1995 (1) TMI 120 - AT - Income Tax

Summary

Issues Involved:
1. Computation of total turnover.
2. Deduction under section 80HHC.
3. Deduction under section 80-I.
4. Prima facie adjustments under section 143(1)(a).
5. Levy of additional tax under section 143(1A).

Detailed Analysis:

1. Computation of Total Turnover:
The assessee, a private limited company, reported a total turnover of Rs. 22,32,92,945.19, which included income from various divisions such as sea food, shipping, software, and construction. The Assessing Officer (AO) adjusted this figure to Rs. 25,24,99,693 by including gross construction receipts. The assessee argued that the receipts from flat owners should not form part of the total turnover as they were treated as advances against which expenditure was booked. The tribunal found that the definition of 'total turnover' in section 80HHC(4A) is nebulous and can be interpreted in more than one way, thus making it a debatable issue that cannot be resolved through prima facie adjustments.

2. Deduction under Section 80HHC:
The assessee claimed a deduction under section 80HHC amounting to Rs. 2,46,41,400.69, which was supported by a Chartered Accountant's certificate. The AO recalculated this deduction to Rs. 2,17,91,117 and restricted it to the export income rather than the total income. The tribunal held that the issue of whether the deduction should be restricted only to the export income or to the profits derived from the export business is a moot point requiring a detailed debate, and thus cannot be decided through prima facie adjustments.

3. Deduction under Section 80-I:
The assessee claimed deductions under section 80-I for its sea food and construction divisions. The AO denied the benefit, arguing that the assessee did not maintain separate accounts for different divisions and that the construction activity did not involve the manufacture or production of any article or thing. The tribunal noted that the issue is debatable, especially considering past decisions from various benches of the Income-tax Appellate Tribunal and the Supreme Court's decision in CIT v. N.C. Budhiraja. Therefore, this issue also cannot be resolved through prima facie adjustments.

4. Prima Facie Adjustments under Section 143(1)(a):
The tribunal emphasized that only adjustments that are very apparent and not debatable can be made under section 143(1)(a). The adjustments made by the AO, such as the inclusion of gross construction receipts in total turnover and the recalculation of deductions under sections 80HHC and 80-I, were found to be debatable and thus not suitable for prima facie adjustments. The tribunal referred to Circular No. 689 dated 24-8-1994, which outlines the scope of prima facie adjustments, to support its conclusion.

5. Levy of Additional Tax under Section 143(1A):
The AO levied additional tax of Rs. 9,96,509 under section 143(1A) due to the adjustments made. The tribunal held that since the adjustments were not prima facie and involved debatable issues, the levy of additional tax was not justified. Consequently, the levy of additional tax was deleted.

Conclusion:
The tribunal allowed the appeal of the assessee, concluding that the adjustments made by the AO were not within the scope of prima facie adjustments as envisaged under section 143(1)(a). The tribunal also deleted the levy of additional tax under section 143(1A).