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TMI Blog2009 (10) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1989-90 along with the tax audit report under section 44AB of the Act. In the computation of income, the assessee claimed deduction of Rs. 21,12,766 under section 80G, being 50 per cent. of the donation amount of Rs.42,25,533. Serial No. 7 of the tax audit report filed with the return reads as follows: Rs. "7. Any tax, duty or other sum. (i) debited to the profit and loss account but not paid during the previous year. 1,66,20,857.02 (ii) paid during the previous year but allowed as a deduction in any earlier year-section 43B 1,22,21,679.88 (b) In respect of the said return, an intimation under section 143(1)(a) of the Act was issued by the Assessing Officer on August 6, 1990. In the said intimation, the Assessing Officer made, inter alia, the following adjustments: Rs. (i) Disallowance under section 43B as per tax audit report 1,66,20,887.00 (ii) Donation debited to profit and loss account disallowed for want of any receipt and also for want any valid certificate for tax exemption certificate filed 42,25,532.00 3. As a result of the aforesaid adjustments, the assessee was made liable for payment of additional tax over and above the normal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also held that the tax audit report did not state that the sum of Rs.1,66,20,857 was inadmissible under section 43B. The Commissioner of Income-tax (Appeals) thus, allowed the assessee's appeals on the said two issues. 9. Against the said order of the Commissioner of Income-tax (Appeals), the Revenue Officer preferred an appeal before the Tribunal objecting to the deletion of adjustment of Rs. 14,72,973 under section 43B as also the adjustment with reference to section 80G. The Tribunal accepted the assessee's contention that no prima facie adjustment could be made under section 143(1)(a) on the ground that proof in support of a claim was not submitted with the return. The Tribunal, thus, deleted the adjustment made with reference to section 80G. However, the Tribunal upheld the adjustment made under section 43B on the ground that it was based on the observation made by the tax auditor in the tax audit report. 10. Mr. J. P. Khaitan, learned advocate, appearing on behalf of the appellant, submitted that section 143 as in force at the material time provided for issue of an intimation under sub-section (1) without any notice or hearing to the assessee. He further submitted that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n support of the claim made by the assessee. In a way, the said clause (iii) of the proviso is analogous to section 154 of the Act. Where it is evident from the return as filed, along with the documents in support thereof, that a claim of the assessee is inadmissible, only then an adjustment under the said proviso can be made. If proof in support of the claim is not furnished by an assessee, then for the lack of proof, no disallowance or an adjustment can be made. The only option which is open to the Income-tax Officer, in such a case, is that he can require the assessee to furnish proof in which case he will presumably have to issue notice under section 143(2)." 14. The said circular and decisions of the hon' ble Bombay High Court and Delhi High Court were considered by a learned single judge of this hon' ble court in Modern Fibotex India Ltd. v. Deputy CIT [1995] 212 ITR 496 (Cal). At pages 507508 of the Reports, the learned single judge agreed with the view taken by the hon' ble Bombay High Court and Delhi High Court. At page 509 of the Reports, it was held as follows: "The exercise of power under section 143(1)(a) is, therefore, required to be scrutinized carefully and kept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct specified by the tax auditor. 18. It was further submitted that in the instant case, the information contained in the tax audit report against serial No. 7(i) did not enable the Assessing Officer to make any prima facie adjustment under section 143(1)(a) with reference to the provisions of section 43B. As required by the prescribed form of the tax audit report, the tax auditor merely specified the amount debited to the profit and loss account but not paid within the previous year. The aggregate amount mentioned in the tax audit report was made up of three amounts-two of which (bonus and commission) were covered by clause (c) of section 43B in respect of which the first proviso was relevant and the provident fund contribution was covered by clause (b) in respect of which the second proviso was relevant. The tax audit report did not contain any break-up of the amount or the further information required in the light of the two provisos to section 43B. The tax auditor did not specify in the tax audit report the amount inadmissible under section 43B. The Assessing Officer had to make further enquiry and examine further facts and documents by calling for break-up of the amount specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment