1992 (2) TMI 166 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of deduction u/s 32AB due to non-filing of audit report in Form No. 3AA with the return.
2. Rejection of rectification petition u/s 154 by the assessing officer.
3. Validity of prima facie adjustments u/s 143(1)(a).

Summary:

Disallowance of Deduction u/s 32AB:
The assessee disclosed a total income of Rs. 20,88,350 after claiming a deduction of Rs. 6,52,550 u/s 32AB. The assessing officer disallowed the claim because the audit report in Form No. 3AA was not filed with the return. The CIT(A) upheld this disallowance, noting that the audit report was filed later with a petition u/s 154, citing precedents that allowed for reconsideration if the audit report was filed before the completion of assessment.

Rejection of Rectification Petition u/s 154:
The assessee filed a rectification petition u/s 154, claiming the disallowance of Rs. 6,52,550 was a mistake apparent from the record. The assessing officer dismissed the petition on this issue, and the CIT(A) declined to interfere, maintaining that the audit report was a condition precedent for the deduction.

Validity of Prima Facie Adjustments u/s 143(1)(a):
The assessee argued that the assessing officer could not lawfully reject the deduction claim u/s 32AB under the guise of prima facie adjustments, which should only cover arithmetical or clerical errors, not quasi-judicial matters requiring further evidence and hearing. The Tribunal noted that prima facie adjustments are intended for clear mistakes apparent from the record and not for issues requiring detailed inquiry. The Tribunal emphasized that the failure to file Form No. 3AA with the return should not negate the deduction if the basic compliance (i.e., making the deposit) was evident from the receipts filed with the return.

Conclusion:
The Tribunal held that the assessing officer was not justified in disallowing the deduction u/s 32AB as a prima facie adjustment, especially when the assessee had provided proof of the deposit with IDBI. The requirement to file an audit report along with the return was deemed directory, not mandatory. The Tribunal directed the assessing officer to allow the deduction u/s 32AB, thereby allowing the assessee's appeal.