2013 (8) TMI 705 - HC - Income Tax

Prima facie adjustments - Scope of section 143(1)(a) of the Act - Prima facie adjustment made by the AO in respect of various deductions/exemptions/claims made in the return in Income - Held that - The scope of section 143(1)(a) of the Act is by now well settled. The assessing officer can make prima facie adjustments only in respect of issues which are not debatable and for which no further information required from the assessee other than that contained in the return of income and the accompanying documents. In other words where the claim admits of more than one interpretation or requires further facts and details, the same is outside the scope of the said section. Power of Commissioner (A) to call for additional evidence under section 143(1)(a) - Ld. CIT (A) call for additional details and also to set aside the claimed deduction to the AO for further verification in a case u/s 143 (I) (a) Held that - While adjudicating an appeal against intimation under sec.143(1)(a) of the Act the CIT(A) is not empowered to call for further details at the appellate stage. The CIT(A) is required to see whether on the basis of the return or, the accompanying documents as filed before the assessing officer, any prima facie adjustment could be made. It is further not open to the CIT(A) to remit set aside the matter to the file of the assessing officer. The CIT(A) may either delete or sustain the prima facie adjustment - Decided against the Revenue. Also, reliance is placed upon the case Khatau Junkar Ltd Vs. K.S. Pathania 1992 (2) TMI 67 - BOMBAY High Court , wherein it was observed that in the absence of any specific provision in the Income Tax Act which disallows a deduction because a specific document specified in that section is not annexed to the return, the Income-tax Officer cannot, under clause (iii) of the proviso to section 143(1)(a), disallow a claim or a deduction because, in his view, adequate evidence in support of such a claim or deduction is not before him. He can disallow a claim for deduction only if he is satisfied, on the basis of the material which is before him, that the assessee is not entitled to such a deduction - Use of the phrases prima facie admissible in clause (ii) to the proviso and prima facie inadmissible in clause (iii) to the proviso also lend support to this interpretation. In its literal sense, prima facie means on the face of it. Hence, on the face of the return and the documents and accounts accompanying it, the deduction claimed must be inadmissible. Only then, can it be disallowed under the proviso to section 143(1)(a). In any further enquiry is necessary, or if the Income-tax Officer feels that further proof is required in connection with the claim for deduction, he will have to issue a notice under sub-section (2) of Section 143.

Issues Involved:

1. Prima facie adjustments by the AO under Section 143(1)(a) of the Income Tax Act.
2. Deduction under Section 80G.
3. Deduction under Section 80HH.
4. Deduction under Section 10B.
5. Deduction under Section 80HHC.
6. Deduction under Section 43B.
7. Adjustment of royalty.
8. Levy of interest under Sections 234B and 234C.

Detailed Analysis:

1. Prima Facie Adjustments by the AO under Section 143(1)(a):
The AO can make prima facie adjustments only on non-debatable issues and where no further information is required beyond the return and accompanying documents. The ITAT found that the AO's adjustments were debatable and required further verification, which should have been done under Section 143(2).

2. Deduction under Section 80G:
The AO disallowed the deduction due to the absence of details of the donees. The CIT (A) held that the approval letter could be filed later. The ITAT ruled that there was no statutory requirement to file the 80G certificate with the return, and the AO should not have made a prima facie adjustment without calling for further details.

3. Deduction under Section 80HH:
The AO allowed the deduction on gross total income instead of unit-wise profits. The ITAT found that the issue was debatable and should not have been adjusted prima facie. The CIT (A) had wrongly taken into account additional details submitted after the intimation under Section 143(1)(a).

4. Deduction under Section 10B:
The AO disallowed the deduction due to the absence of approval and the non-existence of a separate 100% EOU unit. The ITAT ruled that there was no requirement to file approval with the return, and the AO should have called for further details before making any adjustment.

5. Deduction under Section 80HHC:
The AO excluded other income from the computation of profits. The ITAT found that the nature of the income required further details, and thus, no prima facie adjustment could be made.

6. Deduction under Section 43B:
The AO disallowed the deduction due to the non-submission of the superannuation deed. The ITAT ruled that the AO should have called for further details before making any adjustment.

7. Adjustment of Royalty:
The AO made an adjustment based on an incorrect figure of royalty debited. The ITAT found that the AO could not have known from the return whether tax was deducted at source and thus should not have made a prima facie adjustment.

8. Levy of Interest under Sections 234B and 234C:
The ITAT directed the AO to recompute the interest with reference to the tax due on the returned income and verify the payment of the first installment of advance tax.

Conclusion:
The ITAT allowed the assessee's appeal, ruling that the AO's prima facie adjustments were not justified as they required further verification. The Tribunal emphasized that the AO should have issued a notice under Section 143(2) to call for additional details. The High Court upheld the ITAT's decision, confirming that the adjustments made by the AO were not sustainable and dismissing the revenue's appeal.

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