The Assessing Officer has rectified my old s.143(1)(a) intimation under s.154 after already completing a s.143(3) assessment. Can he do that?
No. Once a notice under section 143(2) has gone out and a regular assessment has been made under section 143(3), the earlier intimation under section 143(1)(a) merges into that assessment and no longer stands as an order of its own. There is then nothing left for section 154 to rectify. The Madras High Court set aside a rectification made in December 1998 on an intimation of 7 March 1994, which had charged additional tax of Rs 4,70,346 more than three years after the scrutiny assessment of 22 November 1995 was over, and set aside the revisional order that had confirmed it. The rectification was held to be wholly without jurisdiction.
Decided by the High Court (High Court of Madras - S. Nagamuthu, J.) on 2010-08-19, reported as [2011] 196 Taxman 271 (Madras); W.P. No. 17819 of 2001 (assessment year 1993-94). It bears on section 154, section 143(1)(a), section 143(2), section 143(3), section 264 of the Income Tax Act 1961, in Assessment & Scrutiny matters.
This is the answer to a manoeuvre that still surfaces: the scrutiny assessment produces nothing useful, so the officer goes back to the old summary intimation and 'rectifies' that instead, usually to revive the additional tax that section 143(1A) once carried. The Court's reasoning removes the foundation rather than the result. A section 143(1)(a) intimation is a provisional act that the statute itself displaces the moment the officer takes the scrutiny route; after the section 143(2) notice there is, in the Court's words, no scope at all to proceed under section 143(1)(a). Because the intimation has merged, section 154 has no order in front of it, and the defect is one of jurisdiction, not of merits - which is why a writ lay even though the assessee had already been through section 264. The Court took the merger point from the Supreme Court's decision in Gujarat Electricity Board.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, a State government undertaking, filed its return for the year ended 31 March 1993 declaring nil income. On 7 March 1994 the assessing authority issued an intimation under section 143(1)(a) accepting that position. A notice under section 143(2) followed on 31 March 1994. The assessee filed a revised return on 4 July 1995 reversing deductions it had claimed for provisions for bonus and gratuity, and the scrutiny assessment under section 143(3) was completed on 22 November 1995. Long afterwards, by an order dated 14 December 1998, the officer purported to rectify the intimation of 7 March 1994 under section 154 and levied additional tax of Rs 4,70,346. The assessee's objections were rejected and its revision petition under section 264 was dismissed by the Commissioner. It came to the High Court under Article 226.
The writ petition was allowed and the impugned order set aside. The rectification order and the revisional order confirming it both fell. After an order under section 143(3) has been passed, the intimation under section 143(1)(a) merges into it, and no rectification order under section 154 can be passed to rectify that intimation. The officer had acted wholly without jurisdiction.
The Court worked from the scheme of section 143 as it then stood. Section 143(1)(a) permits a summary acceptance with prima facie adjustments; section 143(2) opens scrutiny; section 143(3) ends in a regular assessment. Once the second and third steps have been taken there is no scope at all to proceed under section 143(1)(a), because the summary intimation has been overtaken by the assessment made after enquiry. Applying the Supreme Court's decision in Commissioner of Income-tax v. Gujarat Electricity Board, the Court held that the intimation gets merged with the order under section 143(3). Section 154 operates on an order or intimation that is still in existence; after merger there is none, so the exercise was not a rectification at all but an act without jurisdiction. The revisional order under section 264, which had confirmed a jurisdictionally void order, could not stand on its own.
After an order has been passed in terms of Section 143(3) of the Act, no rectification order under Section 154 could be passed to rectify the intimation under Section 143(1)(a) of the Act.
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Handle my notice → Ask a CA on WhatsAppNo. Once a notice under section 143(2) has gone out and a regular assessment has been made under section 143(3), the earlier intimation under section 143(1)(a) merges into that assessment and no longer stands as an order of its own. There is then nothing left for section 154 to rectify. The Madras High Court set aside a rectification made in December 1998 on an intimation of 7 March 1994, which had charged additional tax of Rs 4,70,346 more than three years after the scrutiny assessment of 22 November 1995 was over, and set aside the revisional order that had confirmed it. The rectification was held to be wholly without jurisdiction. This was decided by the High Court (High Court of Madras - S. Nagamuthu, J.) and bears on section 154, section 143(1)(a), section 143(2), section 143(3), section 264 of the Income Tax Act 1961. It is reported as [2011] 196 Taxman 271 (Madras); W.P. No. 17819 of 2001 (assessment year 1993-94). This is the answer to a manoeuvre that still surfaces: the scrutiny assessment produces nothing useful, so the officer goes back to the old summary intimation and 'rectifies' that instead, usually to revive the additional tax that section 143(1A) once carried. The Court's reasoning removes the foundation rather than the result. A section 143(1)(a) intimation is a provisional act that the statute itself displaces the moment the officer takes the scrutiny route; after the section 143(2) notice there is, in the Court's words, no scope at all to proceed under section 143(1)(a). Because the intimation has merged, section 154 has no order in front of it, and the defect is one of jurisdiction, not of merits - which is why a writ lay even though the assessee had already been through section 264. The Court took the merger point from the Supreme Court's decision in Gujarat Electricity Board. If it applies to you, the first step is this: If a s.154 order lands on a s.143(1)(a) intimation for a year in which a s.143(3) assessment has already been made, take the jurisdiction point first: the intimation has merged and there is no order to rectify.
