TMI Blog1992 (2) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... e return. 3. Thereupon the assessee filed before the assessing officer a rectification petition under section 154 of the Act. In the said application, the assessee had sought rectification of tax computation on more than one count. Of relevance to the purpose on hand is the fact that according to the assessee the adjustment made by the assessing officer in the said sum of Rs. 6,52,550 was a mistake apparent from record. The assessing officer dismissed the rectification petition on this issue, though he allowed the petition on some other issue. 4. The CIT(A) declined to interfere in the matter, observing : " The appellant's counsel has stated that the assessee-company has compulsory statutory audit and had got its accounts audited accordingly. While doing so, it is pointed out that an Audit Report under section 32AB was also obtained from the Auditors for the purpose of claiming relief under section 32AB in Form No. 3AA. It was only due to a mistake the appellant failed to file the Audit Report under section 32AB in Form No. 3AA along with the Return of Income and that the same was filed along with the petition under section 154. The appellant's counsel has also referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly arithmetical and/or ' ministerial ' (Shri Gopal has obviously used the latter expression as an euphemism for the expression ' clerical ') mistakes can be brought under the pale of prima facie adjustments, and not matters which are quasi-judicial in nature and, which by the sake token could not be decided unilaterally by the assessing officer, and without hearing the assessee. Section 143(1)(a) has a limited role and purpose and that is to rectify mistakes apparent from record. Under the Scheme of the Act, the said section does not contemplate adjudication of complicated issues. Such matters naturally require further proof, arguments, evaluation of evidence etc., and section 143(2) is designed to deal with such cases. In this connection, Shri Gopal drew our pointed attention to paragraph 5.4 of the CBDT Circular No. 549 of October 31, 1989 (182 ITR St. 21), and emphasised the fact that none of the examples of prima facie adjustments given therein involve the collection of further evidence, hearing of arguments and the like. For a fact, even according to the Board, the prima facie adjustments are only those adjustments that can be made on the basis of the information available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that even according to the Department, a hyper-technical view should not be taken in matters relating to any requirement contained in any of the provisions of Chapter IV of Chapter VI-A of the Act. 10. In view of the foregoing, therefore, urged Shri Gopal, the assessee is entitled to succeed. 11. On his part, the learned Departmental Representative strongly supported the impugned orders of the lower authorities. He contended that the assessee's claim for deduction under section 32AB of the Act was rightly brought under the purview of ' prima facie adjustments ', because as is ex facie clear from the provisions of section 32AB(5), the filing of an audit report in Form No. 3AA is a condition precedent to the grant of the allowance. In this case, it is a matter of record that the assessee failed to file Form No. 3AA along with the original return. Consequently, the assessing officer was justified in negativing the assessee's claim. In this view of the matter, therefore, the case before us is one in which there is no mistake, much less a mistake apparent from record. It should, therefore, follow that the application under section 154 filed by the assessee was clearly unmaintaina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn is filed under section 139 or under section 142(1) of the Act, the tax or interest, or as the case may be, the refund found due on the basis of such return, an intimation shall be sent to the assessee specifying the sum payable or as the case may be refundable. There is a significant proviso which allows the Department to make certain adjustments in the income or loss as returned by the assessee. These adjustments which go by the name ' prima facie adjustments ' fall under the following categories. : (i) Rectification of any arithmetical errors in the return or in the accompanying accounts or documents ; (ii) allowance of any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in the record, accounts or documents, is prima facie admissible but it is not claimed in the return ; and, (iii) disallowance of 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. In paragraph 5.4 of the Circular No. 549 dated October 31, 1989 (182 ITR St. 1), the CBDT has given some examples of such prim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibility of a particular claim bring the case under the pale of ' prima facie adjustments ', and (ii) cases in which, having regard to the nature of the claim, it is not possible to arrive at a conclusion, one way or the other, without inquiring into the matter in detail. The cases falling under the former category is typified by a case where the assessee who is in receipt of income chargeable under the head ' Salary ' claims statutory deduction under section 16(i) of the Act. The quantum of the deduction admissible is specified by and under that section ; and all that the assessing officer has to do is to verify whether the assessee has properly quantified the deduction admissible to him. It may here be highlighted that a claim under section 16(i) is one of the examples listed in paragraph 5.4 of the CBDT Circular No. 549 of October 31, 1989. 18. The second category aforesaid encompasses, inter alia the various incentives given to the assessees as a matter of State policy. The Income-tax Act, 1961 is basically a fiscal statute ; that is to say, its aim and objective is to collect tax. Even so, Parliament, in its wisdom, has incorporated certain provisions into the Act, with a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of a particular incentive is to be distinguished from the amount or the quantum of the incentive in question. In order to acquire the right to get the benefit of an incentive, the assessee must first establish that it is entitled to the incentive in question. This the assessee will be able to do, only if it satisfies the pre-conditions, --- ' threshold conditions '--- prescribed by the statute. Once the ' threshold conditions ' are satisfied --- there can be no compromise on them --- the other provisions of the Act relating to a particular incentive must be so construed as to ensure that the benefit of the incentive reaches the assessee and is not denied on flimsy, technical grounds. In other words, those provisions which confer on the assessee the right to a particular incentive will have to be construed strictly. The other incidental provisions must be so construed as to ensure that the benefit reaches the assessee. 19. Clearly matters relating to the issue whether the assessee had satisfied the ' threshold conditions ' cannot be regarded as matters of ' prima facie adjustments '. They are matters that require inquiry. It should, therefore, follow that they can be inqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return. To deny the assessee the benefit of deduction in such cases is to insist on a pound of flesh and to convert the well-meaning provisions of section 143(1) into an instrument of oppression. When the receipts evidencing the factum of the assessee's having made the stipulated deposits with the IDBI are before him, the assessing officer, as we see it, cannot turn a Nelson's eye to them, and reject the assessee's claim. When faced with such prima facie evidence of basic compliance with the provisions of section 32AB, the assessing officer, should either trust the assessee and allow the claim or take the first step in scrutinizing the case, namely, issue a notice under section 143(2). For a fact, the assessing officer had in fact issued a notice under section 143(2) with a view to subjecting the case to scrutiny. More about this later. (iii) There is a line of cases in which it has been held that the failure on the part of the assessee to comply with the conditions of the type under consideration will not prove fatal to the assessee's claim for deduction/relief because such conditions are directory and not mandatory. Reference in this connection may be made to the following ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nored the revised return validly filed by the assesee on 31-12-1990, a return to which audit report in Form No. 3AA was enclosed. 24. Clearly, the assessing officer had converted section 143(1) into an instrument of operation. 25. In view of the foregoing, therefore, we hold that the assessing officer was not justified in negativing the assessee's claim for deduction under section 32AB in the guise of making ' prima facie adjustments ' under section 143(1), particularly when the assessee had appended to the original return proof of the factum of its having made deposits with the IDBI. It is significant to note that as respects the assessee's claim for deduction under section 32AB, the only ' threshold condition ' incorporated in section 32AB(1)(a) is that the assessee should have " deposited any amount " in a deposit account maintained by the assessee with the IDBI before the expiry of the six months from the end of the previous year or before furnishing the return of its income, whichever is earlier. And the assessee did not only satisfy the threshold condition, but had also appended to the original return filed by it proof of the factum of its having satisfied the aforesaid t ..... 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