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TMI Blog2008 (2) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... Eligibility Certificate issued by the Additional Director of Industries, AP, Hyderabad, the sales tax was deferred and should be repaid at the end of the 10th year without interest, out of the sanctioned amount of Rs. 43,65,520. During the financial year 1993-94, an amount of Rs. 31,09,656 has become payable, but the same has been deferred by the sales tax authorities. It was therefore, pleaded that there was no liability for payment of sales tax during the year relevant for the assessment year 1994-95 and as such, no disallowance under section 43B was called for. The CIT(A), by his order dated 10-10-1995, dismissed the appeal of the assessee. On further appeal, the Tribunal, vide its order dated 23-6-2000, in ITA No. 1907/Hyd./95, has set aside the said order, and restored the matter to the file of the CIT(A) for fresh examination in the light of the decision of the Apex Court in CIT v. Hindustan Electro Graphites Ltd. [2000] 243 ITR 48. 2.3 Thereupon, the CIT(A) redecided this issue afresh, by his order dated 19-4-2002 impugned herein, whereby, after detailed consideration of the contentions of the assessee, concluding that the disallowance made while processing the return und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in law in granting relief to the assessee by deleting the disallowance under section 43B, being sales tax deferred payment. Reliance is placed on the decisions following- (a) Prudential Construction Co. Ltd. v. Asstt. CIT [2000] 75 ITD 338 (Hyd.). (b) Mold Tek Plastics Ltd. v. Dy. CIT [2002] 81 ITD 251 (Hyd.). 4. The learned counsel for the assessee on the other hand countered, to say in brief, by defending the order impugned, besides submitting THAT: The issue before us relates to permissibility or otherwise of the disallowance in terms of section 43B made by the Assessing Officer, by way of a prima facie adjustment while processing the return under section 143(1)(a). That being so, in view of the decision of the Supreme Court in the case of Hindustan Electro Graphites Ltd., it is the correctness of the factual and legal position with regard to the claim made by the assessee at the time of filing of the return, that is material. If the matter is viewed from that angle, the disallowance made by the Assessing Officer by way of prima facie adjustment, cannot be sustained, and as such the same was correctly deleted by the CIT(A). Besides distinguishing the case-law rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CBDT No. 674, dated 29-12-1993, sales tax deferred payments converted into loans should be considered for deduction only in the assessment year 1994-95. The decision of the Hon'ble Madhya Pradesh High Court in the case of K.N. Oil Industries relied upon by the learned counsel for the assessee, clearly supports the action of the CIT(A). We find no infirmity in the view taken by the CIT(A). 5.4 In any even, it is beyond the scope of prima facie adjustments permissible while processing the return under section 143(1)(a) of the Act. We are fortified in this behalf by the decision of the Bombay High Court in the case of Khatau Junkar Ltd., wherein it is held as follows- "In the absence of any specific provision in the Income-tax Act which disallows a deduction because 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 merely because, in his view, adequate evidence in support of such a claim or deduction is not before him. He can disallow acclaim for deduction only if he is satisfied, on the basis of the material which is before him, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tek Plastics Ltd. explaining the scope of section 143(1)(a) observed, as per the relevant portion of the head note as under- '... The assessee did not make any alternate claim to write off the three items in question, as revenue expenditure. While processing the return under section 143(1)(a), the Assessing Officer has not been empowered to beyond the return and the statements accompanying the return. In the statement accompanying the return, the assessee claimed depreciation on the three items in question at specified rates. So, while processing the return, the Assessing Officer could go into the question relating to the claim for depreciation, considering (a) whether the asset in question was depreciable; (b) if so, the block in which the particular asset fell; and (c) the rate of depreciation applicable and if the said rate had to be restricted in terms of proviso to section 32(1) for use for less than 180 days. Only these questions could be gone into for making any adjustments, while processing the return under section 143(1)(a), provided it was not a debatable nature. It is too much to expect the Assessing Officer to consider whether the claim of the assessee could be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income was filed on 29-11-1994. Processing was done on 30-3-1995 and the Government order has been communicated on 28-6-1995. If the date of letter by the Government dated 28-6-1995 is the date of permission by the Government, the assessee's claim of deduction of the amount converted can be entertained for the accounting year 1995-96 relevant to assessment year 1996-97. This is not entertain able for the assessment year 1994-95 under our consideration." 