Rc/21/2000 Of Commissioner Of Income Tax Ap 1 Hyd v. M Ramanadham Chetty

THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE R. KANTHA RAO REFERRED CASE No.21 of 2000 Dated:20.12.2011 Between: Commissioner of Income Tax,A.P.I, Hyderabad. …Applicant and Shri M.Ramanadham Chetty,Madakasira,And another. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE R. KANTHA RAO REFERRED CASE No.21 of 2000 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) The following question is referred to this Court underSection 256(1) of the Income Tax Act, 1961 (the Act), at the instance of the Revenue. Whether on the facts and in the circumstances of thecase the ITAT was correct in law in holding that thedisallowance of 40% of the incentive bonus claimed by theassessee as a deduction was a debatable issue till 8.3.95? To appreciate the issue, it is necessary to briefly notice the fact of the matter as summarized in the statement of case. Therespondents/assessees, who were the Development Officer in theLife Insurance Corporation of India, filed their returns and claimeddeduction of 40% of the incentive bonus received by them fromtheir employer towards expenses incurred for earning the same. The same was rejected by the Assessing Officer while processingthe returns under Section 143(1)(a) of the Act by making primafacie adjustments in that behalf. On appeal, for the assessmentyears 1992-1993 and 1993-1994 the Commissioner of Income Tax(Appeals) accepted the claims of the assessees and directed theAssessing Officer to allow necessary deductions. However, in hisappellate order for the assessment year 1994-1995 theCommissioner of Income Tax rejected the contention of theassessee and upheld the action of the Assessing Officer. Theassessee carried the matter in further appeal for the assessmentyear 1994-1995, and the Revenue carried the matter in the secondappeal before the Tribunal. The Tribunal followed the decision ofthis Court in Commissioner of Income Tax v B.Chinnaiah[[1]]anddecided the issue in favour of the assessee and against theRevenue. During the course of arguments the attention of this Court isinvited to the decision of the Supreme Court in Kvaverner JohnBrown Engg. (India) P.Ltd v Assistant Commissioner of Income Tax[[2]], 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 in theincome or loss declared in the return in cases of arithmeticalerrors or in cases where any loss carried forward ordeduction or disallowance which on the basis of informationavailable in such return was prima facie admissible but whichwas not claimed in the return or in cases where any loss carried forward, or deduction or allowance claimed in thereturn which on the basis of information available in suchreturn was prima facie inadmissible. In the present case,therefore, when there were conflicting judgments oninterpretation of Section 80-O, in our view, prima facieadjustments contemplated under Section 143(1)(a) was notapplicable and, therefore, consequently appellant was notliable to pay additional tax under Section 143(1A) of the 1961Act. In view of the same, it may be taken as well settled thatwhile assessing the return of income under Section 143(1)(a) ofthe Act, the Income Tax Officer or any Assessing Officer of theDepartment is not entitled to make adjustments except in regard toarithmetical errors or matters which are prima facie adjustable. Following the above, the reference is answered in theaffirmative in favour of the assessees and against the Revenue. The Referred Case shall stand disposed of accordingly withoutany order as to costs. _______________ (V.V.S.RAO, J) 20.12.2011vs ____________________ (R.KANTHA RAO, J) [1](1995) 214 ITR 368(1995) 214 ITR 368 [2](2008) 305 ITR 103 (SC)(2008) 305 ITR 103 (SC)