Advocate Sameer Bhatia
The Union Budget, 2019 catering to both direct and indirect tax avenues will be tabled before the Parliament by the Hon’ble Finance Minister Smt.Nirmala Sitharaman as on 05th July, 2019. Since, with the passage of time, the parent legislation under the direct taxes i.e. the Income Tax Act has acquired a distinguished web of complexity with a host of internal and external aids to construction and other grammatical proportions making strong ingress into it. With ever increasing hopes and expectations of the society particularly that of the middle class, the corporates and the NGOs with reference to the would be tax concessions/ tax brackets/ reliefs/ allowances or compensatory deductions etc., it would certainly be an appealing, capitvating and scoring event.
|S.No.||Relevant Section||Issue||Recommendation / Suggestion|
|1||Section 154 of the Income Tax Act, 1961||Section 154 of the Income Tax Act deals with powers of the Income Tax Authorities referred to in section 116 to rectify any mistake provided the same is apparent from record. Predominantly the arithmetical inaccuracies/ miscalculations/ errors are taken care of by passing rectification orders within the scope of section 154 of the Act by the authorities concerned. In furtherance, the expression `any mistake’ stemming from the bare provision is also capable of crowded/ numerous interpretations and expositions.
The said provision falls short of rectifying any mistake apparent from record order touching an order which is inconsistent / incongruous with the pronouncement of the constitutional courts. The situation gets further aggravated when the assessee inadvertently fails to file an entitled/lawful claim based on the pronouncements of the Hon’ble Supreme Court or of the jurisdictional High Courts/other writ courts during the course of assessment proceedings as well as during the course of appellate proceedings.
It is not clear as to whether such unfounded though lawful/statutory claims preferred by the assessees beyond certain stage of litigation and based on the pronouncements of constitutional courts can be received as a benchmark so as to fall within the rigours of section 154 of the Act.
|It is well settled that the claims which are based on the pronouncements of the constitutional courts inherent high degree of sanctity and intrinsically more persuading / convincing. As noticeable, various orders are passed under the Income Tax Act, 1961 which stand in negation of the findings/observations of the Hon’ble Supreme Court and/or of the High Courts rendered in context of law. In the given set of circumstances, the assessees are left with the solitary remedy to challenge the same before the first appellate authority and/or challenge the same before the writ courts thereby at times leading to infructuous and unprofitable litigation.
In two recent pronouncements of the Hon’ble ITAT Mumbai & Amritsar Benches in Sharda Cropchem Ltd vs. DCIT (2019) 178 DTR (Mumbai) 83 and Kashmir Steel Rolling Mills vs. DCIT (2018) 169 DTR (Asr)(Trib) 137, it was settled that assessment orders which are inconsistent with the decision of the Hon’ble Supreme Court and/or jurisdictional High Court can albeit constitute a mistake rectifiable from record within the meaning of section 154 of the Act. It was also laid down that claims though in rhyme with the pronouncements of the Supreme Court and/or jurisdictional High Court not preferred / availed by the assessee in the course of assessment proceedings and/or appellate proceedings can still be the subject matter of rectification under section 154 of the Income Tax Act, 1961 and cannot be rejected at the outset.
It is also a settled law that a judicial decision operates retrospectively in light of the pronouncement of the Hon’ble Supreme Court in Assisstant Commissioner of Income Tax vs. Saurashtra Kutch Stock Exchange Ltd (2008) 219 CTR (SC) 90 therefore, it is suggested that rectification provisions be rationalized and the scope be further enlarged to include any mistake arising from an order which is inconsistent with the pronouncements of the Hon’ble Supreme Court and/or High Courts as amenable to rectification under section 154 of the Act.
|2||Section 143(1), 5th Proviso when read in conjunction with section 139(5) & 154 of the Income Tax Act, 1961||Section 143(1) of the Income Tax Act, 1961 deals with the multiple aspects of the procedure governing the framing of assessments commencing from processing of return, issuing statutory notice, furnishing of evidence and passing of the order on the strength of relevant material produced by the assessee.
