Rc/20/2001 Of The Commissioner Of Incometax Vijayawada v. M.raja Mohan Piler

THE HON’BLE SRI JUSTICE V.V.S.RAOAND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.20 OF 2001 Dated:29.12.2011 Between: Commissioner of Income Tax, Vijayawada .. Appellant And Sri M.Raja Mohan, Piler .. Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.20 OF 2001 ORDER:(Per the Hon’ble Sri Justice V.V.S.Rao) The Income Tax Appellate Tribunal, Hyderabad Bench ‘B’referred the following question under Section 256(1) of theIncome Tax Act, 1961 (the Act, for brevity) for the opinion of the Court at the instance of the Revenue. Whether on the facts and in the circumstances of the case,the Tribunal was correct in law in holding that though theA.P. High Court in the case of B.Chinnaiah & others (214ITR 368) impliedly rejected the contention that 40% of theincentive bonus should be allowed as a deduction, it wouldnot be available to the AO as on the date of processing thereturn under Section 143(1)(a) and as such the issuewhether the deduction at 40% is to be allowed from out ofthe incentive bonus received was debatable in nature andconsequently, the OA was not correct in disallowing 40%of incentive bonus claimed as deduction while processingthe return? The assessee is a Development Officer in Life InsuranceCorporation of India. In his return of income for the assessmentyear 1994-1995, he claimed 40% of the incentive bonus as arevenue deduction. The return was processed under Section143(1)(a) of the Act. In purported prima facie adjustments, 40%deduction claimed was disallowed. The Appellate DeputyCommissioner allowed the claim observing that the issue is onewhich could not be disallowed as it was a debatable one. The appeal by the Revenue was dismissed whereupon they soughtthe reference. The question whether the assessing officer can makeadjustments which are debatable is no more res integra. InAssistant Commissioner of Income Tax v Rajesh Jhaveri Stock Brokers P. Ltd.[[1]],it was held as under. What were permissible under the first proviso tosection 143(1)(a) to be adjusted were, (i) only apparentarithmetical errors in the return, accounts or documentsaccompanying the return, (ii) loss carried forward,deduction, allowance of relief, which was prima facieadmissible on the basis of information available in thereturn but not claimed in the return and similarly (iii) thoseclaims which were on the basis of the information availablein the return, prima facie inadmissible, were to berectified/allowed/disallowed. What was permissible wascorrection of errors apparent on the basis of thedocuments accompanying the return. The AssessingOfficer had no authority to make adjustments oradjudicate upon any debatable issues. In other words,the Assessing Officer had no power to go behind thereturn, accounts or documents, either in allowing or indisallowing deductions, allowance or relief. (emphasis supplied) The above view was reiterated in Kvaverner John Brown [2]Engg. (India) P. Ltd. v Asst. CIT ,wherein it was held as under. (emphasis supplied) The above view was reiterated in Kvaverner John Brown [2]Engg. (India) P. Ltd. v Asst. CIT ,wherein it was held as under. One of the main conditions stipulated by way of thefirst proviso to section 143(1)(a), as it stood during therelevant time, referred to prima facie adjustments. The firstproviso permitted the Department to make adjustments inthe income or loss declared in the return of cases ofarithmetical errors or in cases where any loss carriedforward or deduction or allowance which on the basis ofinformation available in such return was prima facieadmissible but which was not claimed in the return or incases where any loss carried forward, or deduction orallowance claimed in the return which on the basis ofinformation available in such return was prima facieinadmissible. In the present case, therefore, when therewere conflicting judgments on interpretation of section 80-O, in our view, prima facie adjustments contemplatedunder section 143(1)(a) was not applicable and, therefore, consequently the appellant was not liable to pay additionaltax under section 143 (1A) of the 1961 Act. In view of the above, the question is answered in theaffirmative in favour of the assessee and against the Revenue. The Referred Case shall stand disposed of accordingly withoutany order as to costs. ________________ (V.V.S. RAO, J) _____________________ (B.N.RAO NALLA, J) 29.12.2011 KH [1](2007) 291 ITR 500 (SC)[2](2008) 305 ITR 103 (SC)