P.P. Abdul Khader and Co. vs Commissioner of Income Tax and Another

Antony Dominic, J.—Heard the learned counsel for the petitioner and the learned standing counsel for the respondents. The petitioner is a partnership firm of four partners engaged in civil and electrical contract works. Concerning the assessment year 1995-96, return was filed by the firm on September 28, 1995. The return was processed u/s 143(1) of the income tax Act and the taxable income was determined at Rs. 35,930. Subsequently, they were issued exhibit P4 notice dated September 11, 1996, u/s 143(2) of the Act requiring them to attend the office of the Assessing Officer to clarify the points mentioned therein.

Accordingly, the petitioner appeared and was also heard. The petitioner says that in pursuance of exhibit P4, exhibit P5 rectifying the assessment order was passed determining the total income at Rs. 1,36,500. In this order, interest paid by them on capital deposit and remuneration paid to the partners were disallowed. They filed an appeal against exhibit P5 which was allowed by exhibit P6 order of the appellate authority.

It is stated that subsequently they were issued exhibit P7 notice requiring them to produce the challans evidencing payment of tax due as per exhibits P5 and P6. However, without any further notice, by exhibit P8 order, the Assessing Officer completed the assessment u/s 144 of the Act determining the total taxable income at Rs. 1,36,500. Consequently, exhibit P9 order was passed u/s 154'' and exhibit P10 order was also passed by the second respondent giving effect to exhibit P6.

Aggrieved by exhibits P8 and P9, the petitioner filed exhibit P11 revision u/s 264 of the income tax Act with an application to condone the delay. That revision was dismissed by exhibit P12 order. In exhibit P12 order, it is held that the assessment evidenced by exhibit P8 is the scrutiny assessment order u/s 144, which, according, to the revisional authority, is independent of the previous assessment u/s 143(1)(a). The disallowance of the interest paid on capital deposit and the remuneration paid to the partners is also, sustained by the revisional authority relying on section 184(5) which states that, if a firm is assessed as an association of persons, interest on capital and salary to partners cannot be allowed as deduction. In this writ petition, petitioner challenges exhibits P8, P10 and P12.

The contention raised by the counsel for the petitioner are mainly three fold. The first contention is that no notice u/s 143(2) was issued to the petitioner before completing the scrutiny assessment as per exhibit P8. It is also contended that exhibit P8 assessment u/s 144 could have been completed only if the circumstances specified in section 144(1)(a) to (c) are present. According to the learned counsel these circumstances are absent in this case and, therefore, also the assessment could not have been completed u/s 144. Yet another contention raised by the learned counsel for the petitioner is that, even if it is permissible to initiate assessment u/s 144, such an assessment could have been completed only by issuing a notice as provided'' under the proviso to section 144(1). Counsel submits that this notice was also not issued to the petitioner.

Having heard the learned counsel for the petitioner and also the learned standing counsel appearing for the Revenue, I am not satisfied that the petitioner is entitled to succeed. In so far as the absence of notices u/s 143(2) and the proviso to section 144(1) which is canvassed before this court are concerned, a reading of exhibit P12 order passed by the revisional authority shows that such a contention was never urged by the petitioner before the revisional authority. Similarly the inapplicability of section 144 for want of the circumstances specified in section 144(1) (a) to (c) which is also canvassed before this court is also not seen urged before the revisional authority. Therefore, these contentions are urged before this court for the first time. A contention which was not urged before the statutory authorities and which the authority had no occasion to deal with, cannot be allowed to be raised for the first time before this court. Therefore, I am not inclined to take cognizance of these arguments raised by the learned counsel for the petitioner and invalidate the impugned proceedings.

Moreover, on facts, it is also seen that by exhibit P4 notice, the petitioner was informed that there are certain points to be clarified in connection with the returns filed by them. Accordingly, they were required to attend the office of the Assessing Officer with documents, accounts and other evidence to support the return filed. This notice is a notice u/s 143(2). In so far as the proviso to section 144(1) is concerned, exhibit P7 notice shows that the petitioner was informed that the assessment is posted for hearing to February 11, 1997. Therefore, exhibit P4 is a notice u/s 143(2) and exhibit P7 is a notice under the proviso to section 144(1). Therefore, the absence of the statutory notices canvassed by the learned counsel for the petitioner is clearly erroneous.

For these reasons, I am not satisfied that the petitioner has made out a case justifying interference. Writ petition fails and is dismissed.