2002 (5) TMI 18 - HC - Income Tax

In this appeal the Revenue has challenged the order of the Income-tax Appellate Tribunal relating to the assessment year 1990-91 on the issue of disallowance of Rs. 15, 84, 216 made under section 43B of the Act while processing the return under section 143(1)(a) of the Act. - We are in respectful agreement with the judgment of S. R. F. Charitable Trust s case in which their Lordships have held that the stage of furnishing of proof is reached as and when the proof is demanded by the Income-tax Officer on a notice under section 143(2) being issued. If no proof in support of the claim was available with the Income-tax Officer he could have issued a notice under section 143(2) but he could not have unilaterally made this disallowance by seeking to invoke the provisions of the first proviso to section 143(1). - We have carefully perused the impugned judgment of the Tribunal. In our considered opinion no interference is called for. Consequently the appeal is accordingly dismissed.

Summary

Issues:
Challenge to order of Income-tax Appellate Tribunal on disallowance under section 43B of the Income-tax Act for assessment year 1990-91.

Analysis:
The Commissioner of Income-tax appealed against the Income-tax Appellate Tribunal's decision on the disallowance of Rs. 15,84,216 under section 43B of the Income-tax Act for the assessment year 1990-91. The Tribunal had allowed the assessee's appeal, relying on a decision of the Gauhati High Court. The Commissioner contended that the Tribunal erred in its decision, as the case cited was not directly relevant. The assessee had filed its return of income but failed to provide evidence supporting the deduction claimed under section 43B. The Commissioner had initially disallowed the deduction, which was upheld in a rectification application and then remanded by the Commissioner of Income-tax for further examination. The Income-tax Appellate Tribunal ultimately allowed the assessee's appeal, leading to the Commissioner's appeal under section 260A of the Income-tax Act.

The Delhi High Court referred to the S. R. F. Charitable Trust case and Circular No. 549 issued by the Central Board of Direct Taxes to analyze the situation. The court highlighted that adjustments under section 143(1)(a) should be based on prima facie admissible or inadmissible information available in the return or accompanying documents. The court emphasized that the Income-tax Officer cannot unilaterally disallow a claim without proper evidence or issuing a notice under section 143(2) to demand proof from the assessee. The court agreed with the previous judgments that proof must be demanded before any disallowance under section 143(1) can be made.

In conclusion, the High Court upheld the decision of the Income-tax Appellate Tribunal, stating that no interference was necessary. The appeal was dismissed, and each party was directed to bear their own costs. The court's decision was based on the principles of natural justice and the requirement for proper evidence before disallowing deductions under section 43B of the Income-tax Act.