Returns filed under section 139, or in response to a notice issued under sub-section (1) of section 142 are processed in line with the provisions of sub-section (1A) of section 143 i.e. per Centralized Processing of Returns Scheme, 2011. 5th Proviso appended to section 143 provides that `No intimation under this sub-section i.e. 143(1) shall be sent after the expiry of one year from the end of the financial year in which the return is made.
Furthermore section 154 of the Income Tax Act, 1961 deals with the rectification of mistakes apparent from record and the order passed under section 143(1) is an order amenable to rectification as per provisions of the Act.
Anomaly arises when the returns filed by the assessees are processed under section 143(1) and the assessee notices inaccuracy / mistakes/ omission / miscalculations in the order passed therein. Since, such mistakes are amenable to rectifications under 154, the online mechanism fails to acknowledge / receive rectification requests wherein the Gross Total Income sought to be rectified varies with the Gross Total Income in respect of such return that stands processed by the Centralized Processing Centre (CPC) under section 143(1) by displaying an error message `Gross Total Income should not vary with the Processed Return’.
Further, section 139(5) of the Income Tax Act, 1961 provides the time limit for filing revised return which has suitably been pruned to fall within any time before the end of the relevant assessment year or before the completion of assessment whichever is earliest.
|There can be multiple situations encompassing the variation between the Gross Total Income shown by assessee in his return of income and processed by the dedicated centre i.e. CPC and the Gross Total Income sought to be rectified through online mechanism available against order passed under section 143(1) of the Act.
Say, the assessee has accidently projected its Income under the head House Property as Income under the head Other Sources thereby getting lawfully deprived of the deduction under section 24 to the extent of 30% of the annual value. In the circumstances and going by the ethos of rectification, he intends to file online request by diverting proceeds reflected under the head Income from other sources to lawful head i.e. Income from House Property in order to avail the concession of 30% deduction from annual value. Now in light of the fact that the assessee’s claims of income under the head income from house property is supported by 30% deduction from the annual value, the gross total income projected earlier is bound to fall/drop in the given circumstances. Now, in the event, the original return stands processed by the department under section 143(1), the online rectification facility fails to acknowledge the above said amendment in view of the fact that `Gross Total Income should not vary with the Processed Return’.
Furthermore in view of the provisions of section 139(5), the assessee cannot avail the concession of filing a revised return as period for filing the same has been suitable lapsed/pruned by way of amendment to section 139(5) by the Finance Act, 2016 w.e.f. 01st April, 2017 thereby calling for either rectification of the order passed under section 143(1) and/or to challenge the same in appeal before the first appellate authority.
It is pertinently mentioned here that the Hon’ble Supreme Court in ACIT vs. Rajesh Jhaveri Stock Brokers Pvt Ltd (2007) 210 CTR 30 (SC) and DCIT vs. Zuari Estate Development & Investment Co, Ltd (2015) 279 CTR 527 (SC) categorically stated that an Intimation under section 143(1)(a) cannot be treated as an order of assessment. It was further settled that expressions “intimation” and “assessment order” have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes “the computation of income”, sometimes “the determination of the amount of tax payable” and sometimes “the whole procedure laid down in the Act for imposing liability upon the tax payer”. In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment.
Since, an order passed under section 143(1)(a) is not to be equated with assessment, consequential relaxation be given in the online rectification facility to acknowledge/receive those rectification requests where Gross Total Income sought to be projected in rectified schema is at variation with the Gross Total Income projected in returns processed by the dedicated Centralized Processing Centre under section 143(1)(a) of the Act.
So, in view of the compilations above, all expectations/hopes rests on the and the associated tax proposals tabled by the Hon’ble Finance Minister that will march a long way to inspire the public faith, confidence and trust by equally enmeshing them as a partner in nation building.
(Article by – Advocate Sameer Bhatia, R/o, 158/2, Guru Teg Bahadur Nagar, Opposite Mata Gujri Park, Jalandhar – 144003, Punjab Contact Nos:- 9041304900 Email Address: email@example.com)