M/s. BARBER SHIP MANAGEMENT INDIA P. LTD., MUMBAI V. ITO - 8(1)(2), MUMBAI

ITA 6635/MUM/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2738 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 1998-1999
• Appeal Filed On: 07-12-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Recovery proceedings; Assessment record; Reason to believe
• Section: 143(3); 234B; 143(1); 208; 147; 148; 144; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SMT.ASHA VIJAYARAGHAVAN , JM ITA NO.6635/MUM/2006 : ASST.YEAR 1998-99 M/S.BARBAR SHIP MANAGEMENT INDIA PRIVATE LIMITED 31/32, 3 RD FLOOR, APPLE HERITAGE, SIR M.V.ROAD, ANDHERI (EAST) MUMBAI 400 093. PA NO.AAACI1614H. THE INCOME TAX OFFICER WARD 8(1)(2) MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI P.R.V.RAGHAVAN RESPONDENT BY : S/SHRI S.S.RANA & S.M.KESHKAMAT O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX U/S.263 ON 29.9.2006 IN RELATION TO THE ASSESSMENT YEAR 1998-99. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE DIRECTION OF THE LEARNED COMMISSIONER OF INCOME TAX FOR CHARGING INTEREST U/ S. 234B FROM THE DATE OF 1 ST APRIL OF THE ASSESSMENT YEAR I.E. 1.4.1998 INSTEAD OF 1.10.1999 AS CHARGED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER BY CONSID ERING THE DATE OF INTIMATION U/S.143(1)(A). 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN DECLARING LOSS OF RS.85,53,430 ON 26.11.1998. THE R ETURN WAS PROCESSED U/S.143(1) ON 10.8.1999 ON THE RETURNED LOSS. THE ASSESSMENT U /S.147 R.W.S. 143(3) WAS COMPLETED ON 25.2.2005 DETERMINING THE TOTAL INCOME AT RS.2,19,58,310. INTEREST U/S.234B WAS CHARGED AMOUNTING TO RS.61,45,483 ON T HE AMOUNTS AND FOR THE PERIODS SPECIFIED BELOW:- ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 2 PERIOD NO.OF MONTHS INTEREST RATE AMOUNT INTEREST 01.10.1999 TO 31.5.2001 20 1.50% 75,17,409 22,55,223 01.06.2001 TO 31.08.2003 27 1.25% 75,17,409 25,37,126 01.09.2003 TO FEB. 2005 18 1% 75,17,409 13,53,134 TOTAL 61,45,483 4. ON THE PERUSAL OF THE ASSESSMENT RECORDS, THE L EARNED CIT, WHILE EXERCISING HIS REVISIONAL POWER , NOTED THAT THE INTEREST WAS CHARGED BY THE A.O. FOR THE SHORTER PERIOD, FOLLOWING THE PROVISIONS OF SUB-SE CTION (3) OF SECTION 234B WHEREAS IT OUGHT TO HAVE BEEN CHARGED WITH REFERENCE TO SUB -SECTION (1) OF SECTION 234B READ WITH EXPLANATION (2) TO SECTION 234B(1). IN THIS BACKDROP OF FACTS THE ASSESSEE WAS CALLED UPON TO EXPLAIN AS TO WHY THE INTEREST B E NOT CHARGED WITH EFFECT FROM 1.4.1998 BEING THE FIRST DAY OF APRIL OF THE ASSESS MENT YEAR TO THE DATE OF REGULAR ASSESSMENT. THE ASSESSEES CONTENTION THAT THE ASSE SSMENT WAS MADE U/S.143(1)(A) AND HENCE THE PROVISIONS OF EXPLANATION (2) TO SECTION 234B(1) WERE NOT APPLICABLE DID NOT FIND FAVOUR WITH THE LEARNED CIT. HE FURTHE R DID NOT ACCEPT THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE THAT THE CBDT CI RCULAR NO.549 DATED 31.10.1989 (1990) 182 ITR (ST) 1 PROVIDES FOR SUCH A COURSE AS WAS ADOPTED BY THE AO. EVENTUALLY THE ASSESSMENT ORDER PASSED ON 25.2.2005 WAS HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE INSOFAR AS CHARGING OF INTEREST U/S.234B WAS CONCERNED. THE ASSESSING OFFI CER WAS DIRECTED TO ENHANCE THE DEMAND PAYABLE IN CONSEQUENCE OF THE ASSESSMENT ORDER BY CHARGING INTEREST U/S.234B FROM 1 ST APRIL, 1998 AT RS. 76,35,455 INSTEAD OF 1 ST OCTOBER, 1999 AS CHARGED BY HIM IN THE ASSESSMENT ORDER AMOUNTING TO RS.61,45,483. 