Should Return Necessarily Be Processed Even When 143(2) Notice Issued?

October 8, 2009 by taxworry · Leave a Comment

Central Board of Direct Taxes in its 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

However,the question “whether the return should necessarily be processed u/s 143(1) even when notice u/s 143(2) has already been issued? ” hounts both the mind of tax practitioner and even A.O.

The answer to this question has been legally settled by Supreme Court in Commissioner of Income Tax v. Gujarat Electricity Board [2003] 260 ITR 84 in which the question before Apex Court was :

whether it is open to the Revenue to issue intimation under section 143(1)(a) of the Income-tax Act, after notice for regular assessment has been issued under section 143(2) of the Income-tax Act, 1961 ?

Supreme Court held as under

There is no dispute that section 143(1)(a) of the Act enacts a summary procedure for quick collection of tax and quick refunds. Under the scheme if there is a serious objection to any of the orders made by the Assessing Officer determining the income, it is open to the assessee to ask for rectification under section 154.

Apart therefrom, the provisions of section 143(1)(a)(i) indicate that the intimation sent under section 143(1)(a) shall be without prejudice to the provisions of sub-section (2).

The Legislature, therefore, intended that, where the summary procedure under sub-section (1) has been adopted, there should be scope available for the Revenue, either suo motu or at the instance of the assessee to make a regular assessment under sub-section (2) of section 143.

The converse is not available; a regular assessment proceeding having been commenced under section 143(2), there is no need for a summary proceeding under section 143(1)(a).

In the result, we see no infirmity in the judgment of the High Court. The appeals are dismissed. There shall be no order as to costs.

Recently Orissa High Court also , relying on the Apex Court’s judgment on this issue gave verdict in favour of assessee in “In view of the well settled legal position as has been decided by the Hon’ble Supreme Court, we are of the opinion that after issuance of notice under Section 143(2) of the Act, it is not open to the Assessing Officer to make adjustments as provided under Section 143(1) of the Act and to issue intimation under the said Section“

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