1997 (7) TMI 199 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of guest house expenses.
2. Levy of additional tax after readjustment under Section 143(1)(a).
3. Claim under Section 43B without proof of payment.
4. Addition of Rs. 84,06,000 for revision in pay structures.
5. Deletion of depreciation amount added by the assessee.

Detailed Analysis:

1. Disallowance of Guest House Expenses:
The assessee challenged the CIT(A)'s decision to maintain the disallowance of Rs. 4,31,752 as guest house expenses. The assessee argued that the issue was debatable and pending before the High Court of Madhya Pradesh, thus no adjustment should be made under Section 143(1)(a). The Tribunal agreed, noting that the issue was indeed debatable and pending adjudication. Consequently, the Tribunal set aside the CIT(A)'s order and deleted the addition, allowing the assessee's appeal.

2. Levy of Additional Tax After Readjustment Under Section 143(1)(a):
The Revenue contested the CIT(A)'s direction that no additional tax be levied if the net resultant figure is a loss after readjustment under Section 143(1)(a). The Tribunal referenced the judgment in the case of Dy. CIT vs. National Textile Corporation and the Madhya Pradesh High Court's decision in Sanctus Drugs Pharmaceuticals (P) Ltd. & Anr. vs. Union of India & Ors., concluding that the issue was covered in favor of the Revenue. Therefore, the Tribunal decided this issue in favor of the Revenue.

3. Claim Under Section 43B Without Proof of Payment:
The Revenue argued that the CIT(A) erred in directing the AO to allow the claim under Section 43B without proof of payment. The Tribunal noted that although the proof was not initially filed with the return, it was submitted during the rectification proceedings under Section 154. The Tribunal found no justification for rejecting the claim under Section 154 and upheld the CIT(A)'s decision, thus partly allowing the Revenue's appeal.

4. Addition of Rs. 84,06,000 for Revision in Pay Structures:
The assessee contested the addition of Rs. 84,06,000 for the revision in pay structures, arguing that the liability was ascertained and should not have been disallowed under Sections 143(1)(a)/154. The Tribunal observed that the AO had issued notices under Sections 143(2) and 142(1) before issuing the intimation under Section 143(1)(a), which was not permissible. The Tribunal quashed the intimation and subsequent proceedings as void ab initio. On merit, the Tribunal found that the liabilities were not ascertained during the accounting period, supporting the CIT(A)'s decision to reject the claim. However, since the intimation was quashed, the addition of Rs. 84,06,000 was deleted.

5. Deletion of Depreciation Amount Added by the Assessee:
The Revenue's appeal included a ground that the CIT(A) erred in deleting the depreciation amount of Rs. 14,28,758 added by the assessee. The Tribunal noted that the depreciation was added back in the revised return and allowed as per law by the AO, leaving the Revenue without any grievance. Consequently, this ground was dismissed as infructuous.

Conclusion:
The Tribunal allowed the assessee's appeals regarding the disallowance of guest house expenses and the addition of Rs. 84,06,000 for revision in pay structures. The Revenue's appeals were partly allowed concerning the levy of additional tax and the claim under Section 43B, while the ground regarding the deletion of depreciation was dismissed.