5. THE LEARNED COUNSEL FOR THE ASSESSEE OPENED HIS ARGUMENTS BY PUTTING FORTH THAT THE LEARNED CIT ERRED IN DIRECTING THE CHARGIN G OF INTEREST U/S.234B WITH EFFECT FROM THE FIRST APRIL OF THE ASSESSMENT YEAR. HE SUB MITTED THAT ONCE THE ASSESSMENT WAS DONE U/S.143(1)(A) IN THIS CASE ON 10.8.1999, T HE SUBSEQUENT ASSESSMENT ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 3 U/S.147 R.W.S. 143(3) COULD NOT BE RECOGNIZED AS R EGULAR ASSESSMENT WITHIN THE MEANING OF EXPLANATION (2) TO SECTION 234B(1). HE FURTHER INVITED OUR ATTENTI ON TOWARDS THE MARGINAL NOTE TO SECTION 143 REFERRING TO ASSESSMENT. IT WAS STATED THAT SINCE SUB-SECTION (1), WHICH TALKS OF THE PRO CESSING OF THE RETURN, FALLS UNDER SECTION 143, IT SHOULD INVARIABLY AMOUNT TO ASSE SSMENT. CO-RELATING THE MEANING GIVEN TO INTIMATION U/S.143(1)(A) AS REFERR ING TO `ASSESSMENT WITH EXPLANATION (2) OF SECTION 234B(1), WHICH ALSO REFERS TO ASSESSMEN T, HE ARGUED THAT HAVING MADE THE ASSESSMENT U/S.143(1), THE SUBSEQU ENT ASSESSMENT U/S.147 R.W.S. 143(3) BY THE AO COULD NOT BE CATEGORIZED AS REGUL AR ASSESSMENT AND HENCE ONLY THE INTEREST WAS CHARGEABLE AS PER SUB-SECTION (3) OF SECTION 234B. HE, THEREFORE, DEFENDED THE ACTION OF THE ASSESSING OFFICER. 6. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESEN TATIVE STRONGLY RELIED ON THE IMPUGNED ORDER. HIS SUBMISSION WAS THAT SUB-SECTION (1) OF SECTION 143 DOES NOT ENVISAGE ANY ASSESSMENT AS IT REFERS TO INTIMATI ON. HE RELIED ON THE JUDGMENT OF THE HONBLE ALLAHABD HIGH COURT IN PRADEEP KUMAR HAR SARAN LAL VS. ASSESSING OFFICER [(1998) 229 ITR 46 (ALL.)] FOR CONTENDING THAT THE PROVISION OF SUB-SECTION (1) AS TAKEN NOTE OF BY THE LD. CIT, FO R CHARGING INTEREST UNDER SECTION 234B, WERE APPROPRIATE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. BEFORE WE PROCEED TO APPRECIAT E THE RIVAL CONTENTIONS, IT WILL BE APPROPRIATE TO SET OUT THE RELEVANT PORTION OF S ECTION 234B AS UNDER :- (1) SUBJECT TO THE OTHER PROVISIONS OF THIS SECTIO N, WHERE, IN ANY FINANCIAL YEAR, AN ASSESSEE WHO IS LIABLE TO PAY ADVANCE TAX UNDER SECTION 208 HAS FAILED TO PAY SUCH TAX OR, WHERE THE ADVANCE TAX PA ID BY SUCH ASSESSEE UNDER THE PROVISIONS OF SECTION 210 IS LESS THAN NINETY P ER CENT OF THE ASSESSED TAX, THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTERES T AT THE RATE OF ONE AND ONE- FOURTH PER CENT FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD FROM THE 1 ST DAY OF APRIL NEXT FOLLOWING SUCH FINANCIAL YEAR TO THE DATE OF DETERMINATION OF TOTAL INCOME UNDER SUB-SECTION (1) OF SECTION 143 AND ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 4 WHERE A REGULAR ASSESSMENT IS MADE, TO THE DATE OF SUCH REGULAR ASSESSMENT, ON AN AMOUNT EQUAL TO THE ASSESSED TAX OR, AS THE C ASE MAYBE, ON THE AMOUNT BY WHICH THE ADVANCE TAX PAID AS AFORESAID FALLS SH ORT OF THE ASSESSED TAX. EXPLANATION 1.- EXPLANATION 2.-WHERE, IN RELATION TO AN ASSESSMENT YEAR, AN ASSESSMENT IS MADE FOR THE FIRST TIME UNDER SECTIN 147, THE ASSE SSMENT SO MADE SHALL BE REGARDED AS A REGULAR ASSESSMENT FOR THE PURPOSES O F THIS SECTION. EXPLANATION 3.