Raju and Prasad vs The Commissioner of Income Tax

L. Narasimha Reddy, J.—The petitioner filed its return for the assessment year 1998-99 before the Income Tax Officer, i.e., the Deputy Commissioner, Circle-3(3), the 2nd respondent herein. After processing the return, the 2nd respondent gave an intimation dated 24-02-1999 u/s 143(1)(a) of the Income Tax Act, 1961 (for short ''the Act'') to the petitioner making prima facie adjustment and indicating that deduction of Rs. 2,61,954/- is prima facie inadmissible. Feeling aggrieved by that, the petitioner filed a revision u/s 264 of the Act before the Commissioner of Income Tax, the 1st respondent herein. Through an order dated 19-03-2001, the 1st respondent upheld the prima facie adjustments made by the 2nd respondent to some extent and remanded the matter, for deleting disallowance of Rs. 11,874/- made u/s 143(1)(a) of the Act. The said order is challenged in this writ petition.

Heard the learned counsel for the petitioner and the learned Senior Counsel for the Revenue.

Normally, one expects, in a prima facie adjustment u/s 143(1)(a) of the Act, the acceptance of the claims made by an assessee. If the assessing officer doubts the correctness of any claims, he is required to follow the procedure prescribed u/s 143(2) and (3) of the Act. If a notice is issued under sub-section (2) of Section 143, the assessee would be in a position to explain the basis for his claim and ultimately an order of assessment is required to be passed under sub-section (3) of Section 143. In the instant case, the 2nd respondent dealt with several contentious aspects and issues in the prima facie adjustment u/s 143(1)(a) itself. In Khatau Junkar Ltd. and another Vs. K.S. Pathania and another, , the Bombay High Court took the view that the exercise of that nature is impermissible in law. The reason is that it is not difficult to discern. It is only when a final order of assessment is passed, that the assessee would be in a position to canvass his grievance in a regular appeal and thereafter in a further appeal before the Tribunal, if necessary. An exercise akin to a summary disposal which is required to be undertaken by an assessing officer u/s 143(1)(a) of the Act on contentious issues would lead to several complications and many a time it would prove to be detrimental to the interests of the assessee, and occasionally to the interests of the Revenue also.

In this case, we find that the 1st respondent has already remanded the matter to the 2nd respondent, though on a limited aspect. We are of the view that the matter needs to be dealt with by the 2nd respondent in detail, particularly on the contested aspects.

We, therefore, dispose of the writ petition directing that the remand made by the 1st respondent to the 2nd respondent shall not be confined to the adjustment of Rs. 11,874/- alone. It is directed that on such of the claims which the 2nd respondent did not accept, he shall issue notice to the petitioner under sub-section (2) of Section 143 of the Act and pass an order under sub-section (3) of Section 143.

The miscellaneous petitions pending in the writ petition shall also stand disposed of.

There shall be no order as to costs.