2003 (9) TMI 697 - AT - Income Tax

Summary

Issues Involved:
1. Prima facie adjustments made under section 143(1)(a) of the Income-tax Act, 1961.
2. Deletion of prima facie adjustment on account of bonus commission.
3. Deletion of prima facie adjustment on account of conveyance allowance.

Detailed Analysis:

1. Prima Facie Adjustments under Section 143(1)(a):
The power of making "prima facie adjustment" is conferred on the Assessing Officer by the first proviso to section 143(1)(a) of the Income-tax Act, 1961. This provision allows adjustments for arithmetical errors, prima facie admissible deductions not claimed, and prima facie inadmissible deductions claimed in the return. The key term here is "prima facie inadmissible," which implies that the deduction must be conclusively inadmissible based on the return and accompanying documents. The courts have consistently held that the absence of proof does not justify a prima facie adjustment unless the law specifically requires such proof to be filed with the return.

2. Deletion of Prima Facie Adjustment on Account of Bonus Commission:
The Assessing Officer made a prima facie adjustment by adding Rs. 7,30,635 on account of bonus commission, which was contested by the assessee. The CIT(A) deleted this adjustment, and the revenue appealed. The tribunal noted that the assessee claimed a deduction of Rs. 2,92,254, while the adjustment was made for the entire receipt of Rs. 7,30,635, part of which (Rs. 4,38,381) was already offered for tax. The tribunal observed that conflicting decisions by various High Courts existed on this issue, and the jurisdictional High Court's decision favoring the revenue came only in 2002, long after the relevant assessment year. Therefore, the adjustment could not be considered prima facie inadmissible at the time. The tribunal upheld the CIT(A)'s deletion of the adjustment.

3. Deletion of Prima Facie Adjustment on Account of Conveyance Allowance:
The Assessing Officer also made a prima facie adjustment by disallowing Rs. 2,75,508 claimed as exempt conveyance allowance under section 10(14). The CIT(A) restricted this disallowance to Rs. 95,980 based on the employer's salary certificate. The tribunal examined whether the exemption under section 10(14) depended on the employer's certification. It concluded that the employer's certificate is relevant only for estimating tax deduction at source and not for the actual exemption claim. The tribunal emphasized that the assessee is not required to file evidence of expenditure with the return or the employer. Therefore, the absence of certification in the salary certificate does not make the claim prima facie inadmissible. The tribunal directed the Assessing Officer to delete the entire prima facie adjustment on account of conveyance allowance, rendering the partial relief issue redundant.

Conclusion:
The tribunal allowed the assessee's appeal and dismissed the revenue's appeal, directing the deletion of prima facie adjustments for both the bonus commission and conveyance allowance. The judgment underscores the principle that prima facie adjustments under section 143(1)(a) require conclusive evidence of inadmissibility based on the return and accompanying documents.