1994 (2) TMI 87 - AT - Income Tax

Summary

Issues Involved:

1. Prima facie adjustment of Rs. 16,46,88,902 in respect of provision for gratuity under Section 143(1)(a) of the Act.
2. Confirmation of addition of Rs. 1,66,678 by way of prima facie adjustment under Section 43B of the Act in respect of unpaid sales-tax.
3. Jurisdiction of the Deputy Commissioner of Income Tax (Dy. CIT) in passing the intimation under Section 143(1)(a) of the Act.

Issue-wise Detailed Analysis:

1. Prima facie adjustment of Rs. 16,46,88,902 in respect of provision for gratuity under Section 143(1)(a) of the Act:

The main grievance of the assessee was that the Appellate Commissioner (AC) erred in confirming the prima facie adjustment of Rs. 16,46,88,902 in respect of provision for gratuity under Section 143(1)(a) of the Act. The assessee argued that whether the provision for gratuity was allowable or not was a debatable issue and should not be considered as prima facie adjustment or inadmissible under Section 143(1)(a) of the Act. The assessee's counsel emphasized the word "seem" used by the Assessing Officer (AO) in the order passed under Section 154 of the Act, indicating uncertainty about the inadmissibility of the gratuity provision.

The Departmental Representative (DR) countered that since the gratuity fund was not approved, it was disallowable under Section 40A(7) of the Act, and the AO had the power to disallow such inadmissible expenditure under Section 143(1)(a) of the Act. The Tribunal upheld the impugned order of the AC, agreeing with the AO's prima facie adjustment of Rs. 16,46,88,902, as the gratuity fund was not approved, making it an inadmissible item of expenditure.

2. Confirmation of addition of Rs. 1,66,678 by way of prima facie adjustment under Section 43B of the Act in respect of unpaid sales-tax:

The assessee initially raised a grievance regarding the confirmation of addition of Rs. 1,66,678 by way of prima facie adjustment under Section 43B of the Act in respect of unpaid sales-tax. However, during the hearing, the assessee's counsel submitted that this grievance did not emanate from the impugned order of the AC, as the AC had directed the deletion of this adjustment. Consequently, this ground was not pressed, and no decision was given on this issue.

3. Jurisdiction of the Deputy Commissioner of Income Tax (Dy. CIT) in passing the intimation under Section 143(1)(a) of the Act:

The assessee raised an additional ground challenging the jurisdiction of the Dy. CIT in passing the intimation under Section 143(1)(a) of the Act. The assessee argued that since there was no tax payable on account of the declared loss, the AO's jurisdiction was ousted under Section 143(1)(a), and he could not make any adjustment or pass an intimation under the said provision.

The Tribunal rejected this plea, stating that the assessee did not raise this issue before the AO or the AC. The subject matter of appeal before the AC and the Tribunal was the power of the AO in making adjustments of the gratuity amount under Section 143(1)(a) of the Act. The Tribunal emphasized that it has no power to admit a new ground outside the ambit and scope of the subject matter of appeal. The Tribunal also noted that the assessee failed to offer any reasonable cause for not taking this ground originally when the appeal was filed or before the first appellate authority.

The Tribunal further stated that the appeal was against the order of the first appellate authority passed under Section 251 of the Act, not against the intimation passed by the AO. Therefore, the new ground raised by the assessee was rejected and not admitted for consideration and adjudication.

Conclusion:

The Tribunal dismissed the appeal, upholding the AC's order confirming the prima facie adjustment of Rs. 16,46,88,902 in respect of the provision for gratuity under Section 143(1)(a) of the Act. The additional ground challenging the jurisdiction of the Dy. CIT in passing the intimation under Section 143(1)(a) of the Act was also rejected.