Concealment penalty – Furnishing inaccurate particulars — Capital gains

Dilip N. Shroff vs. JCIT & Anr. 291 ITR 519 (SC)

The assessee (HUF) had an undivided 1/4th share in certain land and building, which was sold during the previous year relevant to the assessment year 1998-99. To value the property for the purpose of capital gains the assessee appointed a registered valuer. In the report the registered valuer gave all the requisite particulars as required in the prescribed form, and had stated (i) that he had based the valuation on the sale prices given in a newspaper and worked out the value of the assessee’s share in the property as on April 1, 1981, as Rs. two crores fifty lakhs; (ii) that on his inspection he had found that the building was in a dilapidated condition and had collapsed and, therefore, he had taken the scrap value of the building. For the assessment year 1998-99 the assessee had disclosed an income of Rs. 30,80,030 showing a long-term capital loss of Rs. 34,12,000 on account of the sale of the property and had filed the registered valuer’s report along with the return. The Joint Commissioner referred under section 55A of the Income-tax Act, 1961, the matter for valuation of the undivided 1/4th share of the appellant’s property as on April 1, 1981, to the District Valuation Officer who submitted a report determining the share of the assessee at Rs. 1,14,92,907 and on that basis the Joint Commissioner determined the capital gain of the assessee at Rs. 3,09,78,478. After a show-cause notice under section 274 read with section 271 the Joint Commissioner imposed a minimum penalty of Rs. 68,78,095 under section 271(1)(c) on the basis that the assessee had furnished inaccurate particulars of its income. The Commissioner (Appeals) as well as the Appellate Tribunal affirmed the imposition of penalty. The High Court dismissed the assessee’s appeal in limine.

The Supreme Court reversed the decision of the Bombay High Court and cancelled the penalty imposed and allowed the appeal of the assessee. The Supreme Court was called upon to consider the effect of Explanation 1 as relevant for A.Y. 1998-99 which stood as under at the relevant time :

"Explanation 1.— Where in respect of any facts material to the computation of the total income of any person under this Act,—

(A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or

(B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section be deemed to represent the income in respect of which particulars have been concealed.

Their Lordships of the Supreme Court held as under :

"…..The role of the explanation having regard to the principle of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Clause (c) of sub-section (1) of section 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. By reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty not only is discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. Some of those factors apart from being inherent in the nature of penalty proceedings as has been noticed in some of the decisions of this Court, inheres on the face of the statutory provisions. Penalty proceedings are not to be initiated, as has been noticed by the Wanchoo Committee, only to harass the assessee. The approach of the assessing officer in this behalf must be fair and objective.

"Only in the event the factors enumerated in clauses (A) and (B) of Explanation-1 are satisfied and a finding in this behalf is arrived at by the Assessing Officer, the legal fiction created thereunder would be attracted.

The Supreme Court also referred to its earlier decision in S. Sundaram Pillai vs. V.R. Pattabiraman AIR 1985 SC 582 to explain the object of the Explanation as under :

52. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is –

(a) to explain the meaning and intendment of the Act itself,

(b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve,

(c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful,

(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and

(e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same.

Their Lordships further held as under :

"The term "inaccurate particulars" is not defined. Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the explanations are taken recourse to, a finding has to be arrived at having regard to clause (a) of Explanation 1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income."

"The primary burden of proof, therefore, is on the Revenue. The statute requires satisfaction on the part of the Assessing Officer. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the department."

"Once the primary burden of proof is discharged, the secondary burden of proof would shift on the assessee because the proceeding under section 271(1)(c) is of penal nature in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which Parliament considers to be against the public interest and, therefore, it was for the department to establish that the assessee shall be guilty of the particulars of income. [See Anwar Ali (76 ITR 696, SC) and M/s Khoday Eswarsa (83 ITR 360 ,S.C.]"

"The order imposing penalty is quasi-criminal in nature and, thus,the burden lies on the department to establish that the assessee had concealed his income. Since the burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitutes good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle."