- (2) .. (3) WHERE, AS A RESULT OF AN ORDER OF REASSESSMENT OR RECOMPUTATION UNDER SECTION 147, THE AMOUNT ON WHICH INTEREST WAS PAYAB LE UNDER SUB-SECTION (1) IS INCREASED, THE ASSESSEE SHALL BE LIABLE TO PAY S IMPLE INTEREST AT THE RATE OF ONE AND ONE-FOURTH PER CENT FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD COMMENCING ON THE DAY FOLLOWING THE D ATE OF DETERMINATION OF TOTAL INCOME UNDER SUB-SECTION (1) OF SECTION 143 A ND WHERE A REGULAR ASSESSMENT IS MADE AS IS REFERRED TO IN SUB-SECTION (1) FOLLOWING THE DATE OF SUCH REGULAR ASSESSMENT AND ENDING ON THE DATE OF T HE REASSESSMENT OR RECOMPUTATION UNDER SECTION 147, ON THE AMOUNT BY W HICH THE TAX ON TOTAL INCOME DETERMINED ON THE BASIS OF THE REASSESSMENT OR RECOMPUTATION EXCEEDS THE TAX ON THE TOTAL INCOME DETERMINED UNDE R SUB-SECTION (1) OF SECTION 143 OR ON THE BASIS OF THE REGULAR ASSESSME NT AFORESAID. 8. SUB-SECTION (1) OF SECTION 234B PROVIDES THAT INTEREST SHALL BE CHARGED WHERE THE ADVANCE TAX PAID BY THE ASSESSEE IS LESS THAN 90% OF THE ASSESSED TAX. THE PERIOD FOR WHICH INTEREST IS TO BE CHARGED U/S. 234B HAS BEEN PROVIDED AS STARTING FROM 1 ST DAY OF APRIL NEXT FOLLOWING SUCH FINANCIAL YEAR TO THE DETERMINATION OF THE TOTAL INCOME UNDER SUB-SECTION (1) OF SECTION 143 AND WHERE A REGULAR ASSESSMENT IS MADE, TO THE DATE OF SUCH REG ULAR ASSESSMENT, ON AN AMOUNT EQUAL TO THE ASSESSED TAX OR, AS THE CASE MAY BE, O N THE AMOUNT BY WHICH THE ADVANCE TAX PAID AS AFORESAID FALLS SHORT OF THE AS SESSED TAX. IN THE PRESENT APPEAL THERE IS NO CONTROVERSY ABOUT THE AMOUNT ON WHICH I NTEREST IS TO BE CHARGED U/S ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 5 234B. THE DISPUTE ROTATES AROUND THE PERIOD FOR WH ICH THE INTEREST IS TO BE CHARGED AND MORE SPECIFICALLY IT IS ONLY QUA THE DATE FROM WHICH THE CHARGING OF INTEREST UNDER THIS SECTION SHALL COMMENCE. WHEREAS THE LD . CIT HAS MADE OUT A CASE THAT THE INTEREST BE CHARGED FROM 1 ST APRIL, 1998, BEING THE FIRST DAY OF THE A.Y. 1998- 99, THE ASSESEE IS CONTENDING THAT IT SHOULD STAR T FROM THE DATE OF INTIMATION U/S 143(1)(A). HOWEVER THE LD. AR CANDIDLY ACCEPTED THA T THERE WAS SOME MISTAKE ON THE PART OF THE AO IN CHARGING INTEREST FROM 1.10.1 999, WHEREAS IT SHOULD HAVE BEEN ACTUALLY CHARGED FROM 1.8.1999, BEING THE BEGINNING OF THE MONTH IN WHICH ORDER WAS PASSED U/S 143(1). 9. A BARE PERUSAL OF SUB-SECTION (1) OF SEC TION 234B REVEALS THAT THE STARTING DATE FOR THE CHARGING OF INTEREST U/S.234B IS FIRST APRIL NEXT FALLING THE FINANCIAL YEAR, THAT IS 1 ST APRIL OF THE RELEVANT ASSESSMENT YEAR EXTENDING UP TO THE DATE OF REGULAR ASSESSMENT, WHERE SUCH REGULAR ASSESSMENT I S MADE. IF HOWEVER THERE IS ONLY THE `DETERMINATION OF TOTAL INCOME UNDER SUB-S ECTION (1) OF SECTION 143, THEN UP TO THE DATE OF THE DETERMINATION OF SUCH TOTAL I NCOME. THUS IN BOTH THE CASES THE CHARGING OF INTEREST SHALL RUN FROM 1 ST APRIL OF THE RELEVANT ASSESSMENT YEAR. `REGULAR ASSESSMENT HAS BEEN DEFINED U/S. 2(40) TO MEAN THE ASSESSMENT MADE IN SUB-SECTION (3) OF SECTION 143 OR SECTION 144. FRO M HERE IT TURNS OUT THAT WHERE THE REGULAR ASSESSMENT IS MADE EITHER U/S 143(3) OR SEC TION 144, THE INTEREST U/S 234B SHALL BE CHARGED FROM THE 1 ST APRIL OF THE RELEVANT ASSESSMENT YEAR. AT THIS JUN CTURE IT WILL BE USEFUL TO REFER TO EXPLANATION (2) TO