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TMI Blog2023 (10) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 143(1)(a)(iv) of the Act permits adjustment to the income of the assessee on account of expenses which are indicated as disallowable in the Tax Audit Report, but not disallowed while computing the total income of the assessee. In the present case, the Tax Audit Report indicates the amount as both admissible and inadmissible. Therefore, the provisions of Section 143(1)(a)(iv) of the Act were not attracted. Even otherwise, the purport of intimation u/s 143(1) is to make a preliminary assessment of the income of the assessee based on the documents filed along with the return of income, permitting the adjustment to be made only on those counts which are apparently liable to be made. Also find that the assessee has given a plausible e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facie adjustment u/s 143(1) made by CPC. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. NFAC ought not to have upheld the addition of Rs 6,94,192/- u/s 40(b) as prima facie adjustment u/s 143(1) made by CPC. 2.3 The Ld. NFAC has grievously failed to appreciate that the impugned adjustment towards disallowance u/s 40(b) was illegal unlawful as well as beyond the scope of sec 143(1) of the Act. 3. The only issue in the present appeal pertains to adjustment made to the income of the assessee in the intimation made under Section 143(1) of the Act to the tune of Rs. 6,94,190/- on account of inadmissible interest paid to partners in terms of Section 40(b) of the Act as reported in the Tax Audit R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest 40(b) 5,65,692 5,65,690 2 - 2 Interest 40(b) 6,94,190 6,94,190 6,94,190 4. The ld. Counsel for the assessee pointed out that in this column the auditor had reported Rs. 6,94,190/- relating to interest paid to partners in terms of Section 40(b) of the Act and had mentioned this amount as both admissible and inadmissible. He stated that based on this reporting of the impugned amount of Rs. 6,90,190/- being both admissible and inadmissible, no adjustment could have been made to the income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of income while computing the income liable to tax in terms of provision of the Act, the interest or remuneration paid to partners is first disallowed and added to the income of the firm and then in terms of the provisions of the Act, the quantum of such expenditure allowable is subsequently claimed as deduction. He drew our attention to the computation of income for the impugned year placed before us at page no. 3 of the paper-book revealing the above facts as under:- COMPUTATION OF INCOME Rs. Rs. PROFIT GAINS OF BUSINESS or PROFESSION Profit before tax as per P L account (item 53, 64 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee in the intimation made under Section 143(1) of the Act. 8. Having heard the rival submissions and perused the relevant material on record, I find merit in the contention of the ld. Counsel for the assessee. The mere fact, as pointed out to me above, which is not disputed by the ld. DR also, that this amount of interest paid to partners of Rs. 6,94,190/- was shown both as admissible and inadmissible in the Tax Audit Report itself takes the issue out of the purview of Section 143(1) of the Act, more particularly Section 143(1)(a)(iv) of the Act which has been invoked in the present case. As pointed out by the ld. Counsel for the assessee, the provisions of Section 143(1)(a)(iv) of the Act permits adjustment to the income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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