The assessee, a State government undertaking, filed its return for the year ended 31 March 1993 declaring nil income. On 7 March 1994 the assessing authority issued an intimation under section 143(1)(a) accepting that position. A notice under section 143(2) followed on 31 March 1994. The assessee filed a revised return on 4 July 1995 reversing deductions it had claimed for provisions for bonus and gratuity, and the scrutiny assessment under section 143(3) was completed on 22 November 1995. Long afterwards, by an order dated 14 December 1998, the officer purported to rectify the intimation of 7 March 1994 under section 154 and levied additional tax of Rs 4,70,346. The assessee's objections were rejected and its revision petition under section 264 was dismissed by the Commissioner. It came to the High Court under Article 226. The matter was decided on 2010-08-19 by the High Court (High Court of Madras - S. Nagamuthu, J.). On those facts the High Court held as follows. The writ petition was allowed and the impugned order set aside. The rectification order and the revisional order confirming it both fell. After an order under section 143(3) has been passed, the intimation under section 143(1)(a) merges into it, and no rectification order under section 154 can be passed to rectify that intimation. The officer had acted wholly without jurisdiction.
The Court worked from the scheme of section 143 as it then stood. Section 143(1)(a) permits a summary acceptance with prima facie adjustments; section 143(2) opens scrutiny; section 143(3) ends in a regular assessment. Once the second and third steps have been taken there is no scope at all to proceed under section 143(1)(a), because the summary intimation has been overtaken by the assessment made after enquiry. Applying the Supreme Court's decision in Commissioner of Income-tax v. Gujarat Electricity Board, the Court held that the intimation gets merged with the order under section 143(3). Section 154 operates on an order or intimation that is still in existence; after merger there is none, so the exercise was not a rectification at all but an act without jurisdiction. The revisional order under section 264, which had confirmed a jurisdictionally void order, could not stand on its own. In the words reproduced by the source cited on this page: "After an order has been passed in terms of Section 143(3) of the Act, no rectification order under Section 154 could be passed to rectify the intimation under Section 143(1)(a) of the Act." The decision followed or applied CIT v. Gujarat Electricity Board [2003] 260 ITR 84 / 129 Taxman 65 (SC).
It was decided by the High Court on 2010-08-19 and is reported as [2011] 196 Taxman 271 (Madras); W.P. No. 17819 of 2001 (assessment year 1993-94). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 154, section 143(1)(a), section 143(2), section 143(3), section 264, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petition was allowed and the impugned order set aside. The rectification order and the revisional order confirming it both fell. After an order under section 143(3) has been passed, the intimation under section 143(1)(a) merges into it, and no rectification order under section 154 can be passed to rectify that intimation. The officer had acted wholly without jurisdiction. It arises in Assessment & Scrutiny matters, on section 154, section 143(1)(a), section 143(2), section 143(3), section 264 of the Income Tax Act 1961, and was decided by High Court of Madras - S. Nagamuthu, J.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the sequence of dates on record - date of the intimation, date of the s.143(2) notice, date of the s.143(3) order, date of the s.154 order. On these facts the sequence decided the case. Do not let the argument be reduced to whether the mistake was apparent from the record; a s.154 order made without a subsisting order to rectify fails whatever the merits of the adjustment. A s.264 order confirming such a rectification goes down with it, so ask for both to be set aside rather than only the rectification.
Validity check could not be completed. I read only this judgment. I have not read the Supreme Court decision in Gujarat Electricity Board on which the merger reasoning rests, and I have not checked whether any later Madras or Supreme Court decision has doubted this order. The provision it turns on - additional tax under s.143(1A) on a s.143(1)(a) adjustment - has since gone from the statute, so the point arises today mainly for old years. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order is short and does not set out the figures behind the disputed adjustment, so the only amount recorded here is the additional tax of Rs 4,70,346. The operative paragraph reads only 'the writ petition is allowed and the impugned order is set aside', and the writ petition challenged both the rectification of 14 December 1998 and the Commissioner's order under section 264 confirming it; the order does not spell out the two separately in the disposal. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was allowed and the impugned order set aside. The rectification order and the revisional order confirming it both fell. After an order under section 143(3) has been passed, the intimation under section 143(1)(a) merges into it, and no rectification order under section 154 can be passed to rectify that intimation. The officer had acted wholly without jurisdiction.
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