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TMI Blog2022 (8) TMI 1527X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well. We are of the considered view that the impugned adjustment in the course of processing of return u/s 143(1) is vitiated in law, and we delete the same. As we hold so, we make it clear that our observations remain confined to the peculiar facts before us, that our adjudication is confined to the limited scope of adjustments which can be carried out under section 143(1) and that we see no need to deal with the question, which is rather academic in the present context, as to whether if such an adjustment was to be permissible in the scheme of Section 143(1), whether the insertion of Explanation 2 to Section 36(1)(va), with effect from 1st April 2021, must mean that so far as the assessment years prior to the assessment years 2021-22 are concerned, the provisions of Section 43B cannot be applied for determining the due date under Explanation (now Explanation 1) to Section 36(1)(va). That question, in our humble understanding, can be relevant, for example, when a call is required to be taken on merits in respect of an assessment under section 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome tax return are also deductible in the computation of business income, and the adjustment in question, therefore, was unsustainable in law. It was thus contended that dehors the observations made by the tax auditor, what was reported as delayed payment in column 20(b) were delayed payments of contributions received from the employees for various funds, as referred to in Section 36(1)(va) vis- -vis the respective statute, but not vis- -vis the provisions of the Income Tax Act. The judicial precedents in support of the said contention were pointed out. None of these arguments, however, impressed the Assessing Officer- CPC. The disposal of this objection, as per the standard template text embedded in the impugned intimation, was that As there has been no response/the response given is not acceptable, the adjustment(s) as mentioned below are being made to the total income as per provisions of Section 143(1)(a) . Leave aside giving reasons for not agreeing with the submissions of the assessee, no efforts were made even to strike out the inapplicable clause (i.e. whether the reply was not given or whether the reply was found unacceptable). The efforts to get the intimation under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his next plea is that the insertion of Explanations to Section 36(1)(va) and 43B, by the Finance Bill 2021, is prospective in nature, and, accordingly, so far as the period prior to 1st April 2021 is concerned, such a disallowance cannot come into play. Our attention is invited to a series of decisions of the coordinate benches holding so. It is thus submitted that for this reason also, the impugned adjustment under section 143(1) must stand deleted. Shri Chourasia, the learned Senior Departmental Representative, on the other hand, invites our attention to the fact that there is a significant difference between the earlier legal position, i.e. when judgments as in the case of Khatau Junkar (supra) were delivered vis- -vis the law as it stood at the material point of time. It is submitted that the scope of expression an incorrect claim, if such claim is apparent from any information in the return appearing in Section 143(1)(a) is now statutorily defined under Explanation to Section 143(1) and it means a claim, on the basis of an entry, in the return, (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee from any of the employees to which the provisions of sub-clause (x) of clause 24 of Section 2 applies . The intent of the legislature is thus said to be unambiguous. Our attention is then invited to the words of the statute, and it is submitted that it cannot be open to us to disregard the specific words in the legislation itself which specifically uses the expression shall never be deemed to have been applied . It is suggested that while the amendment is to take effect from the date specified, that is 1st April 2021, once that amendment takes effect, it has to apply also on pending cases as it provides covering the earlier cases as is clearly discernible from the peculiar expressions employed therein. We are thus urged to confirm the impugned adjustments and decline to interfere in the matter. In a brief rejoinder, it is submitted that the tax auditor is an independent professional and, even though the tax auditor is appointed by the assessee, the views of the assessee need not be the same as that of the tax auditor and that a statement by the tax auditor cannot be binding on the assessee. It is submitted that in any event the tax auditors in question had subsequently re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h goes well beyond such adjustments and includes the cases such as (iii)disallowance of loss claimed, if the return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, 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 . So far as the first point is concerned, it must be noted that the expression incorrect claim apparent from any information in the return , for the purpose of Section 143(1)(a), is further defined, under Explanation to Section 143(1), and it means that a claim, on the basis of an entry, in the return, (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch intimation, such adjustments shall be made .The scope of permissible adjustments under section 143(1)(a) now is thus much broader, and, as long as an adjustment fits the