TMI Blog2006 (8) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act, 1961 ? 2. The assessee submitted return of income-tax for the assessment year 1992-93 declaring a 'Nil' income. The said return of income of the assessee was processed by the Assessing Officer under Section 143(1)(a) of the Income Tax Act and intimation was sent to the assessee on May 11, 1993 computing total income at Rs. 4,83,10,445/- by making following adjustments in the total income returned by the assessee; (a) Disallowance of earlier years expenses. Rs. 31,31,180/- (b) Disallowance of expenditure on presentation articles. Rs. 6,10,803/- under section rule. 6B (c) Disallowance under section 43B of interest on arrears Rs.7,38,11,883/- of sales tax. 3. It appears that, initially, by mistake the intimation issued by the Assessing Officer on May 11, 1993 was of loss instead of income of Rs. 4,83,10,445. The assessee moved an application on June 24, 1993 under Section 154 of the Act for rectification of the mistake said to be apparent in the order under Section 143(1)(a) on the ground that the aforesaid 3 adjustments to the returned income were beyond the scope of Section 143(1)(a) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ahmedabad Bench 'A'. It was contended on behalf of the assessee that the amount of interest on outstanding sales-tax amount calculated at the rate of 24% per annum will not be covered under the provisions of Section 43B of the Act, as the amount of interest is not included in the word tax used in Section 43B of the Act. It was further contended by the assessee that in the preceding year, i.e., assessment year 1991-92 relating to the assessee itself, the Assessing Officer had made similar prima facie adjustments but deleted the same when application under Section 154 was moved by the assessee, and that fact made the issue debatable and took it out of the ambit of Section 143(1)(a) of the Act. It was the contention on behalf of the Revenue that, in view of the decision of the Hon'ble Supreme Court in the case of Mahalaxmi Sugar Mills Company v. CIT, Delhi, [1980] 123 ITR 429, the said issue has not remained debatable and therefore the case falls within Section 143(1)(a) of the Act and that the amount of Rs. 7,38,11,883/- has rightly been added to the income of the assessee on account of interest on arrears of sales-tax. Considering the rival submissions, the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order that the Department itself has made this issue debatable and when in the case of the assessee itself the Assessing Officer took a contrary view to the view adopted in the year under consideration, and when two views are possible on a particular issue, then it is a debatable issue and comes out of the scope of the word 'prima facie'. Shri Patel has relied upon Instruction No. 1814 [CBDT Circular No. F/244/89/ITA-II] dated 4.4.1989 clarifying the position under Section 143-A as was amended on 1.4.1989. According to Shri Patel, the scope under Section 143(1)(a) was restricted to the same type of adjustments which may be obvious or apparent admissible/inadmissible as is the scope of Section 154 of the Act defined by the Hon'ble Supreme Court in T.S. Balaram, ITO, Company v. Volkart Brothers [1971] 82 ITR 50. It is therefore submitted by him that when there were two views possible, the assessee's case was not of prima facie inadmissibility or deduction to be made under Section 143(1)(a) of the Act. Therefore, it is submitted by him that the case does not fall under Section 143(1)(a) of the Act. Shri Patel has submitted that so far as inclusion of Rs. 7,38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1)(a) of the Act and/or Section 143(1)(a) would be attracted. 5. Mrs. Mona Bhatt, learned counsel appearing on behalf of the Revenue, while supporting the order passed by the Tribunal, has submitted that in view of the judgment of the Hon'ble Supreme Court in the case of Mahalaxmi Sugar Mills Company [1980] 123 ITR 429 the issue was already determined and the interest on unpaid tax was required to be considered as part of tax; that it was not required to be deducted under Section 43B of the Act unless actually paid; and therefore that the said issue did not remain debatable; and therefore the Tribunal was justified in holding that Section 143(1)(a) was attracted. It is submitted by her that merely because the Assessing Officer in the earlier years has granted benefit wrongly and even contrary to the decision of the Hon'ble Supreme Court, that itself will not make the issue debatable more particularly when in view of the judgment of the Hon'ble Supreme Court in the case of Mahalaxmi Sugar Mills Company [1980] 123 ITR 429, the issue was already decided and therefore the Assessing Officer was justified in making adjustment under Section 143(1)(a) and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is a debatable question, that goes out of the ambit of Section 143(1)(a) of the Act. Therefore, the question which is now required to be considered by this Court is whether in the assessment year 1992-93, when the Assessing Officer invoked provisions of Section 143(1)(a) of the Act and passed the order adjusting prima facie and adding Rs. 7,38,11,883/- being interest on outstanding sales-tax calculated at 24% per annum, but not paid, and disallowed the same under Section 43B of the Act, the said question was a debatable question or not, and whether the Assessing Officer was justified in adjusting, prima facie, and adding the aforesaid amount or not. 8. Section 143(1)(a) of the Act reads as under : 143 Assessment. (1) (a) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142 ,__ (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provision of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the Assessing Officer in the preceding assessment year, i.e. 1991-92, the deduction was granted, and deleted the said disallowance relating to amount of interest on arrears of sales-tax the said issue was highly debatable and it ceased to be prima facie inadmissible and therefore Section 143(1)(a) would not be applicable. 10. Now, as stated hereinabove, at the time when the assessee submitted the Return of income for Assessment Year 1992-93 declaring Nil income and not including the amount of Rs. 7,38,11,883/- in the total income, the decision of Hon'ble Supreme Court in the case of Mahalaxmi Sugar Mills Company [1980] 123 ITR 429 was in force as the said judgment was delivered in 1980. Not only that, but when the Assessing Officer accepted the rectification application submitted by the assessee for the assessment year 1991-92 deleting the amount of Rs. 4,83,10,445 being the amount of interest on arrears of sales-tax, the Assessing Officer committed a mistake in allowing the said application under Section 154 and deleting the aforesaid amount, as on that day also the decision of the Hon'ble Supreme Court in the case of Mahalaxmi Sugar Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even the case of the assessee that the assessee was not aware of the correct law. However, the assessee is simply relying upon the order passed by the Assessing Officer for the immediate preceding year and accordingly he has tried to submit that the issue was a debatable issue. However, as stated above, even if the Assessing Officer granted the benefit in the preceding year, in breach of the clear decision of the Hon'ble Supreme Court, it cannot be said that the issue remained debatable. Under the circumstances, the contention on behalf of the assessee, that the Assessing Officer has committed an error in adjusting the aforesaid amount of interest on unpaid sales-tax and disallowing deduction by invoking the provision under Section 143(1)(a) of the Act, cannot be accepted. Once the provisions of Section 143(1)(a) of the Act are invoked and certain amount is held to be prima facie inadmissible, and is disallowed, and is included as income on adjustment, necessary consequences of payment of an additional income-tax calculated at the rate of 20% of the tax payable on such excess amount must follow as required under Section 143(1A)(a)(i) of the Act and the Assessing Officer shall f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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