2000 (4) TMI 148 - AT - Income Tax

Summary

Issues:
1. Whether the Assessing Officer was justified in adding back Rs. 90,80,314 under section 40A(3) during the processing of the return under section 143(1)(a).
2. Whether the Assessing Officer was correct in rejecting the application made by the assessee under section 154 to delete the said disallowances.

Analysis:
1. The Department appealed against the Commissioner (Appeals) decision, arguing that the Assessing Officer was within his jurisdiction to add back Rs. 90,80,314 under section 40A(3) during the prima facie adjustment. The Department contended that the Auditors' report supported this addition.
2. The assessee, on the other hand, argued that the Assessing Officer exceeded his authority by considering information not originally present with the return. The assessee relied on a Bombay High Court judgment to support this claim. The presence of Annexure VI, listing cash payments over Rs. 10,000, did not automatically warrant addition under section 40A(3). The Calcutta High Court precedent emphasized the necessity of allowing the assessee to present their case before making such additions.
3. The Tribunal agreed with the assessee, stating that the Assessing Officer should not have added the amount during the prima facie adjustment. Additionally, the Tribunal highlighted that orders based on mistaken assumptions can be rectified under section 154. Citing judgments from the Delhi and Karnataka High Courts, the Tribunal upheld the Commissioner (Appeals) decision, directing the Assessing Officer to delete the addition of Rs. 90,80,314.
4. The Tribunal dismissed the Departmental appeal, concluding that the Assessing Officer's actions were not justified, and the rectificatory order should have been passed to delete the addition.