Income Tax Appellate Tribunal - Delhi
Sir Shadi Lal Enterprises Ltd. vs Deputy Commissioner Of Income-Tax on 24 August, 1993
Equivalent citations: [1994]48ITD258(DELHI)
ORDER
Manzoor Ahmed Bakhshi, Judicial Member
1. This appeal arises out of the order dated 29th November, 1991 of the CIT(A), Muzaffarnagar. Briefly stating the facts, assessee had filed the return of income for assessment year 1990-91 on 21st December,1990 declaring income of Rs. 1,68,48,754. This return of income was processed by the Assessing Officer on 8-1-1991 after making certain adjustments and computing the income at Rs. 3,32,18,006. The intimation provided under section 143(1) was served upon the assessee on 10th January, 1991. In between the processing of the return on 8-1-1991, and service of intimation on 10-1-1991, assessee filed a revised return on 9-1-1991. This return was also processed on 16-1-1991 under section 143(1) and intimation served upon the assessee on 17-1-1991. On receipt of the first intimation under section 143(1) on 10-1-1991 assessee wrote a letter dated 14-1-1991 referring to the discussion of the assessee's representative with the Assessing Officer on 7-1-1991 and latter expressing doubts regarding sufficiency of evidence attached to the return in respect of payment of taxes, dues covered under section 43B. The assessee has claimed that the revised return filed on 9-1-1991 on the basis of the discussion and it was contended that the adjustments made by the Assessing Officer under section 143 (1) (a) are not covered under the said section. By virtue of the said letter dated 14-1-1991 assessee requested the Assessing Officer to amend the intimation in the light of mandatory provisions of section 143(1B). Assessee also approached the Hon'ble High Court of Allahabad and the latter vide order dated 14th February, 1991, directed the assessee to file an application under section 154(1)(b) of the Income-tax Act raising the contentions and objections as are open in law with regard to the intimation sent by the Assessing Officer under section 143(1). The Deputy Commissioner was directed by the Hon'ble High Court to consider the said application of the assessee and the material enclosed thereto and pass orders within three weeks. Assessee accordingly filed a letter dated 20th February, 1991 which was followed by an application under section 154, dated 25th February, 1991. The Assessing Officer passed a detailed order on 15th March, 1991 in respect of assessee's letter dated 14-1-1991. He also passed a similar order in respect of the application filed under section 154 in which it was pointed out that all the issues raised by the assessee in an application dated 25th February, 1991 had been considered and disposed of vide order dated 15-3-1991. However, considering the directions of the Hon'ble High Court the Assessing Officer passed a separate order on the same lines as in respect of assessee's letter dated 14-1-1991.
2. Assessee filed an appeal to the CIT{A) but failed. Before us several grounds of appeal were raised which have been concised on the directions of the Bench and are reproduced hereunder:
1. That the learned CIT(A) erred in law and on facts in holding that the order passed under section 154 was justified.
2. That the learned CIT(A) erred in holding that the adjustments made in the intimation under section 143(1) (a) should be considered as primafacie adjustments.
3. That the learned C1T(A) erred in law and on facts in holding that the revised return filed on 9-1-1991 was not a valid return and so it could not be taken into consideration for passing the revised intimation and for the purposes of rectification under section 154.
4. That the learned CIT(A) ought to have held that the information filed in the original return as well as in the revised return could not be the basis for making primafacie adjustments under section 143(l)(a).
5. That the learned CIT(A) ought to have directed the deletion of the so called prima facie adjustments in respect of the additions made under section 43B of the Income-tax Act.
3. Giving background of the circumstances under which this appeal has arisen, the learned counsel for the assessee Shri K.C. Srivastava pointed out that assessee had filed the original return on 21st December, 1990 along with a covering letter dated 20th December, 1990 placed at pages 11 and 12 of the paper book. In this very letter the assessee had informed the Assessing Officer that the evidence relating to the payments was voluminous and that the same would be available on being requisitioned. The Assessing Officer discussed the matter with assessee's representative on 7th January, 1991 and expressed the view that the proof of payment had to be attached to the return of income notwithstanding the voluminous nature of the evidence. Assessee accordingly filed a revised return along with the documents in support of the claim of statutory payments having been made before the time for filing of the return of income. The Assessing Officer, however, got the intimation under section 143(1) served upon the assessee by a special messenger on 10th January, 1991 ignoring the revised return and making adjustments on account of bonus, sales-tax etc. under section 43B apart from other adjustments.
