1994 Supreme(Cal) 82

High Court Of Calcutta
Ruma Pal
MODERN FIBOTEX INDIA LTD.AND ANR. - Appellant
Versus
DEPUTY COMMISSIONER OF INCOME-TAX AND ORS. - Respondent
Matter 4101  Of  1992
Decided On : 03/07/1994

The power under Section 143(1)(a) is limited to adjustments which are in the nature of errors apparent on the face of the record and does not apply to a claim which necessitates consideration.

Headnote:

INCOME TAX - Section 143(1)(a) and 143(1a) - Constitutional validity - Scope of power under Section 143(1)(a) - Whether the power can be exercised after issuance of notice under Section 143(2) - Whether the adjustment can be made with retrospective effect - Held, the power under Section 143(1)(a) is limited to adjustments which are in the nature of errors apparent on the face of the record and does not apply to a claim which necessitates consideration. The adjustment can be made only after considering Section 139(4) and (9). The question of prima facie adjustment would have to be considered with reference to the date on which the return is filed and not with reference to events subsequent to the filing.

Fact of the Case:

The petitioner, a company, received cash compensatory support from the Government of India for its exports. The company filed its return for the assessment year in question claiming that the amount received by it on account of cash compensatory support was not taxable. However, the company stated that in case the amount was considered as taxable it may be assessed subject to the company's right of appeal or other remedy available under the law. Subsequently, the Finance Act, 1990, was enacted by which the provisions of Section 28 of the Act were amended with effect from April 1, 1967, making cash compensatory support taxable. On July 31, 1990, the Deputy Commissioner of Income-tax issued an intimation to the company under Section 143(1)(a) of the Act recomputing the loss suffered by the company on the basis of the amended provisions of Section 28 of the Act. The company challenged the constitutionality of Section 143(1)(a) read with Section 143(1a) and Section 4 as well as the intimation dated July 31, 1990, the order under Section 134 dated November 12, 1990, the appellate order of dismissal dated December 27, 1991, and the order under Section 264 dated July 30, 1991, and the recovery of additional tax.

Finding of the Court:

The court held that the power under Section 143(1)(a) is limited to adjustments which are in the nature of errors apparent on the face of the record and does not apply to a claim which necessitates consideration. The adjustment can be made only after considering Section 139(4) and (9). The question of prima facie adjustment would have to be considered with reference to the date on which the return is filed and not with reference to events subsequent to the filing. The court also held that once a notice under Section 143(2) has been issued there is no scope for the authorities either to make prima facie adjustment on the basis of the return as filed or issue an intimation under Section 143(1)(a).

Issues: 1. Whether the power under Section 143(1)(a) is limited to adjustments which are in the nature of errors apparent on the face of the record and does not apply to a claim which necessitates consideration? 2. Whether the adjustment can be made only after considering Section 139(4) and (9)? 3. Whether the question of prima facie adjustment would have to be considered with reference to the date on which the return is filed and not with reference to events subsequent to the filing? 4. Whether once a notice under Section 143(2) has been issued there is no scope for the authorities either to make prima facie adjustment on the basis of the return as filed or issue an intimation under Section 143(1)(a)?

Ratio Decidendi: 1. The power under Section 143(1)(a) is limited to adjustments which are in the nature of errors apparent on the face of the record and does not apply to a claim which necessitates consideration. 2. The adjustment can be made only after considering Section 139(4) and (9). 3. The question of prima facie adjustment would have to be considered with reference to the date on which the return is filed and not with reference to events subsequent to the filing. 4. Once a notice under Section 143(2) has been issued there is no scope for the authorities either to make prima facie adjustment on the basis of the return as filed or issue an intimation under Section 143(1)(a).

Final Decision: The writ application was allowed to the extent that the impugned intimation and adjustment under Section 143(1)(a) were set aside and quashed. Consequently, the order under Section 153 dated November 12, 1990, the appellate order dated December 27, 1991, the revisional order dated July 30, 1991, and any purported recovery of additional tax in respect of the assessment year in question were also quashed and set aside.