Income Tax Appellate Tribunal - Jodhpur
Jain Metal Components vs Deputy Commissioner Of Income Tax on 30 April, 2004
Equivalent citations: (2004)84TTJ(JODH)797
ORDER
Joginder pall, A.M.
1. By this order we shall dispose of this appeal of the assessee filed against the order of CIT(A), Jodhpur for the asst. yr. 1993-94.
2. The first grievance of the assessee is that the CIT(A) was not justified in sustaining the adjustments made by the AO at the time of processing the returns under Section 143(1)(a) of the Act by adding bonus of Rs. 67,956, State sales-tax of Rs. 798 and Central Sales-tax of Rs. 2,325. At the time of hearing of the appeal the learned counsel for the assessee raised an additional ground to the following effect:
"Ground No. 2 "That the learned CIT(A)-II, Jodhpur has erred in law in not cancelling the intimation under Section 143(1)(a) as invalid and deleting the prima facie adjustments made in the returned income as were agitated in appeal before the CIT(A) were not at all prima facie adjustments. The Hon'ble Tribunal, therefore, may please delete the prima facie adjustment made in the returned income by the learned AO and cancel the levy of tax and additional tax thereon."
The learned counsel for the assessee submitted that the issue being purely legal which does not require investigation into the facts, the additional ground raised by the assessee should be accepted. He also relied on various judgments including that of the Hon'ble Rajasthan High Court in the case of Shilpa Associates v. ITO (2003) 263 ITR 317 (Raj).
3. The learned Departmental Representative was fair enough to concede that this issue being purely legal, the additional ground now raised by the assessee may be admitted.
4. We have heard both the parties. We find that the issue raised in the additional ground arises from the orders of the authorities below and the same does not require any investigation into the facts. The relevant facts are already on record. Therefore, the additional ground now raised by the assessee deserves to be admitted. This view also finds support from the judgment of the Hon'ble Rajasthan High Court in the case of Shilpa Associates (supra) and the apex Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC). Accordingly the additional ground raised by the assessee is admitted.
5. Thus, from the above, it is obvious that the dispute in this case relates to sustaining of prima facie adjustments made by adding bonus, State sales-tax and Central Sales-tax to the income at the time of processing the return under Section 143(1)(a) on 15th Sept., 1995. The facts of the case are that the assessee filed original return of income on 1st Nov., 1993. The said return was processed under Section 143(1)(a) on 25th July, 1994. Page 3 of the paper book shows that the then AO having jurisdiction over the case had issued a notice under Section 143(2) in the year, 1994. Thereafter, it appears that the jurisdiction of the case was transferred to Dy. CIT, Special Range, Jodhpur. The assessee filed the revised return of income on 28th Feb., 1995. The revised return was processed under Section 143(1)(a) on 15th Sept., 1995 whereby impugned adjustments were made. No such adjustments appear to have been made at the time of processing the original return. The facts leading to such adjustments are that in the balance sheet the aforesaid amounts were shown as receivable. But the AO observed that these have not been credited to P&L a/c. Therefore, the AO made the aforesaid adjustments at the time of processing the return during the pendency of regular assessment proceedings under Section 143(3). The regular assessment was completed on 9th Feb., 1996.
6. Being aggrieved, the assessee impugned the adjustments before the learned CIT(A). It was submitted before the learned CIT(A) that the amounts in question were only advance payments and had not been charged to P&L a/c. Therefore, no adjustment under Section 143(1)(a) was possible. However, the learned CIT(A) observed that subsequently the AO has also passed orders under Sections 154 and 143(3) on 9th Feb., 1996. The present issue can be raised subsequently against the subsequent orders passed under Sections 154 and 143(3). Accordingly, the learned CIT(A) dismissed the appeal. The assessee is aggrieved by the order of the learned CIT(A). Hence this appeal before us.