4. The learned counsel contended that Assessing Officer was wrong to make adjustments on account of bonus and taxes paid under section 43B as assessee had made the payment before the time allowed for filing of the return of income and apart from giving details of such payments assessee had indicated the nature of proof available and its willingness to produce the evidence as and when demanded. The reasons for not furnishing the evidence were also given in the letter attached to the return of income. In these circumstances, according to the learned counsel, Assessing Officer was not justified in making the disallowance. The Assessing Officer should have allowed the deduction or in the alternative required the assessee to furnish proof in support of the claim of payment having been made within the stipulated time under proviso to section 43B. Reliance was placed on the decision of the Delhi High Court in the case of SRF Charitable Trust v. Union of India [1992] 193 ITR 95 in support of the contention that adjustments that can be made should flow from the return and that the Assessing Officer has no power to disallow the claim of deduction for lack of proof of claim. According to the learned counsel, when proof is required, it was necessary for the Assessing Officer to issue a notice for production of evidence as held by their Lordships of the Delhi High Court in the aforementioned case. Reliance was also placed on the decision of the Bombay High Court in the case of Khatau Junkar Ltd. v. K.S. Pathania [1992] 196 ITR 55 in support of the contention that adjustment under section 143(1) can be made only if the claim is primafacie inadmissible. In the case, before us according to the Iearned counsel, the claim regarding statutory payments could not be said to be prima facie inadmissible. Our attention was also drawn to the decision of the Tribunal in the case of New United Motors v. Asstt. CJT [1993] 45 ITD 302 (Delhi) where there was no information on record as to whether the assessee had made any payment on account of sales-tax before the time allowed for filing of the return, the Tribunal held that adjustments under section 143(1) on account of unpaid sales tax could not be made by the Assessing Officer. It was further held that Assessing Officer was duty bound to make an enquiry from the assessee before making the disallowance. In this case, it has been further held that primafacie disallowance could not be made simply because there was no evidence of proof of payment before the due date of filing of the return. According to the learned counsel the facts in the case of New United Motors (supra) are worse than the facts in the case of appellant. It was accordingly contended that Assessing Officer was not justified in declining to amend the intimation made under section 143(1)(a).
5. In the alternative, the learned counsel contended that assuming that there was an omission on the part of the assessee at the time of filing of the return insofar as the voluminous evidence was not attached to the return of income then the assessee was justified in rectifying the omission by filing a revised return on being advised about such omission. The observation of the Assessing Officer that the revised return was a camouflage was unwarranted as under section 139(5) assessee is entitled to rectify any omission made at the time of filing of the original return. Moreover, according to the learned counsel, assessee had revised the claim relating to depreciation as also claim under section 43B. The observation of the Assessing Officer that the revised return was a camouflage, according to the learned counsel, is misconceived. It was accordingly pleaded that the appeal of the assessee may be accepted and the Assessing Officer directed to amend the intimation and allow deduction under section 43B.
6. The learned D.R., on the other hand, contended that under proviso to section 43B deduction on account of statutoiy payments are permissible if the payment is made before the time allowed for filing of the return and the proof of payment is attached to the return of income. In this case, assessee may have paid the taxes, etc. within the time allowed for filing of the return of income but the proof thereof had not been attached to the return of income and therefore, the benefit of the proviso was not available to the assessee. The learned D.R. contended that where the provisions of; the Act are unambiguous, there is no scope for going beyond the language of the statute. Referring to the decisions of the Delhi High Court in the case of SRF Charitable Trust (supra) and the Bombay High Court in case of Khatau Junkar Ltd. (supra) the learned D.R. contended that these decisions are inapplicable to the facts of this case. It was contended that where there is no requirement of law to attach evidence to the return of income, the decision of the Delhi High Court would be applicable and adjustments not permissible on the ground of lack of evidence. However, where there is specific provisionjfor attaching the proof of payments to the return of income, the decision of the Hon'ble High Court would be inapplicable. The decision of the Bombay High Court was also stated to be inapplicable for the same reasons.
