Order Passed under Section 143(1) is NOT an Assessment: Delhi High Court

Recently Delhi HC in a writ filed by one of the Big 4 has held that the Order Passed under Section 143(1) is NOT an Assessment.

Additionally, the Court noted that the Delhi High Court in Indu Lata Rangwala versus DCIT (2016) had reiterated that where the return initially filed by the the assessee is processed under Section 143 (1) of the Income Tax Act, and an intimation is sent to an assessee, it is not an ‘assessment’ in the strict sense of the term for the purposes of Section 147, which provides for assessment or reassessment of the assessee’s income if it has escaped assessment.

It may be noted that the Supreme Court in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Private Limited, (2008) 14 SCC 208, has held that there is a distinction between ‘intimation’ and ‘assessment’ under Sections 143(1) and 143(3) of the Act. The relevant portion of the said judgment is reproduced hereinbelow:-

“15. In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(l)(a) as it stood prior to April 1, 1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D. K. Jain J) in Apogee International Limited v. Union of India. 16. It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any “assessment” is done by them? The reply is an emphatic “no”. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise.”

Delhi High Court in the present case observed as under:

“Consequently, the order passed under Section 143(1) of the Act is not an assessment for the purposes of Section 147 of the Act. Further, it is not necessary in such a case for the Assessing Officer to come across some fresh tangible material to form a belief that income has escaped assessment.”

The copy of the order is attached herewith as under:

 

Order Passed under Section 143(1) is NOT an Assessment: Delhi High Court