TaxTMI 
TaxTMI 
2006 (11) TMI 253
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....Ind/ 1994 was accordingly dismissed. However, IT Appeal No. 92/Ind/96 was allowed partly. While pronouncing the decision in both these appeals vide our order dated 30-10-2006, it was directed that the detailed reasons for the conclusion would be separately furnished. We, therefore, give our reasons for decision in continuation of our order dated 30-10-2006 and pass this order disposing of both the appeals in accordance with the decision already pronounced in Open Court. 2. We have heard Shri P.M. Chowdhary, ld. counsel for the assessees and S/Shri Prabhash Shankar, CIT, DR and Manoj Kumar, DR for the Revenue and perused the findings of the authorities below and material available on record. As per the order of President, ITAT, this Special Bench was constituted to decide the entire appeal including the following issue referred to it:- "As to whether after granting of refund under section 143(1)(a)(ii) of the Income-tax Act, 1961, notice under section 143(2) could be issued or not?" 3. The ld. counsel for the assessee at the out-set submitted that the appeal in IT Appeal No. 952/Ind/94 in the case of M/s. Agarwal Warehousing & Leasing Limited is not pressed and submit....
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....dy been decided in favour of the assessee, therefore, the Assessing Officer should not have issued notice under section 143(2) after refund has been granted to the assessee under section 143(1)(a)(ii) of the Act. The ITAT Indore Bench, in this case, however, was of the view that earlier the decision of Jurisdictional M.P. High Court in the case of Kamal Textiles v. ITO [1991] 189 ITR 339, was not brought to the notice of the Tribunal, which is against the assessee on the similar issue. The ITAT Indore Bench, therefore, considering the matter in issue in the light of decision of the Jurisdictional M.P. High Court in the case of Kamal Textiles read with the provisions of section 143(1)(a)/143(2)(3) and 143(4) of the Act, held that the Assessing Officer was perfectly justified and within his right to issue a notice under section 143(2) after refund was granted to the assessee under section 143(1)(a)(ii) of the Act. This order was passed on 26-9-1995. The assessee challenged this order dated 26-9-1995. In IT Appeal No. 952/Ind/1994 reference under section 256(1) was made before the M.P. High Court in Income-tax Reference No. 43 of 1997. Hon'ble High Court referred to the five quest....
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....partly allowed. This order dated 22-8-1997, was challenged before the Hon'ble M.P. High Court in Writ Petition No. 1739 of 1997 and the Hon'ble High Court vide its order dated 17-11-2004 set aside the order of the Tribunal dated 22-8-1997 in IT Appeal No. 92 of 1996 for assessment year 1992-93 and the Appellate Tribunal was directed to decide the Tribunal afresh in accordance with law. It would be relevant to mention that the assessee in this writ petition has raised the plea that the order in assessment year 1991-92 in IT Appeal No. 1014 of 1993 should have been followed. 7. The facts noted above shows that in both the appeals as referred to the Special Bench to decide the aforesaid question were pending before the Tribunal for decision in accordance with law. 8. Since the assessee has made request for withdrawal of appeal in the case of M/s. Agarwal Warehousing & Leasing Limited, because it opted for K.V.S.S., it would be relevant to record the facts as referred to in the case of M/s. Arihant Builders, Developers & Investors Private Limited for the purpose of disposal of both the appeals. 9. Ld. counsel for the assessee in the case of M/s. Arihant Builders, Devel....
