| COURT: | Supreme Court |
| CORAM: | A.K. Sikri J., Rohinton Fali Nariman J. |
| SECTION(S): | 143(1), 147, 148 |
| GENRE: | Domestic Tax |
| CATCH WORDS: | 143(1) assessment, Reopening |
| COUNSEL: | Dhruv Aggarwal |
| DATE: | April 17, 2015 (Date of pronouncement) |
| DATE: | November 26, 2015 (Date of publication) |
| AY: | 1991-92 |
| FILE: | Click here to download the file in pdf format |
| CITATION: | |
| S. 143(1)/ 147: As a s. 143(1) intimation is not an assessment, there is no question of "change of opinion" by the AO | |
After going through the detailed order passed by the High Court (Zuari Estate Development vs J.R. Kanekar 271 ITR 269 (Bom)), we find that the main issue which is involved in this case is not at all addressed by the High Court. A contention was taken by the appellant-Department to the effect that since the assessee’s return was accepted under Section 143(1) of the Income Tax Act, there was no question of “change of opinion” inasmuch as while accepting the return under the aforesaid provision no opinion was formed and therefore, on this basis, the notice issued was valid. We find that this aspect is squarely covered by the judgment of this Court in Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Private Limited [2008 (14) SCC 208] in the following manner: –
“15. In the scheme of things, as noted above, the intimation under Section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under Section 143(1)(a) as it stood prior to 1-4-1989, the assessing officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the legislature i.e. to minimise the departmental work to scrutinise each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain, J.) in Apogee International Ltd. v. Union of India.
16. It may be noted above that under the first proviso to the newly substituted Section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under Section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any assessing officer, but mostly by ministerial staff. Can it be said that any “assessment” is done by them? The reply is an emphatic “no”. The intimation under Section 143(1)(a) was deemed to be a notice of demand under Section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under Section 143(1)(a), the question of change of opinion, as contended, does not arise.”
The offshoot of the aforesaid discussion is to hold that judgment of the High Court is erroneous and warrants to be set aside. We allow this appeal setting aside the impugned judgment of the High Court.
Section 143(1) provides for processing the return to ascertain about arithmetical accuracy, wrong claims and determining the tax due or refund payable. It is only after satisfaction that the return conforms to the law it is accepted by the authority. All these activities involve application of mind by the officer who accepts the return as correct only after his satisfaction. With utmost respect for the Hon apex Court one feels that the intimation under Section 143(1) is nothing but a summary assessment.
well reasoned conclusion
Tentative (pending a close study of the SC judgment, in the context of / having due regard to the HC judgment):
The opinion the apex court has handed out, in a manner of viewing, -to say the least, without any intent whatsoever to offending or questioning the judicial wisdom, – is seen to have the effect of setting at naught the very objective of simplification (that is, ‘desimplifying’, unintended or otherwise,), – obviously sought to have been achieved through the scheme of the provisions of relevance herein, as significantly modified from time to time, governing the procedure for making an assessment.
According to a well thought out view, in one’s firm- conviction, the line of reasoning cogently addressed to, and, accepted and adopted by, the HC cannot be faulted to be illogical; OR not reconcilable with the common understanding of those provisions based, as warranted, on a harmonious reading and incisive understanding of those provisions.
For a better appreciation of the intricate nature of the controversies and issues raised, the analytical study attempted and the viewpoints set out in the published article (website of Taxguru) could hopefully be of ready help.
Likewise, could be of help, the amplifications of the above referred modifications of the relevant provisions, -pointedly , those effected with a view to accommodating the newly brought in computerized assessment procedure in the wake of the CPC coming into being – as set out in the personal Blog, in a different context of “TDS woes” though, HERE-
http://vswaminathan-swamilook.blogspot.in/2015/10/tds-woes-of-taxpayers-contd.html
Cross Refer: http://itatonline.org/archives/c-s-atwal-vs-cit-punjab-haryana-high-court-s-247vvi-entire-law-on-whether-the-entering-into-a-joint-development-agreement-with-an-irrevocable-power-of-attorney-in-favour-of-the-developer-resu/
Contd.
As anyone is expected to be aware, under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words “reason to believe” but also inserted the word “opinion” in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words “reason to believe”, Parliament re-introduced the said expression and deleted the word “opinion” on the ground that it would vest arbitrary powers in the Assessing Officer. Suggest to read the relevant portion of Circular No.549 dated 31st October, 1989 ([1990] 182 ITR (St.) 1, 29).
Having regard to the foregoing, in one’s perspective, rather firm conviction, for any assessment year governed by the so amended law – as is the case herein,- for AO to invoke section 147 (rw section 148) the only applicable criterion, rather the essential precondition to be satisfied is, – “reason to believe” ; and NOT the concept of ‘opinion’ or its derivative being ‘change of opinion’ given a go by.
As viewed, therefore, for any further deliberation and discussion in legal circles, of the subject matter (namely, the implications of the apex court judgment on hand), the foregoing feedback input may be of help and guidance.
ADD on:
The subject matter of the ‘sale and purchase’ transaction in the instant case is prima facie a ‘property’ in the nature and having the peculiar characteristics of so called ‘FLAT’, and for use as ‘office.’, in a building complex . As such, for all purposes, including ‘transfer’ of the attendant property rights , the transaction is to be taken as governed by the Maharashtra State special law, known as MOFA (rw the rules framed there under) , read together with the MCSA applicable to co-operative societies formed and registered under, and in accordance with the provisions of the said Act. Under the scheme of things, purchaser of a flat is required to be admitted as ‘member’ of the registered society, by issue of a ‘Share Certificate’, under the name and seal of the society. And, on a resale, as mandated by the law, the transferee is entitled to be admitted as member, in place / substitution of his transferor, provided the society is satisfied that the transferor –member is ‘prima facie’ eligible to A transfer of his “Shares and interest in the Capital / Property of the Society”.