SECTION 234B(1) AS PER WHICH IF AN ASSESSMENT IS MADE FOR THE FIRST TIME UNDER SECTION 147, THE ASSESSMENT SO MADE SHALL BE REGARDED AS A REGULAR ASSESSMENT FOR THE P URPOSE OF THIS SECTION. FROM HERE IT FOLLOWS THAT THE PURVIEW OF `REGULAR ASSESSMENT HAS BEEN WIDENED FOR THE PURPOSES OF CHARGING INTEREST U/S 234B ALSO TO ROPE IN THE CASES IN WHICH THE ASSESSMENT IS MADE FOR THE FIRST TIME UNDER SECTION 147. THUS WHEN WE READ EXPLANATION (2) IN JUXTAPOSITION TO SUB-SECTION (1) OF SECTION 234B IT TRANSPIRES THAT WHERE THERE IS DETERMINATION OF TOTAL INCOME UNDER SUB-SECTION (1) OF SECTION 143, ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 6 THE INTEREST SHALL BE CHARGED FROM 1 ST APRIL OF THE RELEVANT ASSESSMENT YEAR UP TO THE DATE OF SUCH DETERMINATION. IF HOWEVER REGULAR ASSESSMENT IS MADE U/S. 143(3) OR 144, THE INTEREST SHALL BE CHARGED U/S.234B(1) F ROM 1 ST APRIL OF THE ASSESSMENT YEAR TO THE DATE OF SUCH REGULAR ASSESSMENT. FURTH ER IF NO ASSESSMENT IS MADE U/SS.143(3) OR 144 AND SIMPLY ASSESSMENT IS MADE U/ S.147 FOR THE FIRST TIME, SUCH ASSESSMENT MADE U/S.147 SHALL ALSO BE REGARDED AS A REGULAR ASSESSMENT FOR THE PURPOSES OF SECTION 234B(1) AND THE DATE FROM WHICH THE INTEREST IS TO BE CHARGED U/S.234B SHALL AGAIN BE FROM 1 ST DAY OF APRIL OF THE RELEVANT ASSESSMENT YEAR TO TH E DATE OF SUCH REGULAR ASSESSMENT U/S 147 FOR THE FIR ST TIME. 10. SUB-SECTION (3) OF SECTION 234B PROVIDES THAT WHERE AS A RESULT OF ORDER OF REASSESSMENT OR RECOMPUTATION U/S.147, THE AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER SUB-SECTION (1) IS INCREASED, THE ASSESSEE SH ALL BE LIABLE TO PAY SIMPLE INTEREST FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD COMMENCING ON THE DAY FOLLOWING THE DATE OF DETERMINATION OF TOTAL INCOME U/S.143(1) AND WHERE REGULAR ASSESSMENT IS MADE AS IS REFERRED TO IN SUB-SECTION (1) OF SECTION 234B FOLLOWING THE DATE OF SUCH REGULAR ASSESSMENT AND ENDING ON T HE DATE OF THE REASSESSMENT MADE U/S.147. THUS SUB-SECTION (3) COVERS THE CASE S OF REASSESSMENT UNDER SECTION 147. IT INDICATES THAT IF THE REGULAR ASSESSMENT WAS MADE EARLIER AND SUBSEQUENTLY THERE IS REASSESSMENT AS PER SECTION 147, THEN THE INTEREST U/S 234B IN CASE OF SUCH REASSESSMENT SHALL START FOLLOWING THE DATE OF SU CH REGULAR ASSESSMENT. IN CASE NO REGULAR ASSESSMENT WAS MADE EARLIER, BUT THE RETURN WAS SIMPLY PROCESSED U/S 143(1), THEN IN THE CASE OF REASSESSMENT U/S 147, T HE INTEREST SHALL BE CHARGED FROM THE DAY FOLLOWING THE DATE OF DETERMINATION OF TOTA L INCOME UNDER SUB-SECTION (1) OF SECTION 143. 11. HOWEVER, IN ANY CASE, IT NEEDS TO BE EN SURED THAT IF INTEREST HAS ALREADY BEEN CHARGED U/S 234B IN INTIMATION U/S 143(1)(A) F ROM THE 1 ST DAY OF APRIL OF THE ASSESSMENT YEAR TO THE DATE OF SUCH INTIMATION, A ND THEREAFTER REGULAR ASSESSMENT ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 7 IS MADE, THEN SUCH INTEREST CHARGED IN THE INTIMAT ION SHOULD BE ADJUSTED AGAINST THE INTEREST LIABILITY CREATED BY WAY OF REGULAR ASSES SMENT MADE. IN OTHER WORDS WHERE REGULAR ASSESSMENT IS MADE THEN THE INTEREST SHOULD BE CHARGED FROM THE 1 ST APRIL OF THE ASSESSMENT YEAR ONLY ONCE, THAT IS, IN THE REGU LAR ASSESSMENT. TO PUT IF STRAIGHT, WHERE THE ASSESSEE FURNISHED HIS RETURN WITH TOTAL INCOME OF