Case Law Details

Case Name : Anshul Singhal Vs ACIT (ITAT Delhi)
Appeal Number : ITA No. 3738/Del/2007
Date of Judgement/Order : 15/05/2009
Related Assessment Year : 1999- 2000
Courts : All ITAT (4439) ITAT Delhi (983)

RELEVANT PARAGRAPH

10. The present appeal has arisen from the order of Id. CIT(A) dated 19.07.2007 confirming the A.O.’s order passed u/s 154 of the Act on an application filed by the assessee u/s 154 of the Act to rectify the intimation issued u/s 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 29.06.1999 declaring total income at Rs. 15,77,534/-, wherein the arrears of rent was included while computing the income under the head “income from house property”. The A.O. processed the return of income u/s 143(1) at a returned total income of Rs. 15,77,534/-. No adjustment to the returned total income was made by the A.O. while making intimation u/s 143(1) of the Act. Thereafter, the assessee filed an application u/s 154 of the Act with a request to rectify the intimation issued u/s 143(1) by excluding the arrears of rent from the total income chargeable to tax under the Act. The intimation u/s 143(1) is dated 15.12.2000. The assessee filed an application u/s 154 on 08.06.2001. Since return of income was filed on 29.06.1999, the intimation was made on 15.12.2000 u/s 143(1), we have to refer the relevant provisions of section 143(1) with a view to see the scope and effect of section 143(1) of the Act, which has been inserted in the statute with effect from 01.06.1999. Section 143(1) as substituted from 01.06.1999, reads as under:-

(1) “Where a return has been made u/s 139, or in response to a notice under sub-section (1) of section 142,-

(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment 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 u/s 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 and an intimation to this effect shall be sent to the assessee: Provided that except as otherwise provided in this sub-section, the acknowledgement of the return shall be deemed to be intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him: Provided further that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made].

Provided also that where the return made is in respect of the income first assessable in the assessment year commencing on the 1st day of April, 1999, such intimation may be sent at any time up to the 31st day of March, 2002.”

11. The scope and effect of the provisions of section 143(1) as inserted by the Finance Act, 1999 with effect from 01.06.1999 has been elaborated in the following portion of the departmental circular No. 779. dated 14.09.1999, as unden-

“46. Simplification of procedure of processing of return under sub section (I) of section 143 and doing away with prima facie adjustment. –

46.1 Under the existing provisions of the Income-tax Act, ail 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 adjustment s regarding allowable and dis allowable claims and deductions. These are known as prima facie adjustments. In addition to tax on income as a result of prima facie adjustment, 20% 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 return is examined minutely and such adjustments are also open to appellate remedy^ Most of the time of the Assessing Officer is utilized in processing the returns in the above manner leaving very little time for thorough investigation and other important activities. The ever increasing number of returns resulting from the drive to widen the tax base may make it more difficult. In view of the above, the Finance Act, 1999, has amended section 143 of the Income-tax Act to modify the present provisions contained in section 143(1)/143(1A) /143(1B) and to do away with the provisions relating to prima facie adjustments, additional tax and issue of intimations in all cases. Filing of the return by itself would complete the process of assessment limiting its scope to raise demand where taxes are not paid and issue refund wherever due, on the basis of return of income so filed With the exception of issuing intimations where any sum is payable by the assessee or any refund is due to him, the acknowledgement shall be deemed to be an intimation. The Finance Act, 1999, has also amended section 154 of the Income-tax Act to provide for rectification of intimation or deemed intimation referred to in sub-section (1) of section 143.

46.3 These amendments take effect from the 1st day of June, 1999. [Section 64]”

12. On reading the provisions of section 143(1) effective from 01.06.1999, it is, thus, clear that with effect from 01.06.1999, section 143(1) does not contain any provision for any adjustment in respect of any claim made by the assessee in his return. The A.O.’s power to make prima facie adjustment to the income or loss declared in the return while processing the return u/s 143(lXa), as they stood prior to 01.06.1999, has been done away with by the Finance Act, 1999 whereby section 143(1) has been amended containing no provision for any adjustment of the income or loss declared in the return of income by the assessee. In other words, the adjustments permissible u/s 143(lXa) prior to the amendment made by the Finance Act, 1999 with effect from 01.06.1999, are no more permissible while preparing the intimation u/s 143(1) on or after 01.06.1999. With effect from 01.06.1999, in section 143(1), no room is left for any intimation to the assessee except making arithmetical calculation of tax, penalty or interest payable on the basis of claims made by the assessee. Any arithmetical error in the computation of tax, interest could only be corrected by rectification u/s 154(l)(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 01.06.1999 has dispensed with the intimation permitting any prima facie adjustment to the returned income. Intimation u/s 143(1) on or after 01.06.1999 will authorize refund or demand of tax strictly on the basis of return filed by the assessee.

13. Having held that/with effect from 01.06.1999, 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 of returned income) *we have to see whether the A.O. can make any adjustment to the returned income by making rectification u/s 154 of the Act rectifying the intimation issued u/s 143(1) of the Act. The power of rectification of intimation or deemed intimation u/s 154(l)(b) is to be read as co-terminus with the power to make adjustment permissible u/s 143(1) on and from 01.06.1999. Since u/s 143(1), the A.O. cannot revise the returned income and redetermine the income on and from 01.06.1999, it would follow that the A.O. cannot revise the intimation and redetermine the income in purported exercise of power u/s 154 of the Act. The power to rectify intimation cannot go beyond the scope and effect of the section 143(1) effective from 01.06.1999. In other words, what could not have been done directly while making intimation u/s 143(1) on and from 01.06.1999 cannot be done indirectly in the garb of rectification of power given u/s 154(l)(b) of the Act. therefore, the power of rectification u/s 154 of the Act should be limited to the scope and power of making intimation u/s 143(1), and as such the power of rectification u/s 154(l)(b) should be limited to the matters falling within the scope and ambit of section 143(1) effective from 01.06.1999^ In this view of the matter, we, therefore, hold that the A.O. had no authority or power to rectify the intimation u/s 143(1) of the Act so as to redetermine the returned total income shown by the assessee in the return of income. The A.O. can rectify the intimation u/s 143(1) only with a view to determine any sum payable by the assessee or any refund due to the assessee strictly on the basis of returned income and not after redetermining the income shown by the assessee in the return of income.

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0 responses to “A.O. can rectify the intimation u/s 143(1) only to determine tax payable by assessee or any refund due to the assessee”

  1. Shahid says:

    dear sir, plz let me know how many times the application u/s 154 can be moved if refund claim was not given in full in 1st application u/s 154. Thanks and regards shahid

  2. Rotash Nimeal says:

    Dear sir,
    Presently I am working as Chief Engineer on Singapore flag ship at Thailand.
    The ship is likely to come to India.It will be working at Mumbai High approx. 50 km from Mumbai. The source of income remains same, since the salary is being remitted from Singapore in US Dollars. Kindly advise
    1) My income tax liability if any.
    2) NRE status
    Thanks & best regards
    Rotash

  3. PARMOD KUMAR says:

    I SELF ASSESSE BUT I HAVE NO KNOWLEDGE FOR ABOUT U/S 143(1)
    PLZ SEND ME DETAIL OF IT

  4. Sarita Maheshwari says:

    Dear All
    The AO has not paid any interest on the refund of Ass Year 2010-11, issued on 01,09.2011.
    What to do in this matter?
    Should I file return u/s 143(10 to CPC, Bangalore
    I am NRI and residing in Indonesia.
    Thanks and regards
    Sarita Maheshwari

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