Obviously, that is the reason why, having due regard to the above stated procedural legal formalities requiring compliance,the transferor-company ,- while objecting to the impugned action of the AO UNDER SECTON 147 (RW SECTION 148), has pleaded to the effect that pending compliance with the formality of transfer of its “Shares”, there could be no ‘transfer’, so as to attract taxation. Needs to be noted, in the HC judgment , in paragraph 2, explaining the transferor- company’s case, it has been observed “…that the petitioner had also recorded, confirmed and assured the bank that it would take ALL STEPS FOR TRANSFER OF THE PROPERTY ALONG WITH THE SHARE CERTIFICATES on or before September 30, 1997”. (FONT supplied)
The HC has not gone into this particular aspect any further; that is, presumably because it was not considered necessary for deciding the main issue on hand, rightly so. Be that as it may, now that as a result / in consequence of the SC judgment the matter stands remitted back to the ITAT, it may be hoped that also the above referred aspect, apart from quite a few other related (or connected), being equally crucial ones, will be duly gone into in-depth, in deciding the entire matter, ‘on merits’ as directed, in a wholesome manner.Provided, of course,the representing lawyers, as expected of them, make it a point to effectively assist the adjudicating authority to conclusively decide, after taking into consideration all such aspects, fully and fairly , in the larger interests of one and all concerned.
For More:
Refer the text of the write-up displayed on the website of Lci @
http://www.lawyersclubindia.com/articles/Income-tax-Law-vs-Property-Law-A-Case-Law-Study-7006.asp
For hyperlinks, wherever needed,look up the personal BLOG @ http://swaminathanv208.blogspot.in/2015/12/normal-0-false-false-false-en-in-x-none.html
In the earlier write-up in public domain, in which a critical study of the cited SC judgment in Podar Cement case has been covered is HERE
https://www.google.co.in/url?sa=t&rct=j&q&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiV6LD2ks_JAhWKJ5QKHdjjAsoQFggbMAA&url=http%3A%2F%2Ftaxguru.in%2Fincome-tax%2Flaw-and-vs-case-law-on-flats-a-critical-study.html&usg=AFQjCNGjOQUmOI9zKljlsNdM14F-gDiqDQ&sig2=w_chwnNvsX-qqnVZzoXzGw&bvm=bv.109395566%2Cd.dGo
It needs to be noted that, as independently viewed, there appears to be additionally one aspect that has not been specifically/in terms adjudicated upon, addressed though during the proceedings before the HC. That is, whether or not, as per the scheme of the applicable sections of the IT Act , in particular of section 143(1) and section 143 (2), if considered on first principles and in isolation, any assessment or re-assessment is at all possible u/s 147 , r.w. 148; without having to go into the concepts of “reason to believe”,”opinion” or “change of opinion” as covered in the judgments.
Over to eminent experts, active infield practice and suitably equipped, for a further deliberation on the mentioned additional aspect as well.
The viewpoints shared on the website of Citizenmatters
@ http://bangalore.citizenmatters.in/articles/4202-the-apartment-law-you-must-know
could hopefully help in doing so.
Add-on
For MORE @http://swaminathanv208.blogspot.in/2016/01/it-act-controversy-on-meaning-of.html
Update
In one’s in-depth perception, any such case study as attempted, is simply and sincerely intended to provoke more thoughts in those, besides others, who believe and profess to be familiar with / have a good grip of what many concepts not commonly known or heard of, such as the ‘foreign’ concept of ‘legal realism’ as aired in some quarters-
(Ref.-http://www.lawyersclubindia.com/articles/A-Case-Law-Study-Supplement-7087.asp?utm_source=article_mailer&utm_medium=email&utm_campaign=article_followup ),
means or connotes, if at all any , it does. Open to be enlightened, as per the freely extended Invite in the ‘Disclaimer’ therein.
Meanwhile, to invite afresh a useful participation by inspired professionals in active practice, on the subject discussion on the mooted points, among others, to focus on – why the SC view that Sec 143 ((1) or (1a) ‘Intimation’ is not an ‘order of assessment’, calls for a separate mindful debate. To put it in a nut well, could not a better view have been be taken, had the Provisions of the Act of relevance be read and understood in proper light, by applying the rudimentary principles of ‘harmonious reading’, and the like. In this context, for the said purpose, it should help and be of guidance, positive or otherwise,to read through the write-up published in the CA Journal, November Issue (topic, – ‘Time Limit for Issue of…” , pg. 709 (77) ). To pin point, what calls for a purposeful examination is, of the intended meaning of the concept of ‘assessment’, being a term not specifically defined in both the 1922 and 1961 Act.And,in doing so,interpretation of the term ‘escaped assessment’ used in sec 147 should be rightly regarded to be the guiding factor, as canvassed in the above referred write-up and the cited case law, etc.
An Update
Read through the Del.HC judgment since reported >http://itatonline.org/archives/indu-lata-rangwala-vs-dcit-delhi-high-court/
Narration reads:”S.143(1)/ 147: Entire law on the reopening of s. 143(1) assessments in the light of Zuari Estate Development 373 ITR 661 (SC) explained’
Suggest to study, independently, to see whether it brings in any further clarity, so as to say decisively that clinches the issues fully and finally !
An Update:
Look through >https://www.linkedin.com/pulse/notice-u-143-2-must-swaminathan-venkataraman?published=t