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TMI Blog2024 (6) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... specified as part of intimation order. Therefore, the arguments of the ld counsel that intimation order passed is not reasoned, are incorrect. Hon ble Supreme Court in the case of CIT Vs Rajesh Jhaveri Stock Brokers P ltd [ 2007 (5) TMI 197 - SUPREME COURT] distinguished between intimation and assessment and held that under intimation the authority of the AO is limited to carry out adjustment based on the return of income or accompanying documents and he can t go beyond that and make adjustment on any debatable issue. In our opinion, in view of above observation, the AO was not required to pass a speaking order for adjustments made in strict terms, although he has duly proposed the said adjustment twice to the assessee and thereafter in the intimation he has provided reasons of adjustment. Regarding the ratio of PR Packaging [ 2022 (12) TMI 841 - ITAT MUMBAI] , we find that in said case in the Audit report it was not clearly mentioned whether said amount was disallowable or not but in the instant case , the amount has been categorized by the Tax Auditor under penalty or fine for violation of law for time being in force, therefore, the amount being prima-facie disallowable u/s 143(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 A notice was issued to the Appellant calling for the Audit Report filed in Form 3CB 3CD to verify the facts stated by the Appellant. In response to the same, the Appellant provided the documents called for. The claim of the Appellant is carefully considered. 4.2 The facts of the case were carefully considered. Though the compensation of Rs. 1,00,00,000/- was paid in favour of Tata Memorial Hospital, as per the directions of the Hon'ble High Court of Bombay, the same was remitted for infringement of registered design and trademarks held by M/s. Mahaveer Enterprises Ltd. The violation of the patents/trademark, etc. is always prohibited by law and therefore, in view of the provisions contained in Explanation to Section 37(1) of the Income Tax Act (hereinafter referred to as the Act ), the expenditure so incurred by the Appellant was not allowable. It was for such reason, that the Chartered Accountant qualified to undertake the Audit of accounts, had remarked that the donation made as per the order of the Court of Rs.1 crore is inadmissible and incorporated the same in Column no.21(a) of the Audit Report in Form no. 3CD. 4.3 The Appellant has relied on a plethora of case laws to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force. The first item is penalty for Walmart legal metrology case of Rs.25,000/- and second item is donation against court order of Rs.1,00,00,000/-. These two items have been listed under the clause 21(a) by the tax auditor of the assessee company in Form No. 3CD i.e. form prescribed for filing tax audit report, relevant part of which has been extracted by the Ld CIT(A) in his finding reproduced above. Though the assessee admitted other amount of Rs.25,000/- for disallowance in the return of income, but did not add this amount of Rs. 1,00,000/- to the returned income. The Ld. counsel further referred to pages 53 and 56 of the Paper Book which are communication by the Assessing Officer(CPC) proposing adjustment u/s 143(1)(a) of the Act including the amount of Rs.1,00,00,000/-. The assessee was given one more opportunity vide communication dated 04.06.2020 and informed the basis for adjustment to the returned income. 3.1 After considering response of the assessee, the Assessing Officer in order u/s 143(1)(a) of the Act dated 29.09.2020 made adjustment to the returned income containing following note: 3.4 In background of the above facts, the Ld. counsel for the assessee submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken into account in computing the total income in the return; (v) disallowance of deduction claimed under [section 10AA or under any of the provisions of Chapter VI-A under the heading C. Deductions in respect of certain incomes , if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018; (b) the tax, interest and fee, if any, shall be computed on the basis of the total income computed under clause (a); (c) the sum payable by, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g into consideration the adjustment as prescribed subject to communication to the assessee. In the intimation letter, the ld AO has referred the reasons for adjustment. He has made adjustment on the basis of entry made by the tax Auditor of the assessee under the row prescribed for expenditure by way of penalty or fine for violation of law for time in being in force. Out of the two items listed under this row in tax audit report, one item was already added by the assessee for computing returned income but the second item of Rs. 1,00,000/- was omitted for including in the returned income. On the basis of omission observed, the AO (CPC) communicated the proposed adjustment and thereafter passed the intimation order along with reasons of adjustment duly specified as part of intimation order. Therefore, the arguments of the ld counsel that intimation order passed is not reasoned, are incorrect. Further, the contention of the ld Counsel that the AO was required to pass a speaking order, we may like to refer the Hon ble Supreme Court in the case of CIT Vs Rajesh Jhaveri Stock Brokers P ltd (2007) 291 ITR 500 (SC), where in the Hon ble Supreme Court observed as under: 12. What were permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first proviso to section 143(1)(a) , no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No. 2) Act of 1991 with effect from October 1, 1991, and subsequently with effect from June 1, 1994, by the Finance Act, 1994 , and ultimately omitted with effect from Ju ne 1, 1999, by the Explanation as introduced by the Finance (No. 2) Act of 1991 an intimation sent to the assessee under section 143(1)(a) was deemed to be an order for the purposes of section 246 between June 1, 1994, to May 31, 1999, and under section 264 between October 1, 1991, and May 31, 1999. It is to be noted that the expressions intimation and assessment order have been used at different places. The co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry out adjustment based on the return of income or accompanying documents and he can t go beyond that and make adjustment on any debatable issue. In our opinion, in view of above observation, the AO was not required to pass a speaking order for adjustments made in strict terms, although he has duly proposed the said adjustment twice to the assessee and thereafter in the intimation he has provided reasons of adjustment. 5.3 Regarding the ratio of PR Packaging (supra), we find that in said case in the Audit report it was not clearly mentioned whether said amount was disallowable or not but in the instant case , the amount has been categorized by the Tax Auditor under penalty or fine for violation of law for time being in force, therefore, the amount being prima-facie disallowable under section 143(1)(a)(iv) of the Act. 5.4 In view of above discussion, the relevant grounds No. 1 to 3 of the appeal are accordingly dismissed. 6. In ground No. 4, the Ld. counsel for the assessee has challenged the adjustment on the merit. The Ld. counsel referred to order of the Hon ble High Court of Bombay, available on page 62 to 69 of the Paper Book. The Ld. counsel submitted that a suit was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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