"Section 271(1)(c) remains a penal statute. Rule of strict construction shall apply thereto. The ingredients for imposing penalty remains the same. The purpose of the legislature that it is meant to be deterrent to tax evasion is evidenced by the increase in the quantum of penalty, from 20% under the 1922 Act to 300% in 1985."

"A duty may be enjoined on the assessee to make a correct disclosure of income but if such disclosure is based on the opinion of an expert, who is otherwise also a registered valuer having been appointed in terms of a statutory scheme, only because his opinion is not accepted or some other expert gives another opinion, the same by itself may not be sufficient for arriving at a conclusion that the assessee has furnished inaccurate particulars."

Findings of facts cannot be set aside by the High Court unless such findings are perverse

1. The question for consideration before the High Court as referred by the Tribunal was as under:

   "Whether on the facts and circumstances of the case, is the finding of the Tribunal that income from 60.79 acres of unregistered coffee area is not included in the accounts of the assessee supported by any material or evidence?"

2. The High Court held that the order of the Tribunal including the income from 60.79 acres of unregistered coffee area was not correct and the High Court set aside the order of the Tribunal.

3. The Revenue took the matter to the Supreme Court. The Supreme Court set aside the decision of the High Court and remanded the matter to the High Court for fresh consideration. The Supreme Court made the following observations while remanding the matter back to the High Court.

"No reason which weighed with the High Court to upset the orders of the Assessing Authority and the Appellate Authorities, is discernible. Findings of facts were recorded by the said authorities. In a reference there is no scope for interference with the factual findings, unless the findings are per se without reason or basis, perverse and/or contrary to materials on record. Merely because a different view on facts may be available to be drawn, that cannot be a ground to interfere with the findings of fact recorded by the authorities.

"In cases of reference, only a question of law can be answered. Where the determination of an issue depends upon the appreciation of evidence or materials resulting in ascertainment of basic facts without application of law, the issue raises a mere question of fact. An inference from certain facts is also a question of fact. A conclusion based on appreciation of facts does not give rise to any question of law. If a finding of fact is arrived at by the Tribunal after improperly rejecting evidence, a question of law arises. Where the Tribunal acts on materials partly relevant and partly irrelevant, a question of law arises because it is impossible to say to what extent the mind of the Tribunal was affected by the irrelevant material used by it in arriving at the finding.

"A question of fact becomes a question of law if the finding is either without any evidence or material."

Valuation of closing stock – past accounting policy

1. The assessee was a government company. It valued its stock of zinc concentrate of 84,000 metric tonnes by adopting the London Metallic Exchange price which was lower than the weighted average cost by Rs. 27.08 crores.

2. The Department held that the valuation of the closing stock was not in accordance with the accounting policy of the assessee and since there was no export during the accounting year ending March 31, 1996, made an addition to its profits. But the Appellate Tribunal deleted the addition made to the income of the assessee. On appeal, the High Court held that no substantial question of law arose for consideration.

3. Allowing the appeal of the revenue the Supreme Court observed as under:

" The narrow controversy involved in the present case is whether the assessee was right in writing down the inventory (zinc concentrate) below the cost price by estimating its net realisable value at the LME price and not by estimating its net realizable value at the domestic price. There is no dispute in the present case that as on March 31, 1996, the international prices of zinc concentrates were lower than the domestic prices thereof. Further, in the past the assessee has been valuing zinc concentrates at net realizable value at the domestic prices. It is for this reason that auditors in their report have categorically stated that if the net realizable value stood estimated in accordance with the past accounting policy (at domestic prices) the profits of the company would have been higher by Rs. 27.08 crores. This report of the auditors is not erroneous as is sought to be urged on behalf of the assessee. There is no rectification of the said report. In the case of British Paints [1991] 188 ITR 44 it has been held by this court that if the fall in the price has the effect of merely reducing the prospective profits (which appears to be the case if one looks at the auditors’ report) there would be no justification to discard the valuation at cost. Therefore, in our view, the present case is not a case of anticipated loss, it is a case of reduction in the prospective profits.

"For the aforestated reasons, we are of the view that the Income-tax Appellate Tribunal had erred in deleting the additions made in the assessment."

