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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 ..... 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 was filed before the Assessing Officer, it was stated as under : "3.1 Provision for bonus : An amount of Rs. 1,59,00,702 has been provided for bonus for the staff at 8.33 per cent. in accordance with the provisions of the Payment of Bonus Act, 1965. The auditor's report in Form 3CD does not contain any qualification. Annexure 7 attached to the said audit report gives the break up of the aforesaid figure location-wise of the various units. Under these circumstances, it is just not understood as to how the amount of Rs. 1,57,05,083 could be disallowed. The section under which the disallowance has been made has not been indicated. The reason for making the dis-allowance is conspicuous by its total absence. 3.2 Unpaid taxes : An amount of Rs. 1,67,76,886 has been added back under this head presumably as per the observations contained in the auditor's report as per clause 7(a) and 7(d) thereof. 3.2.1 In particular, the entirety of the sum as mentioned by the auditors in clause 7(d) has been disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, did not specifically deal with the contention of the petitioner assessee. In the second order passed by the Assessing Officer under section 154 of the Act dated September 24, 1990, records as under : "The various contentions put forth by the assesse company have been carefully considered but it is found that the claims put forward at S. Nos. 1 and 2 above cannot be accepted because as per the pro-visions of section 43B the assessee did not enclose with the return the necessary evidence for the payment thereof. The certificates now filed cannot be considered. Thus, there is no mistake apparent from record which could be rectified under section 154. Hence, the claim for deduction now made is disallowed." 6. The aforesaid reasoning cannot withstand legal scrutiny and is contrary to the decision of this court in S. R. F. Charitable Trust v. Union of India [1992] 193 ITR 95 (Delhi), wherein it has been held as under (page 98) : "In the instant case, it is clause (iii) of the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee. Some examples of such prima facie admissible or inadmissible in respect of which adjustments can be made to the returned income or loss are : (i) While computing income under the head "Salaries", standard deduction under section 16(1) is not claimed, or claimed at a figure which is less than or in excess of the permissible limit. (ii) While computing income under the head "Income from house property", deduction for one-sixth for repairs or for a new unit under the proviso to section 23(1) is not claimed, or claimed at a figure which is less than or is in excess of the permissible amount. (iii) While computing income under the head "Profits and gains of business or profession", depreciation is claimed at rates lower or higher than those provided for in the Income-tax Rules. (iv) While computing capital gains, deduction of Rs. 10,000 under section 48(2) is not claimed or claimed less or in excess of this amount. (v) Carried forward speculation loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord 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 dated April 4, 1990, making adjustment of Rs. 1,57,05,083 and Rs. 1,67,76,886 on account of alleged unpaid bonus and taxes is set aside and quashed. The writ petition is allowed to the extent indicated above. There will be no order as to costs. 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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 per the prescribed dates. If at all there was any difference of opinion between ourselves and the Department then it was incumbent on the Department to point out such items along with the reasons applicable to those items for making disallowance. There cannot be a wholesale disallowance 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 sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed 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). This is also evident from the fact that, except for the documents specified, the assessee is not required to file the entire books of account or other documents along 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess 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 documents or claimed at a figure which is less than or is in excess of the permissible limit. (xii) Deduction under section 80M claimed at sixty percent. of gross dividend income instead of on net dividend income in violation of the provisions of section 80AA. It may be mentioned that the above is not an 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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