TMI Blog2002 (2) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... income. The return was processed under section 143(1)(a) of the Act on August 31, 1989, in which an adjustment to the tune of Rs. 11,98,354 was made by observing that interest received from the employees on the loans advanced to them and miscellaneous income of Rs.43,431 did not qualify for deduction under section 80P(2)(a)(i) of the Act. The assessee filed an application under section 154 of the Act claiming that the adjustment of Rs.11,98,354 had been wrongly made, but the same was rejected by the Assessing Officer vide order dated March 30, 1990. He observed that the deduction admissible under section 80P(2)(a)(i) of the Act was in respect of the income of a co-operative society carrying on the business of banking or providing credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees had arisen from the business of banking as no distinction could be made between giving of loans to the staff members and advancing loans to the borrowers. Thus, relying on the observations of the Supreme Court in Madhya Pradesh Co-operative Bank Ltd. v. Addl. CIT [1996] 218 ITR 438, it held that the income from interest on loans advanced to the staff members was eligible for deduction under section 80P(2)(a)(i) of the Act. The Tribunal also upheld the assessee's claim for deduction under the said provision in respect of the miscellaneous income on the ground that the same was incidental to the carrying on of the business of banking by the assessee. The Revenue moved an application under section 256(1) of the Act requiring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted in appeal. Thus, under such circumstances, the deduction claimed by the assessee under section 80P(2)(a)(i) of the Act could not possibly be said to be prima facie inadmissible warranting disallowance by way of adjustment under section 143(1)(a) of the Act. It is by now a well settled proposition of law that under the first proviso to section 143(1)(a) of the Act, the Assessing Officer can make an adjustment in income by disallowing deduction claimed in the return if it is prima facie admissible on the basis of information available in such return or accounts or documents accompanying the return. Reference in this behalf can be usefully made to the judgment of the Bombay High Court in Khatau Junkar Ltd. v. K. S. Pathania [1992] 196 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that certain claims of the assessee have been disallowed and more tax or interest is liable to be paid by the assessee, additional tax of 20% can be levied as per that section. Even if the assessee succeeds in a regular assessment thereafter, there is no provision for refund. If, therefore, the power of the Income-tax Officer, at the stage of intimation, to disallow claims in the manner claimed by the respondents is accepted, the consequences for the assessee would be grave. We have no reason to hold that such was the intention of the Legislature, either from the language of section 143(1)(a) or even from the objects and reasons for the amendment in question, which would indicate the circumstances giving rise to the amendment. On the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s resulted in income or loss which would then need to be quantified to see the extent of deduction claimed under section 80P(2)(a)(i) of the Act. Without such quantification, it could not be said whether the total deduction claimed by the assessee under section 80P(2)(a)(i) of the Act also included deduction in respect of such a non-banking activity. In these circumstances, we are of the considered view that the disallowance made in the present case under section 143(1)(a) of the Act was itself uncalled for. Once that is the position, the question sought to be referred for our consideration is merely of academic interest as whatever be the result on the merits, the disallowance made under section 143(1)(a) of the Act cannot be sustained. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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