TaxTMI 
TaxTMI 
2009 (5) TMI 839
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.... for the assessment year 1999-2000. 2. (i) The lower authorities had erred in overlooking the provisions of section 25B which had been inserted by the Finance Act, 2000 to the effect that the arrears of rent would be assessable in the previous year in which the arrears of rent would be received with effect from the assessment year 2001-02. (ii) The lower authorities had erred in not appreciating that arrears of rental income from the said flat could become legally chargeable to tax in the year of the receipt of arrears of rent under section 25B of the Act with effect from the assessment year 2001-02 and as such the same could not be assessed for the assessment year 1999-2000. 3. The lower authorities had erred in not appreciating that there being no specific provision in the Income-tax Act, the receipt of arrears of rental income could not be assessed for the assessment year 1999-2000. 4. (i) The lower authorities had erred in overlooking the judgments of the Supreme Court in the following cases : (a) Nalinikant Ambalal Mody v. Narayan Row (S. A. L.), CIT [1966] 61 ITR 428 (SC) ; (b) CIT v. Express Newspapers Ltd. [1964] 53 ITR 250 (SC) ; (c) CIT v. Ajax Produc....
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....inal return of income including arrears of rental income should have been revised under section 139(5) if there was any omission or wrong statement in such original return, and since the assessee has not filed any revised return under section 139(5) by March 31, 2001, the application for rectification under section 154 was liable to be rejected as there was no mistake apparent on record in the intimation issued by the Assessing Officer on the basis of return of income filed by the assessee. Being aggrieved with the Assessing Officer's order rejecting the application under section 154 of the Act, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) upheld the Assessing Officer's order by concluding as under : "Now the contention of the appellant is not relevant to the facts of the case. Though section 25B inserted by the Finance Act, 2000 was operative for the assessment year 2001-02 onwards, its applicability was not the subject matter before the Assessing Officer while order under section 154 had to be passed. It is sent that whatever income was returned was accepted under section 143(1)....
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....m house property is assessable with reference to the rental value for a period from 12 months, and the arrears of rent cannot be taxed till section 25B of the Act has been inserted in the statute with effect from the assessment year 2001-02. He, therefore, submitted that the arrears of rent included in the total income filed by the assessee should not be brought to tax by the Assessing Officer. Several decisions in support of the contention that arrears of rent are not liable to be taxed till the assessment year prior to 2001-02, have been relied upon by the assessee. He further submitted that according to section 154, the authority concerned may amend any order passed by it under the provision of the Act or any intimation or deemed intimation under section 143(1) of the Act. He then submitted that as per section 154(5), where any amendment made under section 154 has the effect of reducing the assessment, the Assessing Officer shall make a refund which may be due to the assessee. He further submitted that according to section 154(1)(b), amendment may be made in respect of any intimation or deemed intimation under section 143(1) of the Act. He, therefore, submitted that the view ....
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....hat while accepting the return under section 143(1), the Assessing Officer did not have any occasion to apply his mind and decide the applicability of the provisions of section 25B, and since whatever income was returned was to be accepted under section 143(1), there was no mistake apparent on record in intimation under section 143(1) which could be rectified under section 154 of the Act. We have heard both parties and have carefully gone through the orders of the authorities below. We have deliberated upon the relevant provisions of law and decided cases relating to the issue. The present appeal has arisen from the order of the learned Commissioner of Income-tax (Appeals) dated July 19, 2007 confirming the Assessing Officer's order passed under section 154 of the Act on an application filed by the assessee under section 154 of the Act to rectify the intimation issued under section 143(1) of the Act with a view to exclude the arrears of rent from returned total income shown by the assessee in the return of income. In this case, the assessee filed his return of income on June 29, 1999 declaring total income at Rs. 15,77,534, wherein the arrears of rent was included while compu....
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.... day of April, 1999, such intimation may be sent at any time up to the 31st day of March, 2002." The scope and effect of the provisions of section 143(1) as inserted by the Finance Act, 1999 with effect from June 1, 1999 have been elaborated in the following portion of the Departmental Circular No. 779, dated Septem- ber 14, 1999, as under ([1999] 240 ITR (St.) 3, 36) : "46. Simplification of procedure of processing of return under subsection (1) of section 143 and doing away with prima facie adjustment. 46.1 Under the existing provisions of the Income-tax Act, all the returns filed are processed under sub-section (1) of section 143 for payment of tax and issue of refund. Certain powers are available with the Assessing Officer to rectify arithmetical mistakes and to make prima facie adjustments regarding allowable and disallowable claims and deductions. These are known as prima facie adjustments. In addition to tax on income as a result of prima facie adjustment, 20 per cent. of the tax is also levied as additional tax for making incorrect claims. 46.2 It is seen that the present system of prima facie adjustments has become some sort of assessment in itself where every ....
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....e by the assessee. Any arithmetical error in the computation of tax, interest could only be corrected by rectification under section 154(1)(b) of the Act. Determination of any question about the liability otherwise has to be computed as per the return submitted by the assessee, after accepting all the claims to the deduction, allowance or the existence of the liability and any deviation required recourse to regular assessment, which could be the subject-matter of regular appeal. In the light of the discussion made above, it is, thus, clear that section 143(1) as substituted by the Finance Act, 1999 with effect from June 1, 1999 dispensed with the intimation permitting any prima facie adjustment to the returned income. Intimation under section 143(1) on or after June 1, 1999 will authorise refund or demand of tax strictly on the basis of return filed by the assessee. Having held that with effect from June 1, 1999, section 143(1) does not contain any provision for any adjustment to the returned income shown by the assessee in the return of income, and no room is left for any intimation to the assessee except making arithmetical calculation of tax or interest strictly on the basis ....