2001 (2) TMI 289 - AT - Income Tax

Summary

Issues Involved:
1. Additions made under section 143(1)(a) on account of debatable issues.
2. Exemption under section 10(14) for additional conveyance allowance.
3. Imposition of additional tax under section 143(1A).
4. Direction by CIT(A) to AO to examine the matter of conveyance allowance.

Detailed Analysis:

1. Additions Made Under Section 143(1)(a) on Account of Debatable Issues:
The primary issue was whether the additions made under section 143(1)(a) were justified given that the points of contention were debatable. The assessee argued that the deduction for expenses at 40% out of income from incentive bonus and the exemption under section 10(14) for additional conveyance allowance were highly debatable issues. Various Benches of the Tribunal and High Courts had differing views on these matters. The assessee cited several cases and Board's Instruction No. 1814 to support the claim that such adjustments were beyond the scope of section 143(1)(a). The Revenue countered that the incentive bonus was part of salary and not eligible for such deductions, citing decisions in favor of the Revenue from the Andhra Pradesh High Court and the Rajasthan High Court. The Tribunal found that at the time of issuing the intimation under section 143(1)(a), the decision of the jurisdictional High Court was not available, and there were conflicting decisions from other courts, making the issue debatable.

2. Exemption Under Section 10(14) for Additional Conveyance Allowance:
The assessee contended that the additional conveyance allowance received by the Development Officer of LIC was exempt under section 10(14). The Tribunal noted that at the time of the intimation, there was a favorable decision from the Jaipur Bench of the Tribunal, and no contrary High Court decision was available. Subsequent conflicting decisions from various High Courts indicated that the issue was indeed debatable. The Tribunal concluded that the AO should have followed the existing favorable Tribunal decision and refrained from making a prima facie adjustment under section 143(1)(a).

3. Imposition of Additional Tax Under Section 143(1A):
The imposition of additional tax under section 143(1A) was deemed consequential to the primary adjustments made under section 143(1)(a). Since the Tribunal found the primary adjustments to be invalid due to the debatable nature of the issues, the imposition of additional tax under section 143(1A) was also unwarranted.

4. Direction by CIT(A) to AO to Examine the Matter of Conveyance Allowance:
The assessee disputed the CIT(A)'s direction to the AO to examine the matter of conveyance allowance during the regular assessment under section 143(3). The assessee argued that this issue was not raised before the CIT(A) and that the CIT(A) acted suo motu. The Revenue defended the CIT(A)'s power under section 251(1)(a) to enhance the income. The Tribunal found no fault with the CIT(A)'s direction, stating that it was within the CIT(A)'s power to issue such directions.

Conclusion:
The Tribunal concluded that the issues of allowability of deduction for expenses at 40% of incentive bonus and the exemption of conveyance/additional conveyance allowance under section 10(14) were highly debatable at the time of issuing the intimation under section 143(1)(a). Therefore, the prima facie adjustments made under section 143(1)(a) were not justified. Consequently, the additions made on account of these adjustments were deleted. The Tribunal also upheld the CIT(A)'s direction to the AO regarding the examination of conveyance allowance during the regular assessment. The assessee's appeal was allowed in part.