2016 (2) TMI 708 - HC - Income Tax

Adjustments of interest payable to IFCI and sales tax penalty under section 43B while processing the case under section 143(1)(a) - Held that - It has been categorically recorded by the Tribunal that adjustments could be made only on the basis of the details available on record. For making such disallowances it was open for the Assessing Officer to follow the procedure laid down in the Act by issuance of notice under Section 143(2) of the Act. There was nothing wrong in issuing the notice under section 143(2) of the Act and the intimation under section 143 (1)(a) of the Act on the same date. Thus notice under section 143(2) of the Act could not be termed as invalid. As the adjustments made by the Assessing Officer could not be said to be prima facie adjustments therefore the additions made in the intimation issued under Section 143(1)(a) of the Act were not sustainable. The view taken by the Tribunal is in accordance with law which has not been shown to be illegal or perverse in any manner. Thus the question of law referred is answered against the revenue and in favour of the assessee

Summary

Issues:
1. Whether adjustments made by the Assessing Officer under Section 143(1)(a) of the Income Tax Act, 1961, disallowing interest payable to IFCI and sales tax penalty, were prima facie adjustments?

Analysis:
The High Court was tasked with determining the legality of adjustments made by the Assessing Officer under Section 143(1)(a) of the Income Tax Act, 1961, involving the disallowance of interest payable to IFCI and sales tax penalty. The Tribunal had previously ruled in favor of the assessee, stating that such adjustments were beyond the scope of Section 143(1)(a) and were not prima facie adjustments. The Tribunal emphasized that adjustments must be based on details available on record, and the Assessing Officer could disallow deductions through the proper procedure outlined in the Act, including issuing a notice under Section 143(2). The Tribunal found that the Assessing Officer's adjustments were not sustainable as they were not prima facie adjustments and were made without following the necessary procedures.

The Tribunal further clarified that Section 143(1)(a) was intended to expedite assessment work by allowing summary adjustments but not to permit extensive investigations before making such adjustments. The Tribunal highlighted that debatable issues did not fall within the scope of prima facie adjustments and that such adjustments should rely on available record details. Additionally, the Tribunal addressed the validity of the notice under Section 143(2), stating that even if issued on the same date as the intimation under Section 143(1)(a), it was not invalid. The High Court concurred with the Tribunal's findings, emphasizing that the adjustments made by the Assessing Officer were not prima facie adjustments and were beyond the scope of Section 143(1)(a).

In conclusion, the High Court upheld the Tribunal's decision, stating that the view taken was in accordance with the law and not shown to be illegal or perverse. Therefore, the question of law was answered against the revenue and in favor of the assessee, leading to the disposal of the reference accordingly.