Permanent establishment in India and calculation of profits from Indian operations by a foreign company

1. The assessee, a non-resident Korean company, entered into an agreement on March, 12, 1985, with the Oil and Natural Gas Commission (ONGC) for designing, fabrication, hook-up and commissioning of a platform, the South Bassein Field Complex-Facilities, in the Bombay High. The agreement was in two parts, one for the fabrication of the structure in Korea and the other for its installation and commission. The Assessing Officer held that since the duration of the project extended beyond 9 months, the project constituted a permanent establishment in India in terms of Article 5(3) of the Convention for the Avoidance of Double Taxation between India and Korea; in any event, the office of the assessee in Bombay constituted the permanent establishment under Article 5(2)(c) of the Convention and the profits of the assessee attributable to the permanent establishment were liable to be taxed in India in accordance with Article 7 of the Convention.
    

2. The Assessing Officer treated the fabrication as having a nexus with the installation and treated the income from the Korean operations as taxable in India; and estimated the profits of the assessee under the agreement at 20 per cent of the gross receipts and taxed 2 per cent of the contract revenue in Korean operations.
    

3. The Appellate Tribunal, on appeal, held that (i) the contract was divisible, (ii) no part of the income attributable to Korean operations could be taxed in India as before coming into existence of the permanent establishment in India the work of fabrication was completed in Korea and the fabricated platform handed over to the ONGC there, and (iii) the profits from the Indian operations had to be worked out at 3 per cent, and not at 10 per cent. An appeal taken to the High Court was summarily dismissed by the High Court on the ground that no substantial question of law arose.
    

4. The Supreme Court held as under :

"11. On reading Article 7 of the CADT, it is clear that the said article is based on the OECD Model Convention. Paragraph (1) of Article 7 states the general rule that business profits of a enterprise of one Contracting State may not be taxed by the other Contracting State unless the enterprise carries on its business in the other Contracting State through its permanent establishment. The said paragraph (1) further lays down that only so much of the profits attributable to the permanent establishment is taxable. Paragraph (1) of Article 7 further lays down that the attributable profit can be determined by the apportionment of the total profits of the assessee to its various parts or on the basis of an assumption that the permanent establishment is a distinct and separate enterprise having its own profits and distinct from the GE. Applying the above test to the facts of the present case, we find that the profits earned by the Korean GE on supplies of fabricated platforms cannot be made attributable to its Indian permanent establishment ask the installation permanent establishment came into existence only after the transaction stood materialized. The installation permanent establishment came into existence only on conclusion of the transaction giving rise to the supplies of the fabricated platforms. The installation permanent establishment emerged only after the contract with the ONGC stood concluded. It emerged only after the fabricated platform was delivered in Korea to the agents of the ONGC. Therefore, the profits on such supplies of fabricated platforms cannot be said to be attributable to the permanent establishment. There is one more reason for coming to the aforesaid conclusion. In terms of paragraph (1) of Article 7, the profits to be taxed in the source country were not the real profits but hypothetical profits which the permanent establishment would have earned if it was wholly independent of the GE. Therefore, even if we assume that the supplies were necessary for the purposes of installation (activity of the permanent establishment in India) and even if we assume that the supplies were an integral part, still no part of profits on such supplies can be attributed to the independent permanent establishment unless it is established by the Department that the supplies were not at arm’s length price. No such taxability can arise in the present case as the sales were directly billed to the Indian customer (ONGC). No such taxability can also arise in the present case ask there was no allegation made by the Department that the price at which billing was done for the supplies included any element for services rendered by the permanent establishment. In the light of our above discussion, we are of the view that the profits that accrued to the Korean GE for the Korean operations were not taxable in India.

