Research › Search › Judgment

Madhya Pradesh High Court · body

2001 DIGILAW 58 (MP)

Amir Uddin v. Income-tax Officer

2001-01-17

A.M.SAPRE

body2001
JUDGMENT A.M. Sapre, J. 1. By filing this writ petition under Articles 226 and 227 of the Constitution of India, the petitioner--an assessee, has questioned the legality and validity of an order dated July 14, 1992 (annexure-C), passed by the Income Tax Officer, Ward 2(3), Indore, under Section 143(1)(a) of the Income Tax Act, 1961 (for brevity "the Act"). The facts which lie in a narrow compass and which are relevant for the disposal of this writ petition need mention infra. 2. The petitioner, an assessee, is engaged in the business of sale of kerosene and transport. He is also engaged in other kinds of businesses which he is carrying on as partner with some other persons. He also owns certain immovable properties which yield yearly income liable to be taxed under the provisions of the Income Tax Act. The petitioner is being assessed to payment of Income Tax as an individual. 3. The present petition relates to the assessment year 1991-92 for which the accounting year is April 1, 1990, to March 31, 1991. 4. The petitioner for the year in question (assessment year 1991-92) filed his Income Tax return on September 30, 1991, in his individual capacity. In the statement of account submitted in the return the petitioner disclosed some of his income to have been received from "long-term capital gains". 5. By the impugned order dated july 14, 1992, (annexure-C), the Assessing Officer (the ITO) in exercise of his power conferred under Section 143(1)(a) of the Act, held that the income shown by the assessee (petitioner) under the head "Long-term capital gains" is not or/and cannot be described to have been received from/under the head income from "long-term capital gains" but it is in fad an income received from/under the head "Adven- ture in the nature of trade". It is against this finding changing the head of sources of income, as referred to supra, that the petitioner has felt aggrieved and filed this writ petition. 6. The Revenue has supported the order impugned in the writ petition and has prayed for its dismissal, both on the merits and also on the ground of an alternative remedy being available to the petitioner under Section 154(1)(b) of the Act for questioning the correctness and validity of an order passed under Section 143(1)(a) of the Act. 7. 6. The Revenue has supported the order impugned in the writ petition and has prayed for its dismissal, both on the merits and also on the ground of an alternative remedy being available to the petitioner under Section 154(1)(b) of the Act for questioning the correctness and validity of an order passed under Section 143(1)(a) of the Act. 7. Heard Shri G.M. Chaphekar, learned senior counsel for the petitioner, and Shri R.L. Jain, learned counsel for the respondents. 8. Learned counsel for the petitioner while assailing the legality and validity of the order in question, urged that the Assessing Officer (the ITO) did not have any jurisdiction while passing an order under Section 143(1)(a) of the Act to change the nature of sources of income which the assessee has disclosed in the return. It was his submission that while exercising the powers conferred under Section 143(1)(a), the Assessing Officer (the ITO) cannot equate the assessment proceedings under Section 143(i)(a) of the Act with that of the regular assessment proceedings under Section 145(3). Learned counsel urged that under Section 145(1)(a), the Assessing Officer (the ITO) is only empowered to make prima facie adjustments appearing in the statement of return filed by the assessee and that too as enumerated in the first proviso to Section 143(1)(a) ibid. It was urged that the change made by the Assessing Officer (the ITO) in the head "Long-term capital gains" disclosed by the assessee to that of "adventure in the nature of trade" is not permissible under Section 143(1)(a) and hence the order to that extent is rendered without jurisdiction and falling outside the purview of Section 143(1)(a) of the Act requiring it to be set aside. This, in substance, was the submission of learned counsel for the petitioner (assessee). 9. Learned counsel for the Revenue in reply raised a preliminary objection about the maintainability of the writ. Relying upon Section 154(1)(b) of the Act, learned counsel urged that the remedy of the petitioner (assessee) is to invoke the provisions of Section 154(1)(b) to get rid of the impugned order passed under Section 143(1)(a) of the Act rather than to file a writ petition under Articles 226 and 227 of the Constitution of India. Relying upon Section 154(1)(b) of the Act, learned counsel urged that the remedy of the petitioner (assessee) is to invoke the provisions of Section 154(1)(b) to get rid of the impugned order passed under Section 143(1)(a) of the Act rather than to file a writ petition under Articles 226 and 227 of the Constitution of India. Learned counsel urged that it being a settled principle of law that when the petitioner has a statutory remedy available to raise his grievances, then in that event, writ should not be entertained and if entertained, should not be proceeded with on the merits. It was, therefore, urged that the petitioner should be left to pursue his remedy available to him under the Income Tax Act. Alternatively, it was urged that even otherwise, the impugned adjustment made by the Assessing Officer (the ITO) falls within the four corners of Section 143(1)(a) of the Act and hence the Assessing Officer was perfectly justified in making those adjustments which are impugned in this writ petition. 