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.... submitted that even if the assessee has made a request for withdrawal of the appeal in IT Appeal No. 952 of 1994 would not make any difference, because on mere request of withdrawal of the appeal, the constitution of the Special Bench cannot be challenged. The ld. Departmental Representative also submitted that the ITAT, Indore Bench vide reference under section 255(3)/(4) of the Income-tax Act, 1961, dated 30-12-2005, in both the above appeals in IT Appeal No. 952 of 1994 and IT Appeal No. 92 of 1996 has made a request to the Hon'ble President for constitution of the Special Bench to decide the aforesaid question of law, on which Hon'ble President has constituted the aforesaid Special Bench for hearing the question proposed by the Bench. The ld. Departmental Representative, accordingly submitted that there is no merit in the preliminary objection raised by Counsel for the assessee. 11. We have considered rival submissions and material on record. Section 255(3) provides that the Hon'ble President of ITAT may for the disposal of any particular case constitute a Special Bench consisting of three or more Members, one of whom was necessarily be a Judicial Member and one....
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....ent of the Tribunal is authorized to constitute Special Bench of Three or More Members in the instant case also. The learned Members of the Indore Bench of the Tribunal instead of reviewing own earlier judgment ought to have referred the matter to the larger Bench. The matter was remanded to the Tribunal to do the needful in the light of the observations. The Division Bench of ITAT, Indore Bench in IT Appeal No. 952 of 1994 referred the aforesaid question to the Hon'ble President for constitution of the Special Bench vide order dated 7-2-2003. Similarly, a joint request was made for constitution of a Special Bench under section 255(3)/(4) of the Act, by the ITAT, Indore Bench to the Hon'ble President of the Tribunal to constitute the Special Bench in both the cases/appeals vide order dated 30-12-2005. All these materials were placed before the Hon'ble President of the Tribunal and the Hon'ble President of the Tribunal vide order dated 23-3-2006, has constituted this Special Bench for hearing of the question proposed by the Bench. These facts clearly show that the preliminary objections raised by the ld. counsel for the assessee has no force and is liable to be rejec....
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....143 is that a notice under this section shall be served before the expiry of 12 months from the end of the month in which return is furnished. The assessee challenged the order of the Assessing Officer before the CIT(A) on the same reasons, but the CIT(A) rejected the claim of the assessee and relied upon order of the ITAT, Indore Bench in the case of Agarwal Warehousing and Leasing Ltd. Indore, dated 26-9-1995, for assessment year 1989-90 in IT Appeal No. 952 of 1992 in which the Tribunal has decided this issue against the assessee. 15. Ld. counsel for the assessee submitted that in sub-clause (i) of section 143(1)(a), the words "Without prejudice" have been used, whereas such words are not used in sub-clause (ii). He has contended that if the return is processed under section 143(1)(a) and an intimation is sent to the assessee in respect of the tax or interest found due on the basis of the return, then such intimation is issued without prejudice to the provisions of sub-section (2) of section 143. Since the words "Without prejudice" are not mentioned in sub-clause (ii), it was contended that grant of refund under that clause become final and subsequent to the grant of refund, ....
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.... of the Legislature is primarily to be gathered from the language used, which means the attention should be paid to what has been said as also to what has not been said. As a consequences, a construction, which requires for its support, addition or substitution of words or which results in rejection of words as meaningless has to be avoided. He has submitted that the intention of the Legislature not to be speculated on. The meaning of the words ought to be understood to bear is not to be ascertained by any process akin to speculation: The primary duty of Court of Law is to find the natural meaning of the word used in the context in which they occur, that context including any other phrase in the Act, which may throw light on the sense in which the maker of the Act used the words in dispute. He has submitted that even though a Court is satisfied that the Legislature did not contemplate the consequences of an enactment, a Court is bound to give effect to its clear language. The ld. counsel for the assessee further submitted that casus omissus not to be created or supplied and submitted that the second consequence of the rule is that the Statute may not be extended to make a case for ....
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.... law that a taxing statute has to be construed strictly - an Explanation has to be strictly construed in the context in which it appears and it cannot be imported or it cannot be read in other provision where it is not warranted. (VII) Grasim Industries Ltd. v. Collector of Customs 128 STC 349, in which the Hon'ble Supreme Court held that- "No words or expressions used in any statute can be said to be redundant or superfluous. In matters of interpretation one should not concentrate too much on one word and pay too little attention to other words. No provision in the statute and no word in any section can be construed in isolation. Every provision and every word must be looked at generally and in the context in which it is used. Every statute is an edict of the Legislature. The elementary principle of interpreting any word while considering a statute is to gather the mens or sentential legis of the Legislature. Where the words are clear and there is no obscurity and the intention of the Legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or altering the statutory provisions. Wherever the language is clear th....