"12. There is one more aspect to be discussed. The attraction rule implies that when an enterprise (GE) sets up a permanent establishment in another country, it brings itself within the fiscal jurisdiction of that other country to such a degree that such other country can tax all profits that the GE derives from the source country— whether through a permanent establishment or not. It is the act of setting up a permanent establishment which triggers the taxability of transactions in the source State. Therefore, unless the permanent establishment is set up, the question of taxability does not arise—whether the transactions are direct or they are through a permanent establishment. In the case of a turnkey project, the permanent establishment is set up at the installation stage while the entire turnkey project, including the sale of equipment is finalized before the installation stage. The setting up of the permanent establishment, in such a case, is a stage subsequent to the conclusion of the contract. T is as a result of the sale of equipment that the installation permanent establishment comes into existence. However, this is not an absolute rule. In the present case, there was no allegation made by the Department that the permanent establishment came into existence even before the sale took place outside India. Similarly, in the present case, there was no allegation made by the Department that the price at which ONGC was billed/invoiced by the assessee for supply of fabricated platforms included any element for services rendered by the permanent establishment. In the present case, we are concerned with the assessment years 1987-88 and 1988-89. Therefore, we are not inclined to remit the matter to the adjudicating authority. We reiterate, in the circumstances, not all the profits of the assessee company from its business connection in India (PE) would be taxable in India, but only so much of profits having economic nexus with the permanent establishment in India would be taxable in India. To this extent, we find no infirmity in the impugned judgment of the Tribunal. Accordingly, we are of the view that the Tribunal was right in holding that the profits attributable to the Korean operations were not taxable in view of Article 7 of the CADT."

5. The Supreme Court also held that the High Court had erred when it held that no substantial questions of law arose in the matter.
    

6. The Supreme Court further held as under :

"In the present case, as indicated above, the Assessing Officer has rejected the accounts submitted by the assessee. This has not been challenged. Moreover, the assessee appeared before the Department and submitted that its income from Indian operations be computed under section 44BB or under Instruction No. 1767 issued by the Central Board of Direct Taxes. Under the said instruction, in cases where the sales take place outside, as in this case, only 10 per cent of the gross receipts in respect of the activities of installation, commissioning etc. performed in India will be taxable. In view of the stand taken by the assessee, we are of the view that the Commissioner of Income-tax (Appeals) was right in computing the taxable profits at 10 per cent of the gross receipts in respect of the activities of installation, commissioning etc. performed in India."

High Court cannot set aside concurrent findings of facts when there is material to support such findings — Foreign gifts – Section 68

1. The assessees received foreign gifts from one common donor. The payments were made to the assessees by instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiation through a bank in India. Most of the cheques sent from abroad were drawn on the Citibank, N.A. Singapore. The evidence indicated that the donor was to receive suitable compensation from the assessees. On this material the Assessing Officer held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the account books of the assessees as their income applying section 68 of the Income-tax Act, 1961.
    

2. On appeal the High Court re-appreciated the evidence and substituted its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion. The High Court allowed the appeal of the assessee.
    

3. In appeal taken by the revenue, the decision of the High Court was reversed by the Supreme Court, observing as under :

"….. Shri Iyer, learned senior counsel contended that the issue relating to the propriety of the legal conclusion that could be drawn on the basis of proved facts gives rise to a question of law and therefore, the High Court is justified in interfering in the matter since the authorities below failed to draw a proper and logical inference from the proved facts. We are unable to persuade ourselves to accept the submission

"The findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence."

"No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed an error in disturbing the concurrent findings of fact.

"A bare reading of section 68 of the Income-tax Act, 1961, suggests that (i) there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression " the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion.

"In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature."

"The burden is on the assessee to take the plea that, even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature."

Provision for taxation cannot be added while computing the income of an insurance company as it is not an expenditure

Commissioner of Income-tax vs. Oriental Fire & General Insurance Co. Ltd. 291 ITR 370 S.C.

1. The respondent insurance company was assessed after considering the provisions of section 44 of the Income-tax Act, 1961. The case of the revenue before the Supreme Court was that provision for taxation amounting to Rs. 6.57 crores was not an admissible deduction which was allowed by the High Court while computing the income of the respondent insurance company.
    

2. The relevant provisions which fell for consideration before the Supreme Court were extracted as under by the Supreme Court.