7. The learned counsel for the assessee Shri N.R. Mertia submitted that the impugned adjustments made by the AO were illegal and invalid. He submitted that prior to processing of return under Section 143(1)(a) r/w Section 143(1B) on 15th Sept., 1995, the AO had already issued a notice under Section 143(2) in the year 1994. After the notice under Section 143(2) had been issued, the AO could not have processed the return under Section 143(1)(a). He relied on the decision of Tribunal, Jodhpur Bench in the case of Dy. CIT v. Shakti Enterprises (2001) 70 TTJ (Jd) 657, judgment of the Madhya Pradesh High Court in the case of CIT v. Regional Soyabean Products Co-op. Union Ltd. (1999) 239 ITR 217 (MP), judgment of Calcutta High Court in the case of Pieco Electronics & Electricals Ltd. v. Dy. CIT and Ors. (1999) 236 ITR 702 (Cal), judgments of the Gujarat High Court in the case of Lakhanpal National Ltd v. Dy. CIT (1996) 222 ITR 151 (Guj) and in the case of Gujarat Poly Avx Electronics v. Dy. CIT (1996) 222 ITR 140 (Guj) judgment of Calcutta High Court on the case of Modern Fibotex (India) Ltd. v. Dy. CIT and Ors. (1995) 212 ITR 496 (Cal) and judgment of the Hyderabad Special Bench in the case of Dy. CWT v. CWC Wines (P) Ltd. (2004) 83 TTJ (Hyd)(SB) 1. Thus he contended that the order of the CIT(A) deserves to be set aside and impugned adjustments require to be deleted.
As regards merits of the case, he submitted that the assessee had only made advance payments of bonus, Rajasthan Sales-tax and Central Sales-tax. These were not charged to P&L a/c. Therefore, no addition could have been made by resorting to provision of Section 43B. He also relied on the decision of the Tribunal, Hyderabad, Special Bench in the case of Dy. CIT v. CWC Wines (P) Ltd. (supra). Thus he contended that the order of the CIT(A) deserves to be set aside and impugned adjustments required to be deleted.
8. The learned Departmental Representative, on the other hand, heavily relied on the orders of the authorities below.
9. We have heard both the parties at some length and given our thoughtful consideration to the rival submissions with reference to facts, evidence and material on record. We have also gone through the authorities below. From the facts discussed above, it is obvious that the AO made the impugned adjustments under Section 143(1B) because the assessee had filed the revised return on 28th Feb., 1995. It is also a fact that the original return was processed on 25th July, 1994 and no adjustment of this nature was made. The facts discussed above further show that the AO had issued a notice under Section 143(2) prior to processing the revised return on 15th Sept., 1995. No doubt, in a case where the assessee had filed the return, Section 143flB) empowered the AO to process the return under Section 143(1)(a). However, the fact remains whether the AO could have processed such return after issuing a notice under Section 143(2) of the Act. This matter came up before the Hon'ble Supreme Court in the case of CIT v. Gujarat Electricity Board (2003) 260 ITR 84 (SC) where the apex Court held that once a notice under Section 143(2) has been issued, the only option available with the AO is to complete regular assessment under Section 143(3) and the return cannot be processed under Section 143(1)(a). In the case of CIT v. Punjab National Bank (2001) 249 ITR 763 (Del), the Hon'ble Delhi High Court has held that once a notice under Section 143(2) has been issued the only course open for the AO is to complete the assessment under Section 143(3). Rectification of an intimation under Section 154 cannot be made after issue of notice under Section 143(2). The same view was taken by the Hon'ble Punjab & Haryana High Court in the case of CIT v. Arihant Industries Ltd. (2002) 255 ITR 458 (P&H). Apart from these judgments, various other judgments relied upon by the learned counsel also support the case of the assessee. Although these judgments deal with cases where original returns were processed under Section 143(1)(a) and not the cases where the assessee had filed revised returns and such returns were processed under Section 143(1B), but those decisions would equally apply to the cases where revised returns were processed under Section 143(1B). In such cases also where AO had already issued a notice under Section 143(2), revised return cannot be processed under Section 143(1B) r/w Section 143(1)(a). In the light of these facts, we are of the considered opinion that the learned CIT(A) was in error in not deciding this issue on merits and dismissing the appeal simply because subsequently the AO had completed the assessment under Section 143(3). The question still remains whether the AO could have made the impugned adjustments after issue of notice under Section 143(2), which, in our opinion, was not valid in view of various judgments cited above.
Besides, even on merits, we feel that there was no basis for making the impugned adjustments. As explained by the learned counsel, the assessee had only made advance payments of bonus, State Sales-tax and Central Sales-tax to be adjusted against the regular demand--no amount was charged to P&L a/c--therefore, no disallowance/addition for the same could have been made under Section 43B because the assessee had not claimed any deduction for such expenses. Thus, even on merit the assessee deserves to succeed. In the light of these facts and circumstances, the legal position discussed above and respectfully following the aforesaid judgments, we are of the considered opinion that the learned CIT(A) was not justified in sustaining the impugned adjustments. We set aside the order of CIT(A) and cancel the impugned adjustments. Accordingly both the grounds of appeal of the assessee are allowed.
10. In the result, the appeal filed by the assessee is allowed.