Commissioner Of Income Tax v. C.n.ramachandran Nairjudge

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 30TH JANUARY 2008 / 10TH MAGHA 1929 ITA.No. 128 of 2001() --------------------- AGAINST THE ORDER DATED 02/02/2001 IN ITA.204/COCH/1993 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ----------------- THE COMMISSIONER OF INCOME-TAX, COCHIN. BY ADV. SRI.P.K.R.MENON(SR.),SC FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: ------------- MAYFLOWER HOTELS(P) LTD.,PARAMARA ROAD, COCHIN-18. BY ADV. SRI.T.M.SREEDHARAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 30/01/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &T.R.RAMACHANDRAN NAIR, JJ. .................................................................... ....................................................................Dated this the 30th day of January, 2008. JUDGMENT C.N.Ramachandran Nair, J. The appeal is filed against Annexure-C order of the Tribunal whereunder the Tribunal has cancelled the intimation issued under Section143(1)(a) including the demand of additional tax under Section 143(1A) ofthe Income Tax Act. In the return filed even though the assessee claimeddeduction of Rs.16,60,165/- towards interest payable to KSIDC, it is madeclear that the amount was not paid on account of instalment facility grantedby KSIDC. Consequently the claim was not allowable by virtue of Section43B of the Income Tax Act. The assessee does not dispute this position.Since the claim was prima facie inadmissible by virtue of operation ofSection 43B, the Assessing Officer issued proceedings under Section 143(1)(a) computing tax liability including additional tax payable under Section143(1A) of the Act. Even though rectification application was filed againstthis under Section 154, the same was dismissed by the officer. Appealfiled, however, was allowed by the first appellate authority and the secondappeal filed by the department was also dismissed by the Tribunal. It is against this order of the Tribunal that the department has filed this appeal.We have heard Standing Counsel appearing for the department-appellantand counsel appearing for the respondent-assessee. 2. Counsel for the appellant referred to decision of this court in COMMISSIONER OF INCOME TAX V. SITARAM TEXTILES LTD.(2001) 248 ITR 139 and contended that proceedings initiated under Section143(1)(a) is perfectly justified. We find that the decision squarely applies tothe facts of this case because in the proceedings under Section 143(1)(a) ofthe Act the Officer has only disallowed expenditure under Section 43B ofthe Act. Consequently the assessee is liable to pay additional tax underSection 143(1A) of the Act. Counsel for the respondent-assessee submittedthat the financial institution involved in this case is covered under Section43B only with effect from 1.4.1991. According to him, even though theamendment applies for this year also, the assessee was not aware of theprovision. Counsel for the assessee also submitted that in the assessee'sown statement, part payment made on 25.6.1991 was mentioned and thepayment so made qualifies for deduction even under proviso to Section 43Bof the Act. We find force in this contention and, therefore, we feel theAssessing Officer should have rectified the proceedings issued underSection 143(1)(a) by limiting the addition to the extent of the amount not paid till the due date for filing the return. The appeal is therefore partlyallowed reversing the order of the Tribunal, but with direction to the officerto allow deduction to the extent of interest paid as on date of filing thereturn and to rework additional tax liability under Section 143(1A) of theAct. C.N.RAMACHANDRAN NAIRJudge pms T.R.RAMACHANDRAN NAIRJudge