2018 (8) TMI 204 - HC - Income Tax

Entitlement of the assessee for deduction 80P - adjustments made by the Assessing Officer u/s 143(1)(a) - whether Tribunal was justified in holding that entitlement of the assessee for deduction 80P of the Act is not relevant for charging addition Tax u/s 143(1A)? - Held that - From the perusal of provisions of Section 143(1A), it is clear that the additional income tax is chargeable if the loss declaration by the assessee is reduced as a result of adjustments. Whether assessee is entitled for reduction under Section 80P or not is not a relevant factor for the purposes of charging additional tax under Section 143(1A) of the Act. When the assessee did not produce any evidence that it had made payment of gratuity and bonus which are statutory dues, the Assessing Officer was justified in making adjustment of such amounts not paid. Having heard learned counsel for the parties and having perused the material on record, we do not find any error in the impugned judgment and order passed by the Income Tax Appellate Tribunal and the same is affirmed by this Court.

Issues involved:
1. Interpretation of Section 143(1A) of the Income Tax Act regarding additional tax liability.
2. Admissibility of deductions under Section 43B for provisions made for gratuity and bonus.
3. Justifiability of adjustments made by the Assessing Officer under Section 143(1)(a) of the Act.
4. Disallowance and adjustment of debitable issues by the Assessing Officer.

Analysis:

Issue 1: Interpretation of Section 143(1A)
The appellant, a cooperative society, claimed deduction under Section 80P of the Income Tax Act for profits from banking activities. The Assessing Officer charged additional tax under Section 143(1A) due to adjustments made, including provisions for gratuity and bonus. The Court noted that under Section 143(1A), additional tax is levied if the loss declared by the assessee is reduced, irrespective of entitlement to deductions under Section 80P. As the appellant failed to provide evidence of gratuity and bonus payments, the Assessing Officer's adjustments were deemed justified.

Issue 2: Admissibility of deductions under Section 43B
The Assessing Officer disallowed the provisions for gratuity and entertainment expenses, citing inadmissibility under Section 43B of the Act. The appellant sought rectification under Section 154, which was rejected. The CIT (Appeal) upheld the Assessing Officer's decision. The Court affirmed that the Assessing Officer's actions were justified, as the appellant did not substantiate the payments for gratuity and bonus, which are statutory dues.

Issue 3: Justifiability of adjustments under Section 143(1)(a)
The Assessing Officer made adjustments under Section 143(1)(a) for provisions of gratuity and entertainment expenses. The appellant contested these adjustments, but the Court found no error in the Tribunal's decision. The Court upheld the Tribunal's judgment, stating that the Assessing Officer was justified in making the adjustments as the appellant failed to provide evidence of payment for statutory dues.

Issue 4: Disallowance and adjustment of debitable issues
The appellant questioned the disallowance and adjustment of debitable issues by the Assessing Officer under Section 143(1)(a). However, the Court found no merit in the appellant's arguments and dismissed the appeals. The questions of law were answered against the appellant and in favor of the Revenue. No costs were awarded in this matter.

In conclusion, the Court affirmed the Tribunal's decision, upholding the Assessing Officer's adjustments and dismissing the appeals. The judgment clarified the application of Section 143(1A) regarding additional tax liability and the necessity to provide evidence for statutory dues to claim deductions under the Income Tax Act.

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