7. It was further contended that the revised return filed by the assessee on 9-1-1991 was no return in the eye of law as the same was not a bona fide return as demonstrated by the Assessing Officer in his order passed under section 154. According to the learned D.R., a revised return could be filed if there was omission by the assessee at the time of the filing of the original return and is later on discovered. In this case, according to the learned D.R., assessee was aware of the requirement of furnishing of proof along with the return and, therefore, the omission cannot be said to have been discovered by the assessee after filing of the original return. Therefore, the omission of not filing of the proof along with the return was not covered under section 139(5), it was contended.
8. With regard to the revision of the claim relating to depreciation and small adjustments of Rs. 744 in respect of claim under section 43B, the learned D.R. referred to the decision of the Assessing Officer as also that of the CIT(A) in support of of the contention that the return filed on 9-1 -1991 was a camouflage and not a bona fide return.
9. It was accordingly pleaded that the appeal of the assessee may be dismissed.
10. We have given our careful consideration to the rival contentions. The main issue involved in this appeal is as to whether the Assessing Officer was justified in making the adjustment under section 143(1) in respect of statutory payments under section 43B and whether the Assessing Officer on the facts and in the circumstances of the case, was justified in refusing to amend the intimation issued in respect of the return filed by the assessee on 8-1-1991. The dispute has its origin on the interpretation of proviso to section 43B inserted by the Finance Act of 1987 w.e.f. 1-4-1988. Under section 43B, deduction otherwise allowable under the Income-tax Act in respect of: (a) any sum payable by the assessee by way of tax, duty, cess or fee by whatever name called under any law for the time being in force; or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employee; or (c) any sum referred to in clause (it) of Sub-section (1) of section 36; or (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or State financial corporation or State Industrial investment corporation in accordance with terms and conditions of the agreement governing such loan or borrowing is allowed as a deduction in computing the income referred to in section 28 of the previous year in which such sum is actually paid by him. Proviso inserted by the Finance Act, 1987 w.e.f. 1-4-1988 provides that nothing contained in section 43B shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under subsection (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. In this case, there is no dispute that assessee had made the payment of Rs. 1,26,19,206 (barring a payment of Rs.743.50, which is a matter of dispute) before the due date for furnishing of the return under section 139(1). However, the benefit of the proviso to section 43B was denied to the assessee on the ground that sufficient proof of payment as required under the said proviso had not been attached to the original return filed under section 139(1). On peeping deep, it is observed that assessee had added a sum of Rs.744 in the original return under section 43B as an amount disallowable with the following note:
The details of such items provided in the accounting period ending 31st March, 1990 but remaining unpaid or described in F.No. 3 CD Item No. 7(1) and Annexure 7. Out of the total amount of Rs. 1,26,19,206 provided during the year, small sum of Rs. 743.50 still remains payable representing fraction of bonus which is offered for disallowance has not paid before 31 st December, 1990, the due date for filing of the return under section 139(1). All other items have been paid as per evidence (confirmation attached).
This is indicated in the order under section 154 at page 8. Assessee had also filed a covering letter dated 30th December, 1990 placed at pages 11 and 12 of the paper book. In this letter the penultimate para reads as under:
The details of taxes, duties paid as referred to in section 43B up to filing of the return are given above. The evidence being voluminous record can be made available on being requisitioned the brief of which is duly mentioned.
