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TMI Blog1991 (12) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... t of presentation articles carrying the name of the Company 22,050 (ii) Amounts claimed to have been paid towards PF and EPF before filing the return not allowable under section 43B(b) 32,802 (iii) Interest accrued but not paid to the Public Financial Institution under section 43B 3,21,80,142 ---------------------- Total Rs. 3,22,34,994 ---------------------- 3. The assessee filed an application under section 154 of the Act before the Assessing Officer. According to the Assessing Officer, the assessee had worked out disallowance under rule 6B at Rs. 15,750. He accordingly reduced the adjustment of Rs. 22,050 to Rs. 15,750. Further, the Assessing Officer observed that regarding the disallowance under section 43B of the Act, amounting to Rs. 32,802 in respect of PF, PPF and professional tax the assessee had made payments to the tune of Rs. 29,239 for which proof of payment was filed. He, therefore, reduced the adjustment of Rs. 32,802 to Rs. 29,239. 4. In respect of adjustments of Rs. 3,21,80,142, it was explained by the assessee to the Assessing Officer that the State Bank of India could not be treated as Public Financial Institution and the amount of interest of Rs. 7,77,123 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ober 25, 1989. 6. These submissions of the assessee-company supported by the evidence, as discussed above, did not satisfy the Assessing Officer as to non-applicability of section 43B of the Act. He, therefore, as stated above, sustained the adjustments of Rs. 3,05,63,474. He reduced the demand only to the extent of the adjustments reduced by him. 7. The assessee went in appeal before the CIT (Appeals). He was of the opinion that funding of interest came into effect from July 16, 1990, when the agreement in respect thereof was actually executed, and, therefore, it could not be said that there was payment of interest before March 31, 1989, He, however, accepted the plea of the assessee that Rs. 16,02,449 relating to interest accrued upto the earlier years was not includible in the income of the assessee for the instant year by virtue of section 43B of the Act. He also accepted the plea of the assessee that the amount of Rs. 3,563 being the amount of Professional tax deducted from the salary of employees could not be an item of disallowance under section 43B. He, thus, gave relief of Rs. 16,06,012. 8. Learned counsel for the assessee and the learned standing counsel for the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment known as " summary assessment scheme " has been in operation for the last decade. It has been the experience that the objective of making the assessment without requiring the presence of the tax-payer to produce the books of accounts and other evidence in support of the return of income and thereby ensuring expeditious completion of a large number of assessments has not been fully realised. One, of the main reasons for the inadequate success of the scheme is that considerable time is taken in determining whether the requirement of making adjustments to the income or loss declared in the return referred to in items (i) to (iv) specified in para 51 above [item nos. (ii) and (iii) of para 51 are the clauses (ii) and (iii) of section 143(1)(b)] are satisfied and thereby the completion of the assessment is unduly delayed. It has been further found that while there are a number of cases which require rectification of arithmetical errors in the return or the proper adjustment of brought forward allowance or losses, only in a very few cases the deductions admissible to the taxpayer were not claimed or that incorrect deductions or allowances were claimed. It is accordingly pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments, is prima facie admissible but which is not claimed in the return, shall be allowed ; (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed. (1A)(a) Where, in the case of any person, the total income, as a result of the adjustments made under the fist proviso to clause (a) of sub-section (1) exceeds the total income declared in the return by any amount, the Assessing Officer shall-- (i) further increase the amount of tax payable under sub-section (1) by an additional income-tax calculated at the rate of twenty per cent of the tax payable on such excess amount and specify the additional income-tax in the intimation to be sent under sub-clause (i) of clause (a) of sub-section (1) ; (ii) where any refund is due under sub-section (1), reduce the amount of such refund by an amount equivalent to the additional income-tax calculated under sub-clause (i). (b) Where as a result of an order under section 154 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, the amount on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is perhaps no appeal provided against that levy of penalty. And the anomaly is that irrespective of the fact whether the amount of the said adjustment finally stands or not in the assessment under section 143(3), the assessee has to pay the penalty. Thus on one hand there is penalty in the name of additional income-tax on the excess amount found by making adjustments and on the other, such adjustments may not be added to the income of the assessee while framing the assessment on merit. The said clauses (ii) and (iii) of proviso to section 143(1), therefore, must be construed in this light. They are dangerous weapons in the hands of the Assessing Officer and the judicial discretion demands that they should be used sparingly and with utmost caution. 12. The principles of natural justice and the right to be heard may be excluded by the discretionary nature of the power sought to be exercised by the authority concerned. But, such statutory provision places heavy responsibility on the authority executing the same. His decision should be reasonable. The learned counsel for the assessee rightly referred to the following observations of the Hon'ble Mr. Justice Kirpal in the judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made after ensuring that the return of income is complete and after finding that the adjustment is ex facie justified, that is to say, there would not be any other finding than what is reached even if the assessee, is given an opportunity of being heard. No adjustments should be made light heartedly. Otherwise it will give rise to litigation and completely frustrate the intention of law and the purpose to be achieved. 15. Coming to the facts of the instant case we find that the admissibility of the claim of the assessee is very much debatable, inasmuch as that an application under section 154 the Assessing Officer himself gave partial relief to the assessee and on further appeal the CIT(Appeals) also gave some relief to the assessee. The adjustments which have been sustained is still debatable. Much has been argued by the parties for and against. It is not proper to express any opinion at this juncture on the dispute as to whether the amount of Rs. 2,89,61,025 sustained by the CIT(Appeals) as adjustments on account of interest is really deductible under section 43B or not suffice to say that the claim of the assessee does not lack bona fides and ex facie it cannot be included ..... X X X X Extracts X X X X X X X X Extracts X X X X
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