1992 (2) TMI 67 - HC - Income Tax

Summary

Issues Involved:
1. Legality of intimation u/s 143(1)(a) of the Income-tax Act.
2. Scope of adjustments permissible u/s 143(1)(a).
3. Disallowance of specific claims by the Income-tax Officer.
4. Availability of alternative remedies under the Income-tax Act.

Summary:

1. Legality of Intimation u/s 143(1)(a):
The first petitioner challenged the intimation sent under section 143(1)(a) of the Income-tax Act demanding income-tax and additional tax u/s 143(1A) for the assessment year 1990-91. The petitioner contended that the intimation was wholly illegal and beyond the authority of the first respondent.

2. Scope of Adjustments Permissible u/s 143(1)(a):
The court examined the scope of adjustments permissible under section 143(1)(a) and concluded that the Income-tax Officer (ITO) can only make adjustments that are arithmetical or prima facie admissible or inadmissible based on the return and accompanying documents. The ITO cannot disallow claims requiring further inquiry without issuing a notice u/s 143(2).

3. Disallowance of Specific Claims:
- Investment Allowance: The ITO disallowed the claim for investment allowance on new machinery due to the absence of proof of purchase. The court held that this disallowance was ultra vires as the ITO had no power to disallow the claim without issuing a notice u/s 143(2).
- Presentation Articles: The ITO disallowed the claim for presentation articles not bearing the company logo. The court found this disallowance to be beyond the ITO's jurisdiction as it involved a debatable point requiring a hearing.
- Ex Gratia Payment: The ITO disallowed the ex gratia payment to employees due to lack of proof. This claim was later accepted in a rectification application u/s 154.
- Cash Purchases Above Rs. 10,000: The ITO disallowed cash payments exceeding Rs. 10,000. The court held that there was no basis for disallowing this claim prima facie.
- Expenditure of Previous Year: The ITO disallowed the deduction of expenditure related to a previous year. The court found this disallowance to be ultra vires as it required examination of the nature of accounts maintained by the assessee.

4. Availability of Alternative Remedies:
The court addressed the argument that the writ petition should not be entertained due to the availability of alternative remedies under section 154 and section 264. The court concluded that these remedies were not adequate as they could not correct substantive errors or provide an efficacious remedy in the present circumstances.

Conclusion:
The court made the rule absolute in terms of prayers (a) and (b), directing the respondents to deal afresh with the return of income submitted by the petitioners in accordance with law. The respondents were also directed to pay the petitioners' costs.