Out of the total claim of Rs. 1,26,18,481 under proviso to section 43B Assessing Officer allowed a deduction of Rs. 3,25,617 under proviso to section 43B and made adjustment of Rs. 1,22,92,864 under section 43B on the ground that no evidence of such payments has been furnished along with the return of income as required by the first proviso to section 43B. On receipt of the information on 10th January, 1991 assessee filed obj ections on 14-1-1991. Drawing attention of the Assessing Officer about the note in assessee's covering letter of the return of income dated 20th December, 1990 and filing of the revised return in consequence of informal discussion of assessee's representative with the Assessing Officer on 7-1 -1991. Assessing Officer had sent second intimation to the assessee on the basis of the revised return and the claim under section 43B was disallowed on the ground that the evidence for payment under section 43B should have been filed along with the return under section 139(1) and since the evidence had been filed along with the return under section 139(5) hence the claim is inadmissible. Assessee then approached the Hon'ble High Court and the latter directed the assessee to file an application under section 154(l)(b) raising such contentions and objections as may be available under law and directed the Deputy Commissioner to dispose of the same in accordance with law. The Assessing Officer has rejected the objections raised by the assessee as per application dated 14-1-1990 as also the subsequent application filed under section 154 on the directions of the Hon'ble High Court. It is in these circumstances we have to consider as to whether the Assessing Officer was justified in making the adjustments under section 143(1) on account of statutory payments referred to under section 43B. At this stage, it may be useful to refer to some decided cases in this regard. In the case of SRF Charitable Trust (supra), their Lordships of the Delhi High Court have held that the Assessing Officer has no power to disallow the claim of deduction for lack of proof of claim. When proof is required, Assessing Officer is duty bound to issue notice for production of evidence in support of the return to be issued. However, the Assessing Officer cannot unilaterally disallow the deduction under section 143(l)(a). In this case, Assessing Officer had disallowed the claim of the assessee which was a donation towards corpus as non-taxable receipt on the ground that no proof in respect of the claim had been filed with the return. Their Lordships held that adjustments under section 143(1)(a) can be made only if on the basis of information available in the return, accounts or documents acomrnpanying it, the deduction or relief claimed is prima facie inadmissible. The conclusion, according to their Lordships, that the claim of the assessee is inadmissible must flow from the return as filed. Their Lordships further held that no power is given to the Assessing Officer to disallow a claim for the reason that there is no proof in support of the claim made by the assessee. For lack of proof, according to their Lordships, the only option open to the Assessing Officer is to require the assessee to furnish proof. Their Lordships observed that except the document specified, the assessee is not required to file the entire books of account or other documents and that it: is not the law that in support of a claim made in the return for deduction or non-taxability receipt the proof available and original document-must be filed along with the return. Their Lordships further held that the stage of furnishing of proof is reached as and when proof is demanded by the Assessing Officer on a notice under Section 143(2) being issued.
11. In the case of Khatau Junkar Ltd. (supra), their Lordships of the Bombay High Court have also held that adjustment under section 143(1) can be made only if on the basis of material available in the return accompanying documents the claim of deduction is prima facie inadmissible. Their Lordships have also held that disallowance under section 143(1)(a) cannot be made for lack of evidence.
12. At this stage it becomes relevant to deal with the contention raised on behalf of the revenue that the decisions of the Delhi High Court and Bombay High Court are inapplicable in respect of deduction under proviso to section 43B as the furnishing of evidence along with the return of income is the requirement of law. The contention raised requires serious consi-deration. As already pointed out, section 43B is inapplicable by virtue of first proviso if the sum referred to under section 43B is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under Sub-section (1) of section 139 and the evidence of such payment is furnished by the assessee along with such return. So far as applicability of the proviso to section 43B is concerned, two conditions must be satisfied. One is that the payment must have been made before the due date of furnishing the return of income under Sub-section (1) of Section 139. The second condition is that the evidence of such payment is furnished by the assessee along with the return.
13. There is no dispute that the two aforementioned conditions are statutory. However, there are certain statutory provisions which are mandatory in character and there are some which are procedural in nature. Whereas mandatory provisions cannot but be strictly construed the provisions which belong to area of procedure cannot be so strictly construed without looking at the purpose intended to be served. We are fortified, in our view, in this regard by the decision of the Supreme Court in the case of Mangalore Chemicals & Fertilisers Ltd. v. Dy. CIT (21 Tax Gazette 193), where the Hon'ble Supreme Court has held that the stringency and the mandatory nature of a provision must be justified by the purpose intended to be served. It was further held that the mere fact that provision is statutory does not matter one way or the other. Their Lordships have further held that it will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purpose they were intended to serve.
