Rc/131/2000 Of The Commissioner Ofincome Tax v. P.seeta Ramachandrarao

THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.131 of 2000 Dated:26.12.2011 Between: Commissioner of Income Tax,Andhra Pradesh –I, Hyderabad. …Applicant and P.Seeta Ramachandra Rao,Toopran. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.131 of 2000 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) The reference is by the Income Tax Appellate Tribunal underSection 256(2) of the Income Tax Act, 1961 (the Act), in obedience to thedirections of this Court dated 22.03.1991 in I.T.C.No.173 of 1998. Thefollowing question is referred. Whether on the facts and in the circumstances of the case, theITAT was correct in law in holding that while processing the returnunder Sec.143(1)(a) and sending the intimation under the said sectionthe Assessing Officer was justified in law in disallowing 40% of theincentive bonus claimed by the assessee as deduction? The respondent/assessee who was a Development Officer in theLife Insurance Corporation of India filed his return of income for the relevant assessment year. Therein he claimed 40% of incentive bonus asdeduction towards expenditure. While processing the return underSection 143(1)(a) of the Act, the Assessing Officer made adjustments ofthe amounts claimed as deduction after issuing intimation levyingadditional tax also. The same was affirmed by the first appellateauthority. On further appeal by the assessee, the Appellate Tribunalallowed the same. Aggrieved by the same, the reference was sought,which was denied, and thereafter, the Revenue approached this Courtunder Section 256(2) of the Act. This Court directed that the aboveextracted question be referred to this Court. During the course of arguments the attention of this Court is invitedto the decision of the Supreme Court in Kvaverner John Brown Engg. (India) P.Ltd v Assistant Commissioner of Income Tax[[1]], wherein itwas held as under. …One of the main conditions stipulated by way of the firstproviso to Section 143(1)(a), as it stood during the relevant time,referred to prima facie adjustments. The first proviso permitted theDepartment to make adjustments in the income or loss declared in thereturn in cases of arithmetical errors or in cases where any losscarried forward or deduction or disallowance which on the basis ofinformation available in such return was prima facie admissible butwhich was not claimed in the return or in cases where any loss carriedforward, or deduction or allowance claimed in the return which on thebasis of information available in such return was prima facieinadmissible. In the present case, therefore, when there wereconflicting judgments on interpretation of Section 80-O, in our view,prima facie adjustments contemplated under Section 143(1)(a) wasnot applicable and, therefore, consequently appellant was not liable topay additional tax under Section 143(1A) of the 1961 Act. In view of the same, it may be taken as well settled that whileassessing the return of income under Section 143(1)(a) of the Act, theIncome Tax Officer or any Assessing Officer of the Department is notentitled to make adjustments except in regard to arithmetical errors ormatters which are prima facie adjustable. Following the above, the reference is answered in the negative infavour of the assessee and against the Revenue. The Referred Case shall stand disposed of accordingly without any order as to costs. _______________ (V.V.S.RAO, J) 26.12.2011vs ____________________ (B.N.RAO NALLA, J) [1](2008) 305 ITR 103 (SC)