TaxTMI 
TaxTMI 
2008 (4) TMI 276
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.... 3. The appellant is a public limited company engaged in business of manufacture and sale of sponge iron. It was incorporated under the Companies Act, 1956, on July 31, 2005, and assessed to income-tax since the assessment year 1984-85. The appellant filed return under section 139 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for the assessment year 1997-98 on September 26, 1997, and subsequently revised it by return dated December 30, 1997. The return was accompanied by audited profit and loss account and balance-sheet as well as tax audit report. On receipt of the return the Assessing Officer has initiated proceedings of assessment by issuing notice under section 143(2) of the Act on February 19, 1998 and March 18, 1998, posting the case for hearing. The Assessing Officer thereafter processed the return under section 143(1) of the Act on March 31, 1998. While processing the return under section 143(1) of the Act, the learned Assessing Officer made various adjustments in respect of loss of capital investment, interest due, depreciation of guest house and salary of guest house staff and has enclosed an explanatory note to the intimation in respect of the said a....
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....n the Department appeal, the cross-objection became infructuous and has become an academic one. 5. Learned counsel appearing on behalf of the appellant strenuously argued that the learned Income-tax Appellate Tribunal is not justified in holding that the cross-objection filed by the appellant supported the action of the Commissioner of Income-tax (Appeals) and therefore it had become academic and infructuous. He further contended that once notice under section 143(2) of the Act is issued for making a scrutiny assessment under section 143(3) of the Act the Assessing Officer cannot exercise jurisdiction under section 143(1) for making any prima facie adjustment. In support of his contention, he relied on the decision of the Gujarat High Court in the case of Gujarat Poly-AVX Electronics Ltd. v. Deputy CIT [1996] 222 ITR 140 and the Calcutta High Court in Modern Fibotex India Ltd. v. Deputy CIT [1995] 212 ITR 496. 6. The learned counsel appearing for the Income-tax Department vehemently argued that there was no infirmity in the order passed by the learned Income-tax Appellate Tribunal. He further contended that merely because notice under section 143(2) of the Act had been issued to ....
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....pported the action of the learned Commissioner of Income-tax (Appeals) is contrary to the materials available on record. As required under section 253(4) of the Act, the learned Income-tax Appellate Tribunal should have disposed of the memorandum of cross-objection as if it were an appeal presented before it section 253(4) of the Act is reproduced herein below: "The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Deputy Commissioner (Appeals)] or, as the case may be, the Commissioner (Appeals) has been preferred under sub-section (1) or sub-section (2) by the other part, may, notwithstanding that he may not have appealed against such order or any part thereof; within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3)." 9. In view of the clear provisions of section 253(4) of the Act, the le....
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.... making the said adjustments:…. (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 underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished. (3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum ....
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....ction 143(2), the Assessing Officer cannot issue intimation under section 143(1) (a). 12. The Central Board of Direct Taxes also in ifs Circular No. 549, dated October, 31, 1989 (see [1990] 182 ITR (St.) 1) has advised the Assessing Officers to issue intimation under section 143(1) before issuance of notice under section 143(2) of the Act. Therefore, it is not open to the Assessing Officer to make prima facie adjustment as provided under section 143(1) of the Act, after issuance of notice under section 143(2) of the Act. 13. In Modern Fibotex India Ltd. [1995] 212 ITR 496 the Calcutta High Court held that once notice under section 143(2) has been issued there is no scope for the Assessing Officer either to make prima facie adjustment on the basis of return as filed or to issue an intimation under section 143(1)(a) of the Act. In Gujarat Poly-AVX Electronics Ltd. [1996] 222 ITR 140 the Gujarat High Court took a view that after issuance of notice under section 143(2) of the Act, it is not open to the Assessing Officer to make adjustment or to pass order under section 143(1) of the Act but he has to make assessment in accordance with law, i.e., under section 143(3) of t....