9911796707
TMI Blog1997 (7) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... e past years and since the issue is debatable, no adjustment can be made in this regard under s. 143(1)(a) of the Act. The contentions of the assessee did not find favour with the AO and the application under s. 154 was rejected against which the assessee went in appeal before the CIT(A) but the fortune did not fluctuate. 3. The learned counsel for the assessee submitted that the controversy with regard to this issue is still pending before the Hon'ble High Court of Madhya Pradesh under reference for its adjudication. A copy of the draft statement is placed at pp. 11 to 13 of the compilation. While the assessee has been disputing the disallowance on account of guest house expenses in earlier years and a controversy has not been set at rest so far, the adjustment on this account cannot be made under s. 143(1)(a) of the Act. He also relied on the Circular issued by the CBDT reported in (1994) 209 ITR 75 (St.) and the judgment of the jurisdictional High Court in the case of Ramlal Textiles vs. ITO (1991) 95 CTR (MP) 274 : (1991) 189 ITR 339 (MP). On the other hand, the learned Departmental Representative relied on the order of the CIT(A). 4. We have carefully perused the orders of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the AO during the course of rectification proceedings, it should have been duly examined and allowed by the AO while passing an order under s. 154 of the Act. We do not find any justification for rejecting this claim in the order under s. 154 of the Act. We, therefore, subscribe the order of the CIT(A). 11. In the result, the appeal of the Revenue is partly allowed. 12. ITA Nos. 649 & 650/Ind/92.--These appeals are emanated from the order of the AO dt. 22nd Jan., 1992, passed under s. 154 of the Act. In ITA No. 649/Ind/92 the assessee has assailed the order of the CIT(A) on the ground that he has erred in maintaining the addition of Rs. 84,06,000 in respect of revision in pay structures of its supervisory and non-supervisory staff by holding that it was not an ascertained liability. The assessee has further submitted that the disallowance of this liability in the order under s. 143(1)(a)/154 is even otherwise wrong. The facts relating to this issue are that the original return was filed declaring a loss of Rs. 489.09 lacs which was processed under s. 143(1)(a) and the intimation was issued on 29th Jan., 1990. Thereafter, a revised return declaring a loss of Rs. 8,67,90,572 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an intimation once he opted to frame a regular assessment and a notice under s. 143(2) or 142(1) is issued. The learned counsel for the assessee has also relied on the following judgments: (i) Modern Fibotex India Ltd. vs. Dy. CIT (1995) 126 CTR (Cal) 69 : (1995) 212 ITR 496 (Cal); (ii) Kamal Textiles vs. ITO (1991) 95 CTR (MP) 274 : (1991) 189 ITR 339 (MP); and (iii) Gujarat Poly-Avx Electronics Ltd. vs. Dy. CIT (1996) 135 CTR (Guj) 141 : (1996) 222 ITR 140 (Guj). 14. Mr. Mehta further submitted that once the AO has chosen to seek a clarification by issuing a letter dt. 10th May, 1991, and notices dt. 26th July, 1991, he should not have issued the intimation on 27th Sept., 1991, in which the claim of the assessee was disallowed. He submitted on merit that the pay scale was to be revised for supervisory staff from 1st Jan., 1986, and that of non-supervisory staff from 1st Oct., 1986. The management felt that this pay revision will involve an increased payment of salary/wages by about 5 per cent over and above the basic pay and DA received by them and due to that it was felt necessary to make the provision of Rs. 84.06 lacs on estimate basis for pending settlement of pay struct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h July, 1991, issued under s. 143(2) and 142(1) of the Act whereby the date of hearing was fixed on 23rd Aug., 1991, and the assessee was asked to produce all the relevant books of accounts, vouchers, bills, etc. on the date of hearing. After going through these letters and the notices it appears to us that the AO had made up his mind to frame a regular assessment on the basis of revised return, but thereafter the AO issued an intimation after making prima facie adjustment under s. 143(1)(a) of the Act on 27th Sept., 1991. We find force in the argument of the assessee that once the proceedings for framing the regular assessment have been initiated by issuing a notice under s. 143(2) or 142(1) the AO is precluded from making prima facie adjustment under s. 143(1)(a). The Calcutta High Court has specifically held in the case of Modern Fibotex India Ltd. vs. Dy. CIT that once the notice under s. 143(2) has been issued, there is no scope for the authorities either to make prima facie adjustment on the basis of the return, as filed, or issue an intimation under s. 143(1)(a) of the Act. A similar view was taken by the Gujarat High Court in the case of Gujarat Poly-avx Electronics Ltd. in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent proceedings emanated from the said intimation are void ab initio and, accordingly, we quash the intimation under s. 143(1)(a) of the Act and subsequent proceedings emanating from it. 17. We have also perused the record with regard to the claim of the assessee on merit and we find that the accounting period of the assessee ended on 31st March, 1989, for the relevant assessment year and the charter of demands was revised on 10th July, 1989 though it was made on 17th March, 1986. The MOU was executed on 14th Aug., 1989, and was sent for government's approval on 19th Aug., 1989, which was later on approved by the government vide letter dt. 20th Dec., 1989 and finally this MOU was signed on 19th Jan., 1990. It is also obvious from the audit report which is placed at p. 38 that the accounts were audited on 31st July, 1989, in which provision of Rs. 84.06 has been made on estimate basis. We have carefully perused the judgments quoted by the parties and the accounting year standard 4 issued by the Council of the Institute of Chartered Accountants carefully and are of the view that whenever the accounts are maintained on mercantile basis, the assessee can make a provision of con ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