14. In order to consider as to whether a statutory provision is mandatory in nature or procedural in character, it becomes necessary for us to consider the purpose behind the provision. The purpose for insertion of the proviso to section 43B can be derived from the speech of the Finance Minister at the time of introducing the Finance Bill of 1987 and or the Explanatory notes issued in this regard. In the Explanatory notes to Finance Bill, 1987, 165 ITR Statute 125, it is provided as under:
Clause (x) seeks to amend section 43B of the Income-tax Act relating to allowability of certain expenses only on actual payment. It is proposed to insert two provisos. The first proviso seeks to provide that the section shall apply to any sum referred to in clause (a) if the sum is actually paid on or before the due date on which the return of income is due to be furnished under Sub-section (1) of section 139 for the previous year in which the liability to pay such sum was incurred. The second proviso seeks to provide that no deduction shall be allowed in regard to the sum referred to in clause (b) unless such sum has actually been paid during the previous year or before the due date. The due date for the purposes of this proviso shall be the due date as under Explanation to clause (v) of Subsection (1) of Section 36.
This amendment will take effect from 1 st April, 1990 and will accordingly apply in relation to assessment year 1988-89 and subsequent years.
15. As is clear from the above, the stress is on the actual payment before the specified date and there is no reference regarding the attachment of proof of payment. The purpose behind requirement of proof along with the return, in our view, is to facilitate assessment and to discourage inaccurate claims by the assessee. Though the requirement of law is to file evidence along with the return of income, Assessing Officer gets an occasion to consider the same only at the time of making the assessment or adjustment permissible under Section 143(1)(a). There seems to be a purpose behind requirement of law for furnishing of evidence along with the return of income. In the present set up the thrust is upon dispensing with the requirements of the assessees to attend income-tax proceedings. The purpose, therefore, in our view, is to facilitate assessment without requiring the assessee to furnish the proof in support of the return under Section 143(2). Considering the purpose behind incorporation of proviso to Section 43B and the purpose for furnishing of proof along with the return of income, we are of the view that the requirement of proof is only procedural and does not warrant strict interpretation. If the assessee for any reasons omits to furnish proof along with the return he, in our view, would be at liberty to furnish proof at any time before making of the assessment. If assessee fails to attach proof of payment along with the return, the Assessing Officer, in our view, is duty bound to give an opportunity to the assessee to furnish the same before declining to give benefit of proviso to section 43B.
16. In this case assessee had given the entire information regarding the statutory payments having been made before the due date for furnishing of the return of income under section 139(1). Assessee had also informed the Assessing Officer that the voluminous evidence was available and would be furnished on demand. The reasons for riot attaching the evidence to the return of income were also given in the covering letter attached to the return of income. Assessing Officer in our view is not only duty bound to make a fair assessment of tax but also to adopt reasonable and judicious approach in the matter of such assessments in this case, assessee did give the reasons for not furnishing the complete evidence along with the return of income. If the Assessing Officer considered the reasons indicated by the assessee as inadequate, he in our view, was duty bound to inform the assessee about his opinion and demand proof so that intimation under Section 143(l)(a) could be issued. It seems from the letter dated 14-1 -1991 of the assessee to the Assessing Officer that Assessing Officer had indicated to the assessee his view when the latter's representative had an occasion to discuss the matter with the former on 7-1-1991. However, instead of waiting for the evidence to be furnished, Assessing Officer completed the intimation under Section 143(1)(a) and served the same upon the assessee on 10-1-1991, i.e., after the filing of the revised return by the assessee and furnishing of the evidence. We are of the considered view that this approach of the Assessing Officer was too harsh and unreasonable. Assessing Officer should not have proceeded to pass intimation order under Section 143(1)(a) without giving reasonable time to the assessee to furnish such proof as was considered necessary by him. This is one aspect of the matter.