RS. 100 AND AFTER MAKING ADJUSTMENTS U/S 143(1)(A), THE INCOME IS DET ERMINED AT RS. 125 IN INTIMATION. INTEREST U/S 234B SHALL BE CHARGED ON RS. 25 (RS.125 MINUS RS.100) FROM THE 1 ST APRIL OF THE RELEVANT ASSESSMENT YEAR, WHICH AMOUN T, SUPPOSE, COMES AT RS.2. FURTHER PRESUME THAT IF REGULAR ASSESSMEN T IS SUBSEQUENTLY MADE IN THIS CASE AND THE TOTAL INCOME IS ASSESSED AT RS. 175, I N SUCH A CASE THE ASSESSEE WILL BE LIABLE TO BE CHARGED WITH THE INTEREST U/S 234B ON THE DEFICIENCY CONSIDERING THE ASSESSED INCOME AT RS. 175, WHICH AMOUNT STARTING FROM THE 1 ST APRIL OF THE RELEVANT ASSESSMENT YEAR, SAY, COMES AT RS. 10. IN SUCH A CASE THE ONLY AMOUNT OF INTEREST U/S 234B SHOULD BE RS. 10 AND NOT RS. 12 ( RS 10 PLUS RS.2). THE SUM OF RS. 2 CHARGED EARLIER IN INTIMATION NEEDS TO BE ADJUSTE D AGAINST THE LIABILITY OF RS.10 SO AS TO AVOID THE DOUBLE CHARGING OF INTEREST TO THAT EXTENT. COMING BACK TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THERE IS NO SUCH ISSUE INASMUCH AS THE ASSESSEE FILED ITS RETURN DECLARING LOSS AND THE SAME FIGURE OF LOSS WAS ACCEPTED IN INTIMATION U/S 143(1)(A) WITHOUT CARRYING OUT ANY ADJUSTMENT. SO THERE IS NO QUESTION OF THE ASSESSEE HAVING BEEN CHARGED ANY INTEREST U/S 234B FROM 1 ST APRIL OF THE ASSESSMENT YEAR UPTO THE DATE OF INTIMATION U/S 14 3(1)(A). 12. THE ANSWER TO THE MAIN QUESTION FOR OUR CONSIDE RATION WHETHER THE INTEREST BE CHARGED U/S 234B(1) OR (3), BASICALLY DEPENDS O N THE QUESTION AS TO WHETHER THE ASSESSMENT MADE BY THE AO U/S 147 READ WITH 143(3) FOR THE FIRST TIME SHOULD BE CONSIDERED AS REGULAR ASSESSMENT AS PER EXPLANATION 2 TO SECTION 234B(1). THE CONTENTION OF THE LD. AR IS THAT THE PROCESSING O F RETURN U/S 143(1)(A) AMOUNTED TO THE ASSESSMENT AND HENCE THE LATER ASSESSMENT MADE U/S 143(3) READ WITH SECTION 147 COULD NOT BE DESCRIBED AS REGULAR ASSESSMENT F OR THE FIRST TIME. ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 8 13. LET US EVALUATE THIS SUBMISSION. SWEEPING CHANGES WERE MADE IN THE PROVISIONS OF ASSESSMENT BY THE AMENDMENT ACT, 198 7 W.E.F. 1.4.1989. WHEREAS IN THE PRE-AMENDMENT ERA, THE AO COULD FRAME AN AS SESSMENT U/S 143(1) WITHOUT REQUIRING THE PRESENCE OF THE ASSESSEE OR HE COULD ISSUE A NOTICE U/SS (2) OF SECTION 143 AND REQUIRE THE ASSESSEE TO PRODUCE HIS BOOKS O F ACCOUNT AND OTHER EVIDENCE IN SUPPORT OF THE RETURN FILED BY HIM AND THEREAFTER F RAME AN ASSESSMENT U/SS (3) OF SECTION 143. HENCE IT WAS NECESSARY TO PASS AN ASSE SSMENT ORDER EITHER U/SS (1) OR (3) OF SECTION 143. HOWEVER IN THE PERIOD POSTERIOR TO THE AMENDMENT SUCH PROCEDURE HAS BEEN DISPENSED WITH. NOW IT IS MAND ATED TO PROCESS THE RETURN BY MAKING THE PRESCRIBED ADJUSTMENTS. SUB-SECTION (1) PROVIDES THAT AFTER MAKING ADJUSTMENTS, `AN INTIMATION SHALL BE PREPARED OR GE NERATED AND SENT TO THE ASSESSEE SPECIFYING THE SUM DETERMINED TO BE PAYABLE BY, OR THE AMOUNT OF REFUND DUE TO THE ASSESSEE. IT IS FURTHER PROVIDED THAT AN INT IMATION SHALL ALSO BE SENT TO THE ASSESSEE IN A CASE WHERE THE LOSS DECLARED IN THE R ETURN BY THE ASSESSEE IS ADJUSTED BUT NO TAX OR INTEREST IS PAYABLE BY, OR NO REFUND ITS DUE TO HIM. SECOND PROVISO TO SUB-SECTION (1) OF SECTION 143 STATES THAT `NO INTI MATION UNDER THIS SUB-SECTION SHALL BE SENT AFTER THE EXPIRY OF ONE YEAR