent provision. It does not dispense with a regular assessment in accordance with the provisions of the Income-tax Act. Section 44AC is merely an adjunct to and explains the provisions in section 206C. A regular assessment has to be made in respect of an assessee dealing in specified goods in accordance with sections 28 to 43C. Read down in this manner, section 44AC also does not suffer from any constitutional infirmity ; (iv) It is competent for Parliament to adopt the purchase price as a measure for determining the ....