"10. Determination of liability of income tax under the provisions of the 1961 Act for the purpose of computation of income of an assessee, inter alia, for carrying on business in insurance is governed by section 44 thereof and Rule 5(a) of the First Schedule appended thereto, which read as under :

"S. 44.— Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head "Interest on securities", "Income from house property, capital gains or Income from other sources, or in sections 28 to 43 A, the profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or by a co-operative society, shall be computed in accordance with the rules contained in the First Schedule."

"Rule 5(a).— The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the Insurance Act, 1938 (4 of 1938) to be furnished to the Controller of Insurance, subject to the following adjustments :

"(a) Subject to the other provisions of this rule, any expenditure or allowance which is not admissible under the provisions of sections 30 to 43A in computing the profits and gains of a business shall be added back."

3. The Supreme Court observed:

"It is, therefore, evident that the provision of income tax being not an expenditure, the Assessing Officer could not have exercised its jurisdiction in relation thereto.

"There is another approach to the same issue. Section 44 of the Income-tax Act read with the rules contained in the First Schedule to the Act lays down an artificial mode of computing the profits and gains of insurance business. For the purpose of income tax, the figures in the accounts of the assessee drawn up in accordance with the provisions of the First Schedule to the Income-tax Act and satisfying the requirements of the Insurance Act are binding on the assessing officer under the Income-tax Act and he has no general power to correct the errors in the accounts of an insurance business and undo the entries made therein."

4. The Supreme Court, while dismissing the appeal of the revenue held as under :

"28. Section 40(a)(ii) of the 1961 Act, it will bear repetition to state, provides for a non-obstante clause. It is of wide magnitude. sections 32 to 38 of the 1961 Act refer to expenditure admissible under the Act. Section 40, however, seeks to make an exception thereto stating that some expenditures would not be allowed. Section 40(a)(ii), however, does not say that the income-tax would be an expenditure. It does not provide as to how a total income of a person should be computed. It provides for other types of taxes. The said provision has, therefore, no application in the instant case."

Determination of business profits under section 80HHC of the Act

Commissioner of Income Tax vs. Shirke Construction Equipment Ltd. 291 ITR 380 (SC)

1. 1. The revenue took the matter in appeal to the Supreme Court an two questions of law decided by the Bombay High Court in favour of the assessee. The questions so considered by the High Court were:

2. The High Court had decided both the questions against the Revenue and in favour of the assessee. On the first point, the High Court had held that section 80-HHC is independent of section 80-AB and section 80-AB does not control section 80HHC of the Act. On the second point, it was held that unabsorbed business losses of the earlier years could not be set off against the profits from exports.
    

3. Taking a contrary view, the Supreme Court in IPCA Laboratory Ltd. (261 ITR 521) had held that (i) section 80-HHC of the Act is not independent of section 80-AB and would be governed by section 80-AB; and (ii) losses were to be set off against the profits earned from export of self-manufactured goods. It was further held in the said case that section 80 HHC would be governed by section 80-AB and the decision of the Bombay High Court and the Kerala High Court taking the contrary view did not lay down the correct law to that extent.
    

4. The revenue’s appeal was accordingly accepted by the Supreme Court and the decision of the Bombay High Court was reversed on both the Questions.

Reassessment of income escaping assessment — Conceptual difference between sec. 143(1) and sec. 143(3)

1. The respondent, a private limited company, filed its return of income for the A.Y. 2001-02 on October 30, 2001, declaring a total loss of Rs. 2,70,85,105. The said return was processed under section 143(1) of the Income-tax Act, 1961 accepting the loss returned by the respondent. Notice under section 148 of the Act was issued on the ground that claim of bad debts as expenditure was not acceptable. It is in the aforesaid backdrop of facts that the impugned notice under section 148 of the Act dated May 12, 2004, was challenged by the respondent-assessee,
    

2. The High Court allowed the writ petition following the decision of the High Court in Adani Exports vs. Deputy Commissioner of Income-tax (Assessments) [240 ITR 224 (Guj)]
    

3. The Supreme Court while reversing the order of the High Court observed as under :

"Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso.

"The inevitable conclusion is that the High Court has wrongly applied Adani’s case [1999] 240 ITR 224 (Guj) which has no application to the case on the facts in view of the conceptual difference between section 143(1) and section 143(3) of the Act."