to be furnished along with the return. However, as submitted hereinbefore, no prima facie adjustment could be made simply because of want of such evidence with the return. In this context he relied on the decision in the case of CIT v. Berger Paints (India) Ltd. (No. 2) reported in [2002] 254 ITR 503 (Cal). In that case, the court in considering the effect of the provisions of sub-section (5) of section 32A and subsection (4) of section 80HHC which required reports of the accountant to be furnished along with the return of income. It was held that the said requirement was directory and not mandatory and the report could be submitted even subsequent to filing of the return. In fact, in the instant case, the Assessing Officer himself considered the requirement of furnishing the evidence of payment with the return as directory. No evidence as regards payment was furnished by the assessee with the return. However, the Assessing Officer accepted such evidence subsequently furnished by the assessee by way of rectification application and on the basis thereof deleted the disallowance to the extent of Rs. 1,51,47,884 out of Rs. 1,66,20,857. If the Assessing Officer had considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king further enquiry. It was submitted that this court should be pleased to follow the view already taken in Jagatdal Jute' s case [2004] 266 ITR 587 (Cal). 24. He also relied on the decision in the case of Gopi Krishna Granites India Ltd. v. Deputy CIT reported in [2001] 251 ITR 337 (AP). The said case was also distinguishable on the facts. In that case also, the amount specified in the tax audit report only represented interest falling within clause (d) of section 43B and no enquiry as regards its break up with reference to the different clauses of section 43B was necessary. Further, in that case it was held that it was the admitted position that the liability for the interest amount was not incurred and had not accrued during the relevant previous year and that such interest was payable in the next year. As such, the court held that the disallowance could be made. There are no such admitted facts in the instant case. The said decision was rendered on its own facts and does not provide any assistance in deciding the question arising before this court. 25. He further drew our attention in the case of Shree Digvijay Cement Co. Ltd. v. CIT reported in [2007] 289 ITR 250 (Guj). In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears to us that three appeals were preferred by the appellant/assessee which were decided by the Commissioner of Income-tax (Appeals) dated December 28, 1994. The Commissioner allowed the assessee's appeals and the Revenue preferred an appeal before the Tribunal objecting to the deletion of adjustment of Rs. 14,72,973 under section 43B. The Tribunal held in favour of the assessee that no prima facie adjustment could be made under section 143(1)(a) on the ground that proof in support of a claim was not submitted with the return. Thus, the Tribunal upheld the adjustment made under section 43B on the ground that it was based on the observation made by the tax auditor in the tax audit report. 28. After considering the decisions cited at the Bar, we agree with the view taken by the Bombay and Delhi High Court as well as by our High Court and we also hold that the exercise of power under section 143(1)(a) is required to be scrutinized carefully and should be kept strictly within the four corners of the statute, any dispute being resolved in favour of the assessee. (See Khatau Junkar Ltd. v. K. S. Pathania [1992] 196 ITR 55 (Bom), S. R. F. Charitable Trust v. Union of India [1992] 193 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 143(2) and the matter could be gone into under section 143(3) and not by way of prima facie adjustment under section 143(1)(a). (See G. K. W. Ltd. v. CIT [2005] 273 ITR 380 (Cal)). 32. It further appears to us that the decision of the Kerala High Court (CIT v. Sitaram Textiles Ltd. [2001] 248 ITR 139) is distinguishable in the facts and circumstances of this case. After considering the effect of the provisos held under section 43B merely on the basis of statement as regards nonpayment made in the tax audit report ought not to have been done without making further enquiry. 33. We have considered the decisions of this High Court in the cases of (1)Hindustan Motors Ltd. v. CIT reported in [1996] 218 ITR 450 (Cal); (2)CIT v. Padmavati Raje Cotton Mills Ltd. reported in [1999] 239 ITR 355 (Cal) and (3) CIT v. Orient Beverages Ltd. reported in [2001] 247 ITR 230 (Cal) and, in our opinion, the decisions cited on behalf of the Revenue, cannot be a help to them in the facts and circumstances of this case. 34. In the case of Allied Motors (P.) Ltd. [1997] 224 ITR 677, the Supreme Court held that (page 684): "While interpreting section 43B without the first proviso, some of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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