FROM THE END O F THE FINANCIAL YEAR IN WHICH THE RETURN IS MADE. AS PER THE AMENDED LAW, NOW THE AO PROCESSES THE RETURN U/S 143(1)(A) AND DETERMINES THE AMOUNT PAYABLE OR REFU NDABLE ON THAT BASIS. IT IS NOT NECESSARY TO MAKE ASSESSMENT IN EACH AND EVERY CASE . ASSESSMENT ARE MADE IN A LIMITED NUMBER OF CASES SELECTED FOR SCRUTINY UNDER SECTION 143(3). SUB-SECTION (2) OF SECTION 143 PROVIDES THAT WHERE A RETURN HAS BEE N FURNISHED, THE AO SHALL SERVE ON THE ASSESSEE A NOTICE SPECIFYING PARTICULARS OF CLAIM OF LOSS, EXEMPTION, DEDUCTION, ALLOWANCE OR RELIEF ETC TO BE FURNISHED WHERE HE HAS REASON TO BELIEVE THAT ANY CLAIM OF LOSS, EXEMPTION ETC. MADE IN TH E RETURN IS INADMISSIBLE. EVEN WITHOUT ANY SUCH REASONS, HE CAN ISSUE NOTICE UNDER THIS SUB-SECTION IF HE CONSIDERS IT NECESSARY TO ENSURE THAT THE ASSESSEE HAS NOT UN DER-STATED THE INCOME. AFTER MAKING THOROUGH VERIFICATION, THE ASSESSMENT ORDER IS PASSED U/S 143(3). THUS IN THE NEW SCHEME OF ASSESSMENT, INTIMATION IS ISSU ED ON THE PROCESSING OF RETURN ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 9 AND ONLY WHERE THE SCRUTINY ASSESSMENT IS TAKEN U P, THE ASSESSMENT ORDER IS PASSED U/S 143(3). TO BOLSTER HIS SUBMISSION THAT THE PR OCESSING OF RETURN U/S 143(1)(A) SHOULD BE CONSTRUED AS EQUIVALENT TO THE MAKING OF AN ASSESSMENT, THE LD. AR HAS RELIED ON CIRCULAR NO.549. IN OUR CONSIDERED OPINIO N SUCH RELIANCE IS MISCONCEIVED FOR THE REASON THAT PARA 5.2 MAKES IT EXPLICITLY C LEAR THAT : UNDER THE OLD PROVISIONS OF SUB-SECTION (1) OF SECTION 143, AFTER A RETURN OF INCOME HAD BEEN FILED, A REGULAR ASSESSMENT ORDER HAD TO BE PASSED BY THE ASSESSING OFFICERS EVEN WHERE THE RETURN WAS ACCEPTED WITHOUT REQUIRING THE PRESE NCE OF THE ASSESSEE OR THE PRODUCTION BY HIM OF ANY EVIDENCE IN SUPPORT OF THE RETURN. THE SAME PARA FURTHER PROVIDES THAT HOWEVER, SUB-SECTION (1) OF NEW SECT ION, SUBSTITUTED BY THE AMENDING ACT, 1987 HAS DONE AWAY WITH THIS REQUIREM ENT AND IT ONLY PROVIDES FOR PROPER RECOVERY OF TAX OR INTEREST DUE FROM THE ASS ESSEE OR ISSUE OF REFUND DUE TO THE ASSESSEE ON THE BASIS OF THE RETURN. THIS POS ITION HAS BEEN MADE FURTHER CLEAR IN PARA 5.12 OF THE SAME CIRCULAR : SINCE, UNDER THE PROVISIONS OF SUB-SECTION (1) OF THE NEW SECTION 143, AN ASSESSMENT IS NOT TO BE MADE NOW, THE PROVISIONS OF SUB-SECTIONS (2) AND (3) HAVE ALSO BEEN RECAST AND ARE ENTIRELY DIFFERENT FROM THE OLD PROVISIONS. A NOTICE UNDER SUB-SECTION (2) WHIC H WILL BE ISSUED ONLY IN CASES PICKED UP FOR SCRUTINY, IS NOW ISSUED ONLY TO ENSUR E THAT THE ASSESSEE HAS NOT UNDERSTATED HIS INCOME OR HAS NOT COMPUTED EXCESSIV E LOSS OR HAS NOT UNDERPAID THE TAX IN ANY MANNER WHILE FURNISHING HIS RETURN O F INCOME.. THUS IT IS MANIFEST THAT IN THE PERIOD PRIOR TO 1.4.1989 ASSE SSMENT COULD HAVE BEEN MADE EITHER U/S 143(1) OR 143(3). BUT AFTER AMENDMENT, ALL THE RETURNS ARE FIRST PROCESSED U/S 143(1) AND ONLY SOME RETURNS ARE ASSESSED U/S 1 43(3). THE ISSUANCE OF INTIMATION (AS APTLY DESCRIBED IN SUB-SECTION (1) OF SECTION 143 ITSELF) CANNOT BE EQUATED WITH THE REGULAR ASSESSMENT. THE HONBLE DE LHI HIGH COURT IN MTNL VS CBDT (2000) 246 ITR 173 (DEL) HAS HELD THAT : `THE INTIMATION UNDER SECTION 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSES SMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THE