17. The second aspect of the matter is that assessee had given the details of the payments and indicated the proof available in respect of the payments covered under Section 43B. On the basis of this information, a question arises as to whether adjustment could be made by disallowing the claim under Section 43B. As held by their Lordships of the Delhi High Court in the case of SRF Charitable Trust (supra) and their Lordships of the Bombay High Court in the case of Khatau Junkar Ltd. (supra) disallowance under Section 143(1)(a) can be made only if the claim is prima facie inadmissible considering the fact that the statutory requirement of furnishing of evidence of payment along with the return belongs to area of procedure, Assessing Officer as held earlier was duty bound to issue a notice to the assessee requiring the proof considered necessary by the former to support the claim. Such requisition not having been issued, the only course open to the Assessing Officer was to accept the claim on the basis of evidence furnished along with the return of income. It could not be said that the claim made by the assessee was prima facie inadmissible. Lack of proof could be a ground for disallowance only if such proof was not furnished on demand. In the case of New United Motors (supra) Delhi Bench 'A' of the Tribunal has held that the words 'primafacie' under Section 143 would mean on the face of it and that the disallowance could not be made simply because there was no evidence of proof of payment before the due date of the filing of the return. According to the Bench, the Assessing Officer was duty bound to make enquiry from the assessee and if the claim made by the assessee was found wrong, penal consequences would follow. In the case before us, revenue is not disputing about the correctness of the claim made by the assessee regarding the payments having been made within the stipulated time under Section 43B. However, a disallowance of huge sum of Rs. 1 crore 26 lakhs and odd has been made on a technical ground by taking a very strict view of the proviso to Section 43B. Considering the facts and circumstances of this case, we are satisfied that assessee had made a bonafide claim in the return filed under Section 1.39(1) and had furnished the primary evidence in support of the claim of having made the payments. In respect of supporting evidence assessee had indicated that the same would have furnished on demand as it could not be attached because of its big volume.
18. Assessee did file a revised return on 9-1-1991 when it had not received any intimation from the Assessing Officer regarding the original return. This return has been considered by the Assessing Officer as a camouflage. In this regard reference has been made by the Assessing Officer to the claim of depreciation made by the assessee. We need not go into the claim of depreciation which has been altered by the assessee in the revised return as that loses its importance when we consider that assessee had furnished evidence in support of the claim under proviso to section 43B along with the revised return. The claim of the assessee relating to statutory payments has been disallowed by the Assessing Officer on the ground of omission by the assessee to attach evidence along with the return of income. If the views of the Assessing Officer were to be accepted then there is no doubt that assessee had made an omission at the time of filing of the original return. under Section 139(5), if assessee discovers any omission or any wrong statement after filing of original return, he may furnish a revised return at any time before the expiry of time specified under that sub-section. If Assessing Officer is of the view that Assessing Officer has made an omission, there is no reason why assessee could not file a revised return to correct that omission. There may be two possible views in respect of furnishing of proof under proviso to section 43B along with the return. However, in this case, on the one hand, the revenue has treated the non-filing of the sufficient evidence along with the return in support of the claim under Section 43B as a ground for denying the claim and on the other hand, it has been held that the revised return was a camouflage. The revenue wants to blow hot and cold in same breath. It wants to eat the cake and have it too. If there is omission in furnishing of proof of original return, assessee would be entitled to file a revised return under Section 139(5). The view of the revenue on the one hand that there was omission by the assessee to furnish the proof along with the original return of income and on the other that there was no omission enabling the assessee to file a revised return under Section 139(5) is contradictory and unwarranted.
19. Considering totality and the circumstances of this case, we are of the view that the adjustment made by the Assessing Officer under Section 143(1)(a) on account of statutory payments made before the due date of furnishing the return of income under Section 139(1) was uncalled for and that the adjustment made by the Assessing Officer in respect of statutory payments under Section 43B was not prima facie disallowable claim. The lack of sufficient proof did not warrant raising the demand against the assessee by way of adjustment under Section 143(1)(a). The deficiency of proof could be cured only by issue of notice under Section 143(2) and if the assessee failed to furnish proof on demand by the Assessing Officer, disallowance would then be justified. However, in a case like that of present one where complete information is furnished evidence is referred to and the reasons for not furnishing the same are indicated, the Assessing Officer not demanding the proof, in our view, calls for only one conclusion that is the adjustment made by the Assessing Officer under Section 143(1)(a) in respect of statutory payments was unjustifiable and uncalled for. We, therefore, direct the Assessing Officer to modify his intimation order and allow deduction to the assessee on the basis of information and evidence available on record including the evidence furnished by the assessee along with the revised return and intimation amended accordingly.
20. In the result, appeal of the assessee is allowed.