10. Having heard learned counsel for the parties and having perused the impugned order, I find force in the submissions made by learned counsel for the petitioner and as a consequence, I am inclined to allow the writ petition and quash the adjustment made in the order of assessment passed under Section 143(1)(a) of the Act. 11. Coming to the preliminary objection raised by learned counsel for the respondent-Revenue, I find no merit in it. Once this court admits the writ petition under Articles 226 and 227 of the Constitution of India against an order then this court ordinarily would not dismiss the writ petition essentially on the ground of alternative remedy. Indeed this issue was examined by their Lordships of the Supreme Court in the case reported in Hirday Narain v. ITO [1970]78ITR26(SC) , while overruling the preliminary objection so raised by the respondents, this is what their Lordships ruled (page 31): "An order under Section 35 of the Income Tax Act is not appealable. It is true that a petition to revise the order could be moved before the Commissioner of Income Tax. But, Hirday Narain moved a petition in the High Court of Allahabad and the High Court entertained that petition. It is true that a petition to revise the order could be moved before the Commissioner of Income Tax. But, Hirday Narain moved a petition in the High Court of Allahabad and the High Court entertained that petition. If the High Court had not entertained his petition, Hirday Narain could have moved the Commissioner in revision, because at the date on which the petition was moved the period prescribed by Section 33A of the Act had not expired. We are unable to hold that because a revision application could have been moved for an order correcting the order of the Income Tax Officer under Section 35, but was not moved, the High Court would be justified in dismissing as not maintainable the petition, which was entertained and was heard on the merits." 12. In view of the aforesaid view taken by their Lordships of the Supreme Court, I have no hesitation in overruling the preliminary objection raised by learned counsel for the Revenue. 13. A perusal of Section 143(1)(a) of the Act and in particular its first proviso shows that the Assessing Officer is empowered to allow or to make the following adjustments in the income or loss declared in the return namely :-- "(i) any arithmetical errors in the return, accounts or documents accompanying it are to be rectified ; (ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, is to be allowed ; (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, is to be disallowed." 14. If I examine the impugned adjustment made by the Assessing Officer (the ITO), I find that they do not fall in any of the categories specified supra. The question, whether a particular income disclosed by the assessee is to be taxed under a particular head cannot be changed for being taxed under an altogether a new source of income under Section 143(1)(a). The impugned adjustment in the present case does not (sic) appear to me to be prima facie bad. In the return, the assessee disclosed that a particular income is being shown to be received under the head "Long-term capital gains". The impugned adjustment in the present case does not (sic) appear to me to be prima facie bad. In the return, the assessee disclosed that a particular income is being shown to be received under the head "Long-term capital gains". This was changed to an income to have been received from an "adventure in the nature of trade" by the learned Assessing Officer (the ITO). 15. This, in my opinion, needed a factual inquiry and could not be termed as a prima facie adjustment within the meaning of Section 143(1)(a), first proviso. This could be done only by issuing proper notice to the assessee or in the regular assessment under Section 143(3) of the Act, where the assessee would get an opportunity to satisfy the assessing authority that what he has disclosed in the return is the correct source of income and the same cannot be taxed under the head "Adventure in the nature of trade". 16. Accordingly, and in view of the aforesaid discussion, the impugned adjustment, treating the income to have been received under the head "Adventure in the nature of trade" is set aside by issuing a writ of certiorari. As a consequence the petition is allowed. 17. No costs. Security amount, if deposited by the petitioner, be refunded.