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TMI Blog2008 (10) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... esh loan and that the proviso to section 43B of the Act was not applicable. - 434 of 2004 - - - Dated:- 24-10-2008 - K. L. MANJUNATH and B. V. NAGARATHNA JJ. S. Parthasarathy for the appellant. M. V. Seshachala for the respondent. JUDGMENT The judgment of the court was delivered by NAGARATHNA J. - This appeal is filed by the assessee challenging the order of the Income-tax Appellate Tribunal bearing No. I. T. A. No. 698/Bang/2000 dated, February 27, 2004. 2. The relevant facts of the case are that the assessee is a private limited company and had filed its return of income for the assessment year 1997-98 on November 27, 1997, declaring nil income. In the said return of income, the assessee had claimed deduction tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent as provided under section 143(1)(a) of the Act and that the adjustment as made was not permissible and accordingly disallowance as made was required to be cancelled. The Tribunal, however, held that the disallowance was proper and permissible under section 143(1) (a) of the Act and dismissed the appeal by order dated February 27, 2004. It is the said order which is challenged in the instant appeal. 4. We have heard Sri S. Parthasarathy, learned counsel for the appellant and Sri M. V. Sheshachala, learned counsel for the respondent. 5. It is submitted on behalf of the appellant that the interest related to the assessment years 1994-95 and 1995-96 on the loan advanced by the Karnataka State Financial Corporation and that K.S.F.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department that prima facie, the interest amounts were not repaid by the assessee and, therefore, the disallowance made under section 143(1)(a) of the Act is just and proper and that the disallowance made cannot be said to be a debatable issue. Therefore, the assessee is not entitled to claim deduction. He, therefore, submits that there is no merit in this appeal and that the same ought to be dismissed. 7. It is not in dispute that M/s. Karnataka State Financial Corporation to whom interest was payable by the assessee had rescheduled the outstanding interest under a revival scheme and the same was sourced by means of a fresh loan which had a repayment schedule all over three years. The assessee had claimed in its return of income deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for the accounting years relating to the assessment years 1994-95 and 1995-96 though were provided in the accounts of the respective assessment years were not claimed and added back to the total income of the respective years, thereby the assessee had not made any claim in the respective years with regard to the interest accrued by applying the proviso to section 43B of the Act. It was only in the assessment year 1997-98, the K.S.F.C. funded the above by way of interest by granting of fresh loan and loan repayment schedule. Since the interest amount was funded by the K.S.F.C. the assessee had claimed deduction in the relevant assessment year as the amount of interest deemed to have been paid. In our view, the authorities below as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n other words, the Assessing Officer to make any adjustment in the returned income by disallowing any claim for deduction or allowance or relief must be satisfied on the basis of the information available in the return documents and accounts accompanying it and that there was no possibility of further debate thereon. Further, the question of prima facie adjustment under section 143(1)(a) of the Act has to be considered with reference to the date on which return of income is filed and not with reference to the events subsequent thereto. In a given case the Assessing Officer has any dought about the allowability of deduction or claim made by the assessee, it open to him to issue a notice under sub-section (2) of section 143 and have the evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he return, only if it is prima facie inadmissible, on the basis of the information available in such return or accounts or documents accompanying the return. The fact that on ultimate analysis the assessee may not be entitled for the deduction claimed from the total income does not mean that records can be had to disallow under section 143(1)(a), dispensing with hearing and denying an opportunity to the assessee to challenge the assessment. Under the guise of effecting an adjustment under section 143(1)(a) the Assessing Officer cannot decide debatable issues. If the Assessing Officer wants to disallow a deduction or a claim, he is bound by the procedure under section 143(2) by giving a notice to the assessee and that no substantial adjustme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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