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....o that the tax payable by the assessee are paid through the demand notice and that refund is granted in case the same is due to the assessee. The ld. Departmental Representative submitted that the phrase "Without prejudice" to the provisions of sub-section (i) have to be read in conjunction in these provisions. The ld. Departmental Representative further submitted that the phrase "Without prejudice" is not used in section 143(2). The ld. Departmental Representative submitted that the Assessing Officer has power under section 143(2) to issue notice to the assessee even after intimation is issued under section 143(1)(a), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner. The ld. Departmental Representative further submitted that even sub-clause (4) of section 143 is applicable, which states that even after refund is granted, the same would be adjusted towards tax after regular assessment is made under section 143(3) by issue of notice under section 143(2). The ld. Departmental Representative submitted that all the sections have to be read together in order....
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....by the Assessing Officer determining the income, it is open to the assessee to ask for rectification under section 154. Apart therefrom, the provisions of section 143(1)(a)(i) indicate that the intimation sent under section 143(1)(a) shall be without prejudice to the provisions of sub-section (2). The Legislature, therefore, intended that, where the summary procedure under sub-section (1) has been adopted, there should be scope available for the Revenue, either suo motu or at the instance of the assessee to make a regular assessment under sub-section (2) of section 143. The converse is not available; a regular assessment proceeding having been commenced under section 143(2), there is no need for a summary proceeding under section 143(1)(a)." (c) Apogee International Ltd v. Union of India [1996] 220 ITR 248, in which Hon'ble Delhi High Court held that a notice under section 143(2) after issue of intimation under section 143(1)(a)(i) is not invalid. Section 143(1)(a) itself says that the intimation under sub-clause (i) thereof is without prejudice to the provisions of sub-section (2). (d) Gujarat Poly-A VX Electronics Ltd. [1996] 222 ITR 140 in which Hon'ble....
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....nd due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee: Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared, namely:- Xx xx xx xx xx xx (2) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, cause to be produced there, any evidence on which the assess....
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....nt whether after grant of refund under section 143(1)(a)(ii) of the Act, the Assessing Officer has authority to issue a notice under section 143(2) of the Act was not directly involved. However, we noticed that in between sub-clauses (i) and (ii) of section 143(1)(a), the word "and" is used. It is clear that when the word "and" is used, the same indicates the connection and the addition of the items within the same class or type. Therefore, by using the word "and" in between sub-clauses (i) and (ii) of section 143(1)(a), the Legislature clearly intended to use the expression "Without prejudice" for both the provisions. We do not have any quarrel with the proposition laid down by the authority cited by Shri P.M. Chowdhary, the learned counsel for the assessee. However, authorities cannot be read out of context and divorced from the background of the circumstances in which those authorities were rendered. Provisions of sub-sections (1) & (2) of section 143 are machinery provisions and not charging provisions. It is well-settled that machinery provision of a taxing statute must be construed in a manner which makes the statute workable. These cannot be construed in a manner which wi....
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....aking such adjustments. With effect from 1-4-1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till 1-6-1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between 1-4-1998, and 31-5-1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word "intimation" as substituted for "assessment" that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is ....
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....at the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them? The reply is an emphatic "no". The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise." There are several other decisions on above lines pointing out that intimation is to be sent under section 143(1) both in cases where sum is found to be payable by the assessee towards any tax or interest as also in cases where refund is found to be due on the basis of return filed by the assessee. It is also not disputed by Shri Choudhary that intimation sent by the Assessing Officer under section 143(1) after amendment of the sub-section as noted by the Hon'ble Delhi High Court is....
