2009 (3) TMI 87 - HC - Income Tax

Jurisdiction of AO to pass an order u/s 154 amending the intimation u/s 143(1)(a) and to make a prima facie adjustment in an intimation issued held that Tribunal was not justified in holding that disallowance u/s 43B in respect of provident fund contribution, could be made as a prima facie adjustment u/s 143 (1) (a) Tribunal was not justified in law in not deciding the contention of assessee that the order under Section 154 and revised intimation both were barred by limitation - assessee s appeal allowed

Issues Involved:
1. Jurisdiction of the Assessing Officer to pass an order under Section 154 amending the intimation under Section 143(1)(a) for both assessment years 1989-90 and 1994-95.
2. Whether the Tribunal was justified in holding that opportunity was granted to the appellant before passing the order under Section 154.
3. Whether the order under Section 154 and revised intimation were barred by limitation.
4. Whether the disallowance of provident fund contribution was justified on the grounds of payment not being made within the statutory period for both assessment years.

Detailed Analysis:

Issue 1: Jurisdiction of the Assessing Officer
For both assessment years 1989-90 and 1994-95, the primary question was whether the Assessing Officer had the jurisdiction to pass an order under Section 154 amending the intimation under Section 143(1)(a) and to make a prima facie adjustment. The Court noted that Section 43B, which was inserted by the Finance Act, 1983, allows for the deduction of certain amounts only upon actual payment, regardless of the accounting method employed by the assessee. The Court referenced the case of Modern Fibotex India Ltd. and Jagatdal Jute & Industries Ltd., which established that a prima facie adjustment under Section 143(1)(a) can only be made if the deduction claimed is inadmissible on the face of the return and the accompanying documents. The Court concluded that the "due date" for provident fund contributions was not apparent from the records, and further enquiry was necessary, which could not be done under Section 154 or as a prima facie adjustment under Section 143(1)(a).

Issue 2: Opportunity to the Appellant
The Tribunal's finding that the opportunity was granted to the appellant before passing the order under Section 154 was challenged. The Court observed that under Section 154, the Assessing Officer is obligated to provide a reasonable opportunity of being heard if the amendment increases the liability of the assessee. The Court found that no notice under Section 154 was served, and the order and revised notice were dispatched much later than their dated issuance, thus violating the principles of natural justice.

Issue 3: Limitation
The appellant argued that the revised intimation and the order under Section 154 were time-barred. The Court noted that under Section 154, no amendment can be made after four years from the end of the financial year in which the order sought to be amended was passed. The original intimation under Section 143(1)(a) was issued on June 30, 1990, meaning any rectification order should have been passed by March 31, 1995. However, the order was received by the assessee on December 11, 1996, well beyond the permissible period. The Court found that the Tribunal's finding that the issue of limitation was not raised was contrary to the record and perverse.

Issue 4: Disallowance of Provident Fund Contribution
For both assessment years, the disallowance of provident fund contributions was contested. The Court observed that the Assessing Officer could not make a disallowance in respect of provident fund contributions in proceedings under Sections 143(1)(a) or 154, as the "due date" for payment was not ascertainable from the return or accompanying documents without further enquiry. Therefore, the disallowance on the grounds of payment not being made within the statutory period was not justified.

Conclusion:
The Court answered the primary question regarding the jurisdiction of the Assessing Officer in the negative and in favor of the assessee, rendering it unnecessary to decide the other questions. The appeal was allowed, and the Court emphasized the importance of adhering to statutory requirements and the principles of natural justice.

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