Y STOOD AT DIFFERENT POINTS OF TIME. THE INTIMATION UNDER SECTION 143(1)(A) WAS DE EMED TO BE A NOTICE OF DEMAND ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 10 UNDER SECTION 156, FOR THE APPARENT PURPOSE OF MAKI NG MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX APPLICABLE. BY SUCH AP PLICATION ONLY RECOVERY OF THE AMOUNT INDICATED TO BE PAYABLE IN THE INTIMATION BE CAME PERMISSIBLE. AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISION. A LMOST SIMILAR VIEW HAS BEEN REITERATED IN SHREE SOMESHWRA FARMERS CO-OPERATIVE SPG. MILLS VS. JT. CIT (1999) 236 ITR 829 (KAR). IN THE LIGHT OF THE LEGAL POSITION DISCUSSED ABOVE COUPLED WITH THE RELEVANT CIRCULAR AND THE JUDICIAL PRONOUNCEMENTS ON THE POINT, THERE REMAINS NO DOUBT WHATSOEVER THAT INTIMATION U /S 143(1) CANNOT BE CATEGORIZED AS `ASSESSMENT. THE CONTENTION OF THE LD. AR, TO T HIS EXTENT, THEREFORE, FAILS. 14. THE LD. AR ARGUED THAT THE PROVISIONS O F SUB-SECTION (3) OF SECTION 234B SHOULD BE INVOKED AS THE ASSESSMENT IN THIS CASE WA S MADE ONLY U/S 147 AND AS SUCH THE INTEREST BE CHARGED FROM THE DATE OF INT IMATION U/S 143(1)(A). IT IS TRUE THAT SUB-SECTION (3) OF SECTION 234B PROVIDES FOR T HE CHARGING OF INTEREST, AS A RESULT OF REASSESSMENT U/S 147, IN A SITUATION IN WHICH EITHER THE ASSESSMENT WAS ORIGINALLY MADE U/S 143(3) OR THERE WAS DETERMINATI ON OF INCOME U/S 143(1). IN BOTH THE SITUATIONS THE INTEREST U/S 234B(3) IS C HARGED WITH THE STARTING POINT AS THE DATE OF DETERMINATION OF INCOME OR THE DATE OF REGU LAR ASSESSMENT. IF THE CONTENTION OF THE LD. AR IS ACCEPTED THAT IN A CASE WHERE THER E IS AN ASSESSMENT U/S 147 THEN INVARIABLY THE INTEREST SHOULD BE CHARGED U/S 234B (3) FROM THE DATE OF DETERMINATION OF INCOME U/S 143(1) OR THE DATE OF ORIGINAL REGULAR ASSESSMENT, THEN THE PROVISIONS OF EXPLANATION 2 TO SUB-SECTION (1) OF SECTION 234B SHALL BECOME OTIOSE. THE VIEW SO CANVASSED ON BEHALF OF T HE ASSESSEE IS NOT LEGALLY SUSTAINABLE. THE OPENING WORDS OF SUB-SECTION (3) OF SECTION 234B ARE : `WHERE, AS A RESULT OF AN ORDER OF REASSESSMENT OR RECOMPUTATI ON UNDER SECTION 147. IT DOES NOT ENCOMPASS `ASSESSMENT MADE U/S 147. FROM THE LANGUAGE OF SECTION 147, IT CAN BE EASILY VIEWED THAT IT REFERS TO BOTH THE ` ASSESSMENT AS WELL AS `REASSESSMENT WITHIN ITS FOLD, SUBJECT TO THE FULF ILLMENT OF OTHER CONDITIONS. THIS SECTION PROVIDES THAT : `IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 11 INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, A SSESS OR REASSESS SUCH INCOME[EMPHASIS SUPPLIED BY US]. FROM HERE IT I S PALPABLE THAT SECTION 147 REFERS TO THE MAKING OF ASSESSMENT OR REASSESSMENT WHEN THE INCOME ESCAPES ASSESSMENT. WHEREAS `ASSESSMENT IN THIS SECTION R EFERS TO THE MAKING OF ASSESSMENT FOR THE FIRST TIME, THE `REASSESSMENT PRE-SUPPOSES THE EXISTENCE OF AN EARLIER ASSESSMENT. THIS POSITION IS FURTHER CLARIF IED BY THE EXPLANATION 2 TO SECTION 147. CLAUSE (A) OF THIS EXPLANATION DEEMS INCOME ESCAPING ASSESSMENT EVEN WHEN NO RETURN HAS BEEN FILED BY THE ASSESSEE. CLAUSE (B) COVERS WITHIN ITS AMBIT THE CASES WHERE A RETURN OF INCOME HAS BEEN FILED BUT N O ASSESSMENT IS MADE. CLAUSE (C) EXTENDS TO THE CASES WHERE AN ASSESSMENT HAS B EEN MADE BUT STILL INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED OR SUCH IN COME HAS BEEN ASSESSED AT TOO LOW A RATE ETC. SECTION 234B EXTENDS TO BOTH THE CASES U/S 147, VIZ, WHERE IT IS ASSESSMENT (THAT IS, ASSESSMENT FOR THE FIRST TIME ) AND REASSESSMENT (THAT IS, WHERE IT IS NOT THE FIRST ASSESSMENT). THERE IS A CLEAR CUT LINE OF DEMARCATION. THE CASES OF `ASSESSMENT U/S 147 ARE COVERED UNDER SUB-SECTION (1) OF SECTION 234B, BY WAY OF EXPLANATION 2, THE CASES OF `REASSESSMENT U/S 147 ARE COVERED UNDER SUB-SECTION (3). THE FURTHER SUBMISSION MADE ON BEHALF OF TH E ASSESSEE THAT THE HEADING OR MARGINAL NOTE OF SECTION 143 IS `ASSESSMENT AND H ENCE THE PROCESSING OF RETURN UNDER SUB-SECTION (1) OF THIS SECTION SHALL ALSO AM OUNT TO ASSESSMENT, IS DEVOID OF ANY MERIT. IT IS WELL SETTLED THAT THE MARGINAL NO TE TO A SECTION, ALBEIT PLAYS AN IMPORTANT ROLE IN THE INTERPRETATION OF A PROVISION , BUT CANNOT CONTROL THE CLEAR LANGUAGE OF A PROVISION. THE HONBLE SUPREME COURT IN PRAKASH NATH KHANNA & ANR VS. CIT (2004) 266 ITR 1 (SC) HAS LAID DOWN TH AT THOUGH THE HEADING OF SECTION OR MARGINAL NOTE MAY BE RELIED UPON TO CL EAR ANY DOUBT OR AMBIGUITY IN THE INTERPRETATION OF THE PROVISION AND TO DISCERN TH E LEGISLATIVE INTENT, IT CANNOT CONTROL THE MEANING OF THE BODY OF THE SECTION I F THE LANGUAGE EMPLOYED THERE IS CLEAR. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDICTIONAL HIGH COURT IN DHARAMVAT PROVISIONS STORE VS. CIT (1983) 139 IT R 700 (BOM). WE, THEREFORE, ITA NO.6635/MUM/2006 BARBER SHIP MANAGEMENT INDIA PVT. LTD. 12 JETTISON THIS CONTENTION ADVANCED ON BEHALF OF THE ASSESSEE FOR THE REASON THAT THE LANGUAGE OF SUB-SECTION (1) OF SECTION 143 IS CLEAR AND UNAMBIGUOUS AS IT REFERS TO THE PROCESSING OF RETURN AND THE RESULTANT ISSUANC E OF `INTIMATION TO THE ASSESSEE. IN SUCH A SITUATION THERE IS NO RATIONALE TO GO BY THE HEADING OF SECTION 143 WHICH REFERS TO `ASSESSMENT, ALSO COVERING THE REGULAR A SSESSMENT UNDER SUB-SECTION (3). 15. ADVERTING TO THE FACTS OF THE INSTANT CASE IT IS OBSERVED THAT THE DETERMINATION OF TOTAL INCOME UNDER SUB-SECTION (1) OF SECTION 143 WAS MA DE ON 10.8.1999. NO REGULAR ASSESSMENT WAS MADE U/S.143(3). NOTICE WAS ISSUED U/S.148 AND THE ASSESSMENT WAS MADE FOR THE FIRST TIME U/S.147 R.W.S. 143(3), WHICH FITS INTO EXPLANATION (2) TO SECTION 234B(1) TO BE REGARDED AS REGULAR ASSESSMENT FOR THE PURPOSES OF THE SECTIO N. AS INTIMATION U/S 143(1)(A) IS OBVIOUSLY NOT AN ASSESSMENT AND IT IS THE CASE OF `ASSESSMENT FO R THE FIRST TIME IN THE HANDS OF THE ASSESSEE U/S 147, THE CASE WILL FALL UNDER SUB-SECTION (1) OF SE CTION 234B. WE, THEREFORE, HOLD THAT THE LEARNED CIT WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT THE ASSESSMENT ORDER PASSED BY THE A.O. WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE INASMUCH AS THE STARTING POINT FOR THE CHARGING OF INTEREST U/S.234B(1) OUGHT TO HAVE BEEN AS 1.4.1998 INSTEAD OF 1.10.1999 AS ADOPTED BY THE AO. EX CONSEQUENTI , WE APPROVE THE VIEW TAKEN BY THE LD. CIT. 16. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 9 TH DAY OF DECEMBER, 2009 SD/- SD/- ( ASHA VIJAYARAGHAVAN ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI : 9 TH DECEMBER, 2009. DEVDAS* . FIT FOR PUBLICATION (ASHA VIJAYARAGHAVAN) (R.S.S YAL) JUDICIAL MEMBER ACCOUNTANT MEMBER