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....) govern different situations and operate in different fields. Sub-section (1) deals with issuance of "intimation" whereas sub-section (2) enables the Assessing Officer to issue notice to make a regular assessment. The scope of sub-section (1) has been explained by CBDT in Circular No. 541, dated 31-10-1989. The purpose is to find and immediately recover if any amount is payable by the assessee on the basis of income returned by the assessee. Likewise if any refund is due to the assessee, the same should be immediately granted and higher payment of interest on refund on account of delay avoided. This intention is made more than clear by express language of sub-section (1) of section 143. It has nothing to do with a regular assessment. Sub-section (2) enables the Assessing Officer to issue notice to the assessee if he consider it necessary or expedient to ensure that assessee has not understated the income or has not computed excessive loss or underpaid tax in any manner. Thus object of sub-section (2) is quite different from object of sub-section (1) of section 143. Sub-section (2) provide circumstances under which power of making a regular assessment is to be exercised by issui....
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....ng with a machinery provision of a taxing statute and must construe the same in a manner which would make it workable to achieve the purpose of Legislature. 21. We are of the view that the principle laid down by Hon'ble Jurisdictional M.P. High Court in the case of Kamal Textiles would squarely apply to the case, where refund is granted by the Assessing Officer after processing of the return under section 143(1)(a)(ii) of the Income-tax Act, 1961. Accordingly, the decision of the Hon'ble Delhi High Court in the case of Apogee International and the decision of Hon'ble Supreme Court in the case of Gujarat Electricity Board, also fortify our opinion on the said legal proposition. 22. Section 143(2) is meant for regular assessment whereas section 147 deals with the assessment for escapement of income. The Assessing Officer is empowered to proceed for regular assessment under section 143(3) by issuing notice under section 143(2). Both the provisions are altogether dealing with different situation. Even if Revenue has remedy to proceed under section 147 of the Income-tax Act, 1961, the powers of the Assessing Officer cannot be curtailed for issuing notice under section ....
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....fore the Tribunal on behalf of the assessee. Thus, the Tribunal concluded that the assessment has become complete in that case and nothing more was needed to be complete the assessment. The ld. counsel for the assessee, therefore, demolished his own case by contending now that the processing of the return under section 143(1)(a) is not an assessment, as is also held in his own argued case of Om Prakash Bagria. As per the decision in the case of Om Prakash Bagria there is a distinction between processing of the return under section 143(1)(a) and section 143(2). The case laws relied upon by the ld. counsel for the assessee would not support his contention at all. Considering the above discussion and the case laws referred to above, we hold that the Assessing Officer was perfectly justified and have jurisdiction to issue notice under section 143(2), even after refund was granted to the assessee under section 143(1)(a)(ii) of the Act. This issue is, therefore, decided in favour of the Revenue and against the assessee. 25. Now we deal with the grounds on merits, because the Special Bench was constituted to decide the entire appeal including the issue referred to above as decided with....
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.... are made in cash without supporting vouchers. The Assessing Officer issued show-cause notice to the assessee to explain these issues and the defects pointed out in the books of account and the vouchers, but the assessee replied before the Assessing Officer that since it is a case of Private Limited Company and books of account are audited. Therefore, the same cannot be rejected. The Assessing Officer, however, did not accept the contention of the assessee and considering the aforesaid defects in the vouchers and books of account rejected the book result and directed to apply the net profit rate at 12.5 per cent on the total receipts shown by the assessee and computed the income of the assessee accordingly. The addition was challenged before the CIT(A) and the ld. CIT(A) considering the defects pointed out by the Assessing Officer, confirmed the rejection of the books of account and also dismissed the appeal of the assessee. 29. The ld. counsel for the assessee did not argue on this issue. Therefore, we are left with no alternative except to consider and decide this issue on the basis of the merits and the material available on record in the light of the observations of the auth....