2.2 Annexure-4 of the tax audit report mentions the following remark against sales tax of Rs. 31,29,350:- "On account of sales tax deferment vide GO Ms. 117 (IFR) Department dated 17-3-1993, the sales tax collected during the year is not payable." Thus, the date 17-3-1993 is the date of Govt. Order Ms and not the date of permission. There was no evidence accompanying the return which showed that permission under the above GO Ms was allowed by the Government during the financial year 1993-94. In this view of the matter the condition laid down in Board's Circular No. 674 supra has clearly not been fulfilled by the assessee. Also the GO Ms does not have the same effect as that of amendment of Sales Tax Act which cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 26-6-2000, directing as under:- "This appeal is filed by the assessee. Relevant assessment year is 1994-95. The assessee has raised the following ground in this appeal. 1. The ld. CIT(A) ought not to have confirmed the disallowance of sales tax payment deferred under the provisions of section 43B of the Income-tax Act. 2. The ld. CIT(A) ought to have noted that the liability for payment of sales tax during the year relevant to the assessment year 1994-95 existed in view of the deferment by the Sales Tax authorities. 3. We considered the matter. In view of the decision of the Hon'ble Supreme Court in the case of CIT v. Hindustan Electro Graphites Ltd in 243 ITR 48, we find that the matter has to be considered afresh by the ld. CIT(A). In view of this matter, we set aside his order and send back the file to him to dispose the appeal afresh in view of the judgment and after giving the assessee opportunity of being heard. For statistical purposes, the appeal is treated as allowed. Sd/ Sd/ (H.S. Sidhu) (Dr. O.K. Narayanan) Judicial Member Accountant Member" 2. The matter wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling on 25-11-1994, he held that the amount of Rs. 31,29,350 could not have been disallowed. He deleted the addition in dispute. 4. On further appeal before the ITAT, the Hon'ble V.P. (Judicial Member) agreed with the reasoning given by the ld. CIT(A). In his view, the substantial issue arising for consideration was not with regard to the correctness of the disallowance on account of deferment of sales tax liability made under section 43B but more or less confined to permissibility of such disallowance by way of adjustment while processing the return under section 143(1)(a) of the Act in the light of the directions of the Tribunal dated 23-6-2000. The ld. V.P. also referred to eligibility certificate issued to the assessee under the Deferment Scheme dated 1-3-1994. He also referred to Circulars of CBDT which were duly considered by the Hon'ble Madhya Pradesh High Court in the case of K.N. Oil Industries, and the issue decided in favour of the assessee. 5. On the question that issue involved was a debatable point and beyond the scope of prima facie adjustments permissible under section 143(1)(a) of the Act, the ld. Judicial Member relied upon the decision of the Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h cannot be considered in proceedings under section 143(1)(a) of the Act. The ld. Counsel accordingly relied upon and supported the order of the ld. Judicial Member. 8. The ld. DR fully supported the order of the ld. Accountant Member. He pointed out that only additional tax of Rs. 3,59,875 was levied in this case by invoking the provisions of section 143(1A) of the Act. No tax has been levied on the amount of Rs. 31,29,350 representing sales tax liability. Therefore, the question before the Third Member was a limited one. However, having regard to the documents available on record and filed with the return, the assessee was not able to establish that the amount of Rs. 31,29,350 was not sales tax liability and became a deferred loan as per the scheme of the sales tax department. He again drew my attention to Circular of the CBDT No. 674, dated 29-12-1993 and emphasized that deduction was to be allowed in the assessment of the previous year in which conversion of sales tax liability was permitted to be converted into a loan. No such permission for the year ending 31-3-2004 was available and permission was received much after the close of the year. In these circumstances, the deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty the revenue cannot say that levy of additional tax is automatic under section 143(1A) of the Act. If additional tax could be levied in such circumstances it will be punishing the assessee for no fault of his. That cannot ever be the legislative intent. In the circumstances of the present case, levy of additional tax taking into account the income by way of cash compensatory support was not warranted. Decision of the Madhya Pradesh High Court in CIT v. Hindustan Electro Graphite Ltd [1998] 229 ITR 16 affirmed." Applying ratio of above case, I find that no material has been brought on record to show that the assessee did not act in accordance with law and therefore was liable to pay additional tax. Even otherwise, after considering the facts and circumstances of the case, I do not see any merit in this appeal of the revenue. There is no dispute that assessee became eligible under the Deferred Scheme with effect from 1-3-1994 i.e., the date on which eligibility certificate was admittedly issued to the assessee. After the above date, sales tax payable by the assessee was shown as converted into loan under the Scheme of the State Government in the books. The scheme admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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