1. The petitioner is a public limited company registered under the Companies Act, 1956, and is an assesee under the previsions of the I.T. Act, 1961 (hereinafter referred to as 'the Act'). The relevant assessment year is 1978-79 and the corresponding previous year is the calender year ending on December 31, 1977. In the relevent previous year, the petitioner paid advance tax totalling to Rs. 1,38,27,462. On May 5, 1978, the petitioner filed a return of income under s. 139 of the Act declaring a total income of Rs. 2,18,14,185 as per the computation of income prepared and the audited balance-sheet. As per the return, the tax pay able came to Rs. 1,25,97,691 and the petitioner was entitled to a refund of Rs. 12,29,771 being the deference between the total tax paid and deducted at source and the tax due and payable the income returned. The petitioner thereupon by letter dated May 5, 1978, requested the ITO, Companies Circle IV(1), Bombay, to pass a provisional order under s. 141A of the Act and to refund the sum of Rs. 12,29,771 together with interest.
2. The petitioner while filing the return had claimed deduction from income of a sum of Rs. 1,09,30,869, being the liability for purchase tax payable to the Uttar Pradesh Government under the Uttar Pradesh Sales of Motore Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976. The petitioner had filed a writ petition in the Allahabad High Court challenging the levy of purchase tax and the Allahabad High Court had granted an injunction in favour of the petitioner restraining the Government of Uttar Pradesh from realising the purchase tax. The respondent No. 1, the ITO, passed an order dated November 20, 1978, under s. 141A of the Act determining an income of Rs. 3,32,20,054 by disallowing the the statutory liability for purchase tax of Rs. 1,09,30,869. The respondent No. 1 by the interim order demanded a sum of Rs. 53,57,188 from the petitioner as the tax payable under the Act. The petitioner complains against the said order and claims that the consequent notice of demand of tax is invalid. The petitioner filed this petition under article 226 of the Constitution of India on April 20, 1979, challenging the legality of the order.
3. Shri Mehta, learned counsel appearing on behalf of the petitioner, submitted that under s. 141A of the Act, the ITO is authorised to made a provisional assessment of the sum refundable to the assessee, and the ITO had no authority to pass any order whereby any tax can be demanded from the assessee. The submission of the learned counsel is correct and deserves acceptance. Sub-s. (1) of s. 141A of the Act reads as under :
'141A. (1) Where a return has been furnished under section 139 and the assessee claims that the tax paid or deemed to have been paid under the provisions of Chapter XVII-B, or Chapter XVII-C, exceeds the tax payable on the basis of the return and the accounts and documents accompanying it, the Income-tax Officer, if he is of the opinion that the regular assessment of the assessee is not likely to be made within six months from the date of furnishing of the return, shall make in a summary manner within the said six months a provisional assessments of the sum refundable to the assessee, after making such adjustments to the income or loss declared in the return as are required to be made under sub-section (2) with reference to such return, accounts and documents, and for the purposes of the adjustments referred to in clause (iv) of sub-section (2), also with reference to the records of the assessments, if any, of past years.'
4. A plain reading of this sub-section makes it clear that the ITO has a power to make adjustment to the income declared in the return by disallowing any deduction which, on the basis of the information available in such return, accounts and documents, is prima facie not admissible. the sub-section also makes it clear that the ITO has power only to grant refund to the assessee and has no power to determine and demand tax. the order passed by respondent No. 1 is clearly without jurisdiction and cannot be sustained. As the impugned order suffers form a serious infirmity, it is required to be quashed.
5. Accordingly, the petition succeeds and the rule is made absolute is terms of prayer (a) of the petition. In the circumstances of the case, there will be no order as to costs.