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TMI Blog2013 (7) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Dated:- 14-5-2012 - SANJIV KHANNA and EASWAR R. V. JJ. For petitioner R. Satharam. For respondent Sanjeev Sabharwal. Judgment: Sanjiv Khanna J.- Indian Drugs and Pharmaceuticals Ltd., a public sector undertaking, has filed the present writ petition for quashing of the intimation dated April 4, 1990, under section 143(1)(a) of the Income-tax Act, 1961 ("the Act", for short). The petitioner has also prayed for quashing of the consequential orders passed thereafter by the Assessing Officer rejecting the application for rectification in respect of two items (i) unpaid bonus of Rs. 1,57,05,083, and (ii) unpaid taxes of Rs. 1,67,76,886. We may record that some other adjustments were also made in the intimation under section 143(1)(a) but these have been deleted/withdrawn by the Assessing Officer while passing rectification orders under section 154 of the Act. These orders are dated July 17, 1990, and September 24, 1990. 2. With regard to the unpaid bonus and taxes in the adjustment sheet, the Assessing Officer has mentioned that he relies upon the audit report paragraph 7(a) and 7(d). 3. In the rectification application dated May 22, 1990, which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of the type as made by your goodself. 3.2.2. A further amount of Rs. 42,42,531 pertaining to the staff dues must also have been cleared by the respective units as per the dates applicable to such amounts under the Government statutes has been disallowed in toto without even making as much as an enquiry into the aspect of such amount within the time as required under law. 3.2.3. The entirety of the disallowance on both the above counts is totally misconceived and untenable." 4. The assessee, during the course of the rectification proceedings, had filed full details for the payments made towards bonus up to the date of filing of the return and also actual payment made along with a photocopy of challans towards sales tax, surcharge, ESI, etc. Copy of the said letters have been placed on record by the petitioner. With regard to bonus, it stated that full details of the actual bonus paid were earlier not available as the offices were located at Madras, Gurgaon, Hyderabad and corporate office. These details and proof were filed with the rectification application. 5. The first order passed by the Assessing Officer under section 154 of the Act dated July 17, 1990, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with the return. The proof in support of the claim may be evidenced from correspondence, from the books of account or other documents and it is not the law, as we understand it, that, in support of a claim made in the return for deduction or non-taxability of a receipt, all the proofs available and original documents must be filed along with the return. It is apparent on a reading of the said provision that adjustment can be made only if there is information available in such return that prima facie a claim or allowance is inadmissible. For the aforesaid view which we are taking, support is available from the understanding of the said provision by the Department itself. Learned counsel for the petitioner has drawn our attention to Circular No. 549 reported at [1990] 182 ITR (St.) 1, at page 21 issued by the Central Board of Direct Taxes wherein examples have been given of adjustments which can be carried out. The relevant part of the said circular is as under : 'The prima facie adjustments mentioned at (ii) above can be made only on the basis of information available in the return or the accompanying accounts or documents and not on the basis of the past records of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exhaustive but only an illustrative list of prima facie admissibles or inadmissibles for which adjustments can be made to the returned income or loss.' The aforesaid examples contained in the circular clearly show that, for want of proof, no disallowance or adjustment can be made. It is only when a disallowance is evident from the facts on record that in adjustment can be made." 7. It is clear from the aforesaid reasoning that in case the Assessing Officer wanted to reject any expenditure for want of proof/evidence, he should have issued notice and called for the said evidence for deciding the question. The Assessing Officer could not have made the said addi- tion for want of documents. In the present case, this procedure was not followed and the adjustment were made without notice. The adjustment made are not covered by the scope of section 143(1)(a) and as per the law expounded in S. R. F. Charitable Trust (supra). We may record that the payments were made by the assessee before the due date of filing of the return and these aspects have not been denied and referred to by the Assessing Officer. In these circumstances, we allow the present writ petition and intimation dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar, the entirety of the sum as mentioned by the auditors in clause 7(d) has been disallowed. The auditors have nowhere said in their report that the impugned amount was not paid over to the exchequer on such date on which they were due. After the amendment of section 43B of the Act, there are two conditions involved in making any disallowance. The first of these is that it must be a sum which falls within the ambit of section 43B of the Act and the second condition is that such sum, according to the law applicable to that sum, should not have been paid by the due date prescribed under that law. Your good self has made a most arbitrary disallowance without either considering the legal requirements or the factual position pertaining to the case. The payments relate to sales tax, income-tax, professional tax, tax deducted at source, CPF and ESI contributions for which the due dates of payments fall after 31st March. All these are in the nature of statutory payments where delay in payment beyond the prescribed date involves penalties. In other words, payment or these items can, at most, be delayed but cannot be avoided. All these payments would have been made after March 31, 1989, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under (page 98) : "In the instant case, it is clause (iii) of the proviso which was sought to be applied by the Income-tax Officer. The said clause clearly provides that the Income-tax Officer can make an adjustment to the income or loss declared in the return if, on the basis of the information available in such return, accounts or documents, the deduction, allowance or relief claimed is prima facie inadmissible. The conclusion that the claim of the assessee is inadmissible must, in other words, flow from the return as filed. No power is given to the Income-tax Officer to disallow a claim for the reason that there is no proof in 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 poof 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less or in excess of this amount. (v) Carried forward speculation loss set off against income from business or profession or against income under any other head. (vi) Loss under any head, other than under the head "Profits and gains of business or profession", carried forward and set off against the current income. (vii) Carried forward loss of business set off against income of the current year under other heads. (viii) Old loss of more than eight assessment years set off against the current business income, if the information is available in the return or the accompanying documents. (ix) Deduction under section 80C in respect of provident fund contributions or life insurance premia or N. S. C. VI or VII Issue not claimed, though the information is available in the documents accompanying the return, or claimed at a figure which is less than or is in excess of the permissible amount. (x) Deduction under section 80L not claimed or claimed at figure which is less than or is in excess of the permissible amount. (xi) Deduction under section 80G not claimed, although allowable on the basis of the information available in the return or the accompanying doc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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