description under section 143(1)(a) (i) to (v), read with Explanation to Section 143(1), such an adjustment, subject to compliance with first and second proviso to Section 143(1), is indeed permissible. It is, however, important to take note of the fact that unlike the old scheme of prima facie adjustments under section 143(1)(a), the scheme of present section 143(1) does not involve a unilateral exercise. The very fact that an opportunity of the assessee being provided with an intimation of such adjustments [as proposed under section 143(1)], in writing or by electronic mode, and the response received from the assessee, if any to be considered before making any adjustment makes the process of making adjustments under section 143(1), under the present legal position, an interactive and cerebral process. When an assessee raises objections to proposed adjustments under section 143(1), the Assessing Officer CPC has to dispose of such objections before proceeding further in the matter- one way or the other, and such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Whether the statute specifically provides for it or not, in our considered view, the need for disposal of objections by way of a speaking order has to be read into it as the Assessing Officer CPC, while disposing of the objections raised by the assessee, is performing a quasi-judicial function, and the soul of a quasi-judicial decision making is in the reasoning for coming to the decision taken by the quasi-judicial officer. While on this aspect of the matter, we may usefully refer to the observations made by the Hon ble Supreme Court, in the case of Union Public Service Commission v. Bibhu Prasad Sarangi and Ors., [2021] 4 SCC 516. While these observations are in the context of the judicial officers, these observations will be equally applicable to the decisions by the quasi-judicial officers like us as indeed the Assessing Officer CPC. In the inimitable words of Hon ble Justice Chandrachud, Hon ble Supreme Court has made the following observations: ..Reasons constitute the soul of a judicial decision. Without them, one is left with a shell. The shell provides neither solace nor satisfaction to the litigant. We are constrained to make these observations since what we have encoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endence of the tax auditor. The fact remains that the tax auditor is a third party, and his opinions cannot bind the auditee in any manner. As a matter of fact, no matter how highly placed an auditor is, and even within the Government mechanism and with respect to CAG audits, the audit observations are seldom taken an accepted position by the auditee- even when the auditor is appointed by the auditee himself. These are mere opinions and at best these opinions flag the issues which are required to be considered by the stakeholders. On such fine point of law, as the nuances about the manner in which Hon ble Courts have interpreted the legal provisions of the Income Tax Act in one way or the other, these audit reports are inherently even less relevant- more so when the related audit report requires reporting of a factual position rather than express an opinion about legal implication of that position. In the light of this ground reality, an auditee being presumed to have accepted, and concurred with, the audit observations, just because the appointment of auditor is done by the assessee himself, is too unrealistic and incompatible with the very conceptual foundation of independence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights and for any other purpose to any person or authority, including in appropriate cases any Government, within its territorial jurisdiction. Under article 227 it has jurisdiction over all Courts and Tribunals throughout the territories in relation to which it exercises jurisdiction. It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that Court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate Courts can equally do so, for there is no specific provision, just like in the case of the Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working: otherwise, there would be confusion in the administration of law and respect for law would irretrievably suffer 8. When the law enacted by the legislature has been construed in a particular manner by the Hon ble jurisdictional High Court, it cannot be open to anyone in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as well. 9. What a tax auditor states in his report are his opinion and his opinion cannot bind the auditee at all. In this light, when one considers what has been reported to be due date in column 20 (b) in respect of contributions received from employees for various funds as referred to in Section 36(1)(va) and the fact that the expression due date has been defined under Explanation (now Explanation 1) to Section 36(1)(va) provides that For the purposes of this clause, due date means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued there under or under any standing order, award, contract of service or otherwise , one cannot find fault in what has been reported in the tax audit report. It is not even an expression of opinion about the allowability of deduction or otherwise; it is just a factual report about the fact of payments and the fact of the due date as per the Explanation to Section 36(1)(va). This due date, however, has not been found to be decisive in the light of the law laid down by Hon'ble Courts above, and it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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