2003 (5) TMI 21 - HC - Income Tax

Appeal arises out of proceedings of rectification in intimation issued under section 143(1)(a) as the assessee in his return claimed deduction of the amount of cash deposit for obtaining the bank guarantee for satisfying the demand of bottling fee in case he lost in the pending litigation - respondent is also right in his submission that the substantial question framed at the time of admission does not give the true picture of controversy for consideration in this appeal which arises out from the rectification proceedings by intimation under section 143(1)(a) and relates to the validity of rectification proceedings - question of deduction claimed by the assessee raises a debatable issue and cannot be considered as a mistake apparent from the record Revenue s appeal dismissed

Summary

Issues:
1. Whether unpaid amount of bottling fee treated as actual payment on furnishing bank guarantee under section 43B of the Income-tax Act, 1961?
2. Can rectification in intimation under section 143(1)(a) be made after regular assessment proceedings under section 143(2)?
3. Is the deduction claimed by the assessee debatable and not a mistake apparent from the record?

Analysis:
1. The primary issue in this case was whether the Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 6,00,000 by considering the unpaid amount of bottling fee as actual payment upon furnishing a bank guarantee. The court examined the circumstances and concluded that the deduction claimed by the assessee raised a debatable issue and could not be considered a mistake apparent from the record. The court referenced previous decisions and held that the question of deduction was to be decided substantively in the pending regular assessment proceedings, not through rectification under section 143(1)(a).

2. Another crucial issue raised was whether rectification in intimation under section 143(1)(a) could be carried out after the initiation of regular assessment proceedings under section 143(2). The respondent argued that once regular assessment proceedings were initiated, rectification in intimation was provisional and had to give way to the final regular assessment. The court agreed with the respondent, citing a previous decision that disallowed creating additional liability through rectification proceedings when regular assessment proceedings were underway. The court emphasized that all questions and demands should be settled through the regular assessment process.

3. The third issue pertained to the debatability of the deduction claimed by the assessee. The court found that the deduction raised a substantial question of law and was not a clear mistake on record. Referring to legal precedents, the court determined that the deduction issue was to be addressed in the pending regular assessment proceedings. Ultimately, the court dismissed the appeal, aligning with previous decisions and emphasizing that the deduction claimed by the assessee required substantive consideration during the regular assessment process.

In conclusion, the judgment highlighted the importance of resolving tax-related issues through the proper channels of regular assessment proceedings rather than rectification in intimation. The decision underscored the need for thorough examination and substantive determination of debatable deductions within the framework of the Income-tax Act, 1961.