HC explains scope of ‘intimation’ under section 143(1)(a) of Income Tax Act, 1961

AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Limited Vs DCIT (Madras high court)

The scope of an ‘intimation’ u/s 143 (1) (a) of the Act, extends only to the making of adjustments based upon errors apparent from the return of income and patent from the record

The scope of an ‘intimation’ under Section 143 (1) (a) of the Act, extends to the making of adjustments based upon errors apparent from the return of income and patent from the record. Thus to say that the scope of ‘incorrect claim’ should be circumscribed and restricted by the Explanation which employs the term ‘entry’ would, in my view, not be correct and the provision must be given full and unfettered play. The explanation cannot curtail or restrict the main thrust or scope of the provision and due weightage as well as meaning has to be attributed to the purposes of Section 143(1)(a) of the Act.

The provisions of Section 80AC(ii) make it clear that any deduction that is claimed under Part C of Chapter VIA would be admissible only if the return of income in that case were filed within the prescribed due date. Thus no claim under any of the provisions of Part C of Chapter VIA would be admissible in the case of a belated return. There is no dispute on this position. The date of filing of a return of income would be apparent on the face of return and upon a perusal thereof, it would be clear as to whether the return is a valid return, having been filed within the statutory time limit, or a belated one. This is mechanical exercise and one that can be carried out by the CPC, very much within the scope of Section 143 (1) (a) (ii) of the Act.

The conduct of the petitioners is also relevant. Not only have the returns been filed belatedly but the petitioners have also chosen not to co-operate in the conduct of assessment. They are admittedly in receipt of the defect notices from the CPC, but have not bothered to respond to the same. The writ petitions have themselves been filed belatedly and after the elapse of more than six to eight months from the dates of impugned orders, in all cases. It is only when the Revenue has initiated proceedings for recovery by attachment of bank accounts have the petitioners approached this Court. This factor also strengthens my resolve that these are not matters warranting interference in terms of Article under Section 226 of the Constitution of India, quite apart from the decision that I have arrived at on the legal issue.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

These 16 writ petitions have been filed by Co-operative Societies, being either Primary Agricultural Co-operative Credit Societies, Thrift Societies, Employees Societies or other categories of Co-operative Societies, and challenge intimations under Section 143 (1) of the Income Tax Act, 1961 (in short ‘Act’). The year of assessment in all cases is 2018-19.

2. The admitted facts are:

(i) None of the Societies have filed returns of income within the time stipulated under Section 139 of the Act and returns have been filed belatedly on various dates,

(ii) The Central Processing Centre (CPC), upon receipt of the returns filed, had issued communications proposing an adjustment in terms of Section 143(1)(a) of the Act. The reason for the proposed adjustment is ‘error/incorrect claim/inconsistency’ and the details are set out in Part A of the communication reading as follows:

PART -A

Adjustment u/s.143(1)(a)

(iii) None of the petitioner societies have either responded to the notices or furnished any explanation in regard to the proposed alleged adjustment.

(iv) In view of the utter silence on the part of the petitioner, the proposals have come to culminate in the intimations impugned in these writ petitions.

3. The challenge to the intimations is on the ground that they do not confirm to the prescription of Section 143(1)(a) of the Act. Mr.Sudhakar and Mr.Prakasam, Mr.Karthikeyan not being present before the Court, would argue that the provisions of Section 143(1)(a) of the Act can only be invoked in cases where there are

(i) patent arithmetical errors,

(ii) an incorrect claim, such incorrect claim being apparent from any information/entry contained in the return,

(iii) disallowance of loss claimed if the returns were filed beyond the due date,

(iv) disallowance of expenditure indicated in the audit report but not taken into account in computing total income

(v) disallowance of deduction claimed under specified provisions of the Act if the return was filed beyond due date or

(vi) additional income appearing in Form 26AS or 16A or 16, which has not been taken into account in computing total income. According to them, there is no error as aforesaid that emanates from the returns of income filed by the petitioners and as such, the invocation of Section 143 (1)(a) of the Act is itself flawed.

4. Per contra, Mrs.Hema Muralikrishnan, learned Senior Standing Counsel for the Revenue would argue that the error arises from the fact that the returns of income have been filed belatedly and beyond the dates stipulated under Section 139 of the Act. There is no doubt or dispute in this regard. Hence, the claim under Section 80P could not have been putforth in the light of provisions contained in Section 80AC(ii) as it stood post amendment with effect from 01.04.2018.

5. Learned counsel for the petitioners would than argue that the Explanation under Section 143(1)(a) of the Act explains ‘an incorrect claim’ for the purpose of Clause (ii) of Section 143 (1) (a) of the Act, as meaning a claim based on an entry in a return of income. According to them, the date of return does not constitute an ‘entry’ and hence no adjustment is called for on this score.

6. Section 143 (1) (a) of the Act reads thus:-

‘143.(1) Where a return has been made undersection 139, or in response to a notice under sub-section (1) ofsection 142, such return shall be processed in the following manner, namely:—

(a) the total income or loss shall be computed after making the following adjustments, namely:—

(i) any arithmetical error in the return;

(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;

(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) ofsection 139;

(iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return;

(v) disallowance of deduction claimed undersections 10AA,80-IA,80-IAB,80-IB,80-IC,80-IDorsection 80-IE, if the return is furnished beyond the due date specified under sub-section (1) ofsection 139; or

(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:

Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:

Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:‘

7. The scope of an ‘intimation’ under Section 143 (1) (a) of the Act, extends to the making of adjustments based upon errors apparent from the return of income and patent from the record. Thus to say that the scope of ‘incorrect claim’ should be circumscribed and restricted by the Explanation which employs the term ‘entry’ would, in my view, not be correct and the provision must be given full and unfettered play. The explanation cannot curtail or restrict the main thrust or scope of the provision and due weightage as well as meaning has to be attributed to the purposes of Section 143(1)(a) of the Act.

8. The provisions of Section 80AC(ii) make it clear that any deduction that is claimed under Part C of Chapter VIA would be admissible only if the return of income in that case were filed within the prescribed due date. Thus no claim under any of the provisions of Part C of Chapter VIA would be admissible in the case of a belated return. There is no dispute on this position. The date of filing of a return of income would be apparent on the face of return and upon a perusal thereof, it would be clear as to whether the return is a valid return, having been filed within the statutory time limit, or a belated one. This is mechanical exercise and one that can be carried out by the CPC, very much within the scope of Section 143 (1) (a) (ii) of the Act.

9. The conduct of the petitioners is also relevant. Not only have the returns been filed belatedly but the petitioners have also chosen not to co-operate in the conduct of assessment. They are admittedly in receipt of the defect notices from the CPC, but have not bothered to respond to the same. The writ petitions have themselves been filed belatedly and after the elapse of more than six to eight months from the dates of impugned orders, in all cases. It is only when the Revenue has initiated proceedings for recovery by attachment of bank accounts have the petitioners approached this Court. This factor also strengthens my resolve that these are not matters warranting interference in terms of Article under Section 226 of the Constitution of India, quite apart from the decision that I have arrived at on the legal issue.

10. These writ petitions are dismissed and connected Miscellaneous Petitions are also closed.

11. M.P. Nos.14346, 16166, 16167, 16171, 16225, 16226 of 2020 and 2654 of 2021 have been filed by the Revenue seeking to vacate the stay originally granted by this Court. The MPs do not figure in the main list and I have hence directed that the same be listed today by way of a special list. The MPs also stand closed in light of my order as above. No costs.