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TMI Blog2000 (5) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... g such adjustments under s. 143(1)(a) is restricted by statute only to rectify apparent errors as enumerated under s. 143(1)(a) and such power does not cover power to deal with legal and contentious issues. 3. That the learned CIT(A) has not appreciated that claim of late delivery damages Rs. 58,79,839 and penal interest Rs. 14,69,905 was based on mercantile system of accounting both the claims having accrued during the previous year and making of book entries is neither germane nor relevant for claiming deduction under the Act." 2. Before arguing in support of the above grounds, the learned authorised representative of the assessee raised a legal issue submitting that the intimation under s. 143(1)(a) itself was illegal. It was pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(2) was to be served before the expiry of 12 months from the end of the month in which the return was furnished. The assessee had filed its return on 28th Nov., 1997, and, therefore, notice under s. 143(2) was to be served before 27th of Nov., 1998. Therefore, there was a need of urgency for serving notice under s. 143(2), whereas there was no such urgency for serving intimation under s. 143(1)(a), which could be served till 31st March, 2000. Under the circumstances, it was argued that there was nothing illegal about the intimation under s. 143(1)(a). 4. We have carefully considered the rival submissions and the facts of the case. On this issue, the Hon ble M.P. High Court in the case of Regional Soyabean Co-operative Union Ltd. have h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t: "(v) Liabilities on account of liquidated damage due to the delay in supply amounting to Rs. 58,79,839 not accounted for as in the opinion of the management the same is fully, recoverable once the equipments are erected and commissioned. (vi) Additional/penal interest charged by the bank on additional borrowings during the year due to various reasons amounting to Rs. 14,69,904.95 not accounted for as the management has made the representation and in their opinion the same will be waived by the bank." 6. Against the order of the AO, the assessee went on appeal before the CIT(A) and submitted before him that the assessee manufactures its products on the basis of purchase orders placed by the customers. The purchase orders contain cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the financial year 1996-97 relevant to asst. yr. 1997-98. The assessee had made representation to the bank to exempt it from such levy and in the hope of favour had not accounted for the same in the accounts for financial year 1996-97. The request was finally rejected. It was further argued that since the assessee was following mercantile system of accounting, the liabilities which had accrued has to be allowed even though they were not accounted in the books. The learned CIT(A) did not accept the contention of the assessee. In view of the comments of the auditors and the admitted opinion of the management, he was of the view that the liabilities had not accrued and crystallised during the year. He also held that the assessee had wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accompanying documents and hence, could not disallow the claim under prima facie adjustment. The issue of liability of these claims is a legal issue and can be determined only after applying judicial mind in course of regular assessment. 8. It was submitted by the learned Departmental Representative that the assessee itself had not made the provision in the accounts for liquidated damages, as in the opinion of the management the same was fully recoverable. Similarly it had not provided for the penal interest charged by the bank as in the opinion of the management the penal interest was to be waived by the bank. In view of these facts, it was submitted that the assessee had not admitted about the liability and, therefore, it has rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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