Income Tax Appellate Tribunal - Indore
Minar Manufacturers vs Assistant Commissioner Of Income-Tax on 18 March, 1993
Equivalent citations: [1993]47ITD557(INDORE)
ORDER
N.S. Chopra, Accountant Member
1. In the original return of income for the assessment year 1989-90 the assessee-firm claimed deduction of Rs. 14,939 on account of bonus payment and also made claim of deduction of Rs. 5,282 on account of provision for bonus and of Rs. 1,099 on account of Provident Fund & Employees Insurance Scheme. The Assessing Officer framed the assessment under Section 143(l)(a) of the Income-tax Act, 1961 and thereby made adjustments by adding Rs. 25,243, which included the aforestated amount of Rs. 21,320. The assessee filed an application under Section 154 of the Act for rectification of the order with the submission that the proof for payment of Rs. 14,939 on account of bonus was already enclosed with the return and, therefore, no addition for Rs. 14,939 should have been made. Objections as to addition of Rs. 206 relating to Provident Fund and Rs. 804 relating to Employees Insurance Scheme were also made. The Assessing Officer, however, observed that there was no evidence of payment of bonus filed along with the return of income. He rejected the application of assessee under Section 154, vide order dated 31-8-1990. The assessee went in appeal before the CIT (A), who deleted the addition of Rs. 206 & Rs. 804 and sustained the addition of Rs. 14,939. He also observed that no evidence of payment of bonus was filed with the return. Aggrieved by the said order of the CIT (A) dated 13-3-1991, the assessee is in appeal.
2. It is further to be seen that after passing the order under Section 143(l)(a), assessment under Section 143(3) was completed on 26-2-1991. In that assessment, the Assessing Officer proceeded with the computation of income as was determined under Section 143(l)(a) vide intimation dated 26-2-1990. The assessee again went in appeal before the CIT (A), who again sustained the addition of Rs. 14,939 and certain other additions, vide order dated 28-4-1992. Also aggrieved by the said order of the CIT (A), the assessee is in appeal on the following grounds of objections:-
(i) The CIT (A) erred in not deciding the issue of allowability of claim of bonus of Rs. 14,939 and Rs. 5,282.
(ii) The CIT (A) erred in setting aside the issue of addition of Rs. 11,094 in the trading a/c.
(iii) The CIT (A) erred in confirming disallowance of Delhi Branch loss of Rs. 31,960.
(iv) The CIT (A) erred in confirming disallowance of l/4th claim of depreciation of vehicle and its maintenance.
(v) The CIT (A) erred in confirming disallowance of Rs. 1,000 out of premises maintenance.
3. Once having processed the return under Section 143(l)(a), the Assessing Officer considered necessary expedient to ensure that the assessee has not under-stated the income or has not computed excessive loss or has not under-paid the tax, and accordingly issued notice under Section 143(2) and completed the assessment under Section 143(3). He, however, stuck to the intimation under Section 143(l)(a) making it as. the basis of computation of income under Section 143(3). The Assessing Officer was clearly in error, since the intimation under Section 143(l)(a) ceased to exist for the purposes of assessment on merit under Section 143(3) which is based on the return submitted by the assessee. In this view of the matter, the appeal of the assessee against the order under Section 154 is mere academic and does not require to be dealt with separately.
4. Now we proceed with the objections of the assessee in appeal against the order dated 28-4-1992 of the CIT (A).
5. Ground No. (i):
We find no merit in the contention of the assessee that the evidence as to payment of bonus of Rs. 14,939 was filed with the return. There is categorical finding of the CIT (A) that he verified from the case record and found that though in the computation of income filed along with the return, the assessee had claimed payment out of provision for bonus made on 16-8-1989, amounting to Rs. 14,939, but no evidence with regard to payment of bonus was enclosed with the return filed on 30-8-1989. It, therefore, should be taken that no evidence of payment of bonus was filed by the assessee along with the return of income. The CIT (A) was, however, in error in not deciding this issue on merit in the appeal against the order under Section 143(3) by simply depending upon his order under Section 154 arising out of the order under Section 143(1) dated 26-2-1990, thereby he acted in the same manner in which the Assessing Officer had acted which, as stated above, we do not approve.
6. Now we come to the merit of the claim. It is beyond dispute that the assessee later filed evidence of payment of Rs. 14,939 with the application under Section 154. According to first proviso to Section 43B, any-sum referred to in clause (ii) of Sub-section (1) of Section 36 [viz. Bonus) 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 in respect of the previous year in which liability to pay such sum was incurred is allowable as deduction if the evidence of such payment is furnished by the assessee along with the return of income. Now the crucial point of determination is as to whether furnishing of evidence of payment along with the return of income is mandatory.
7. The following passage from Crawford on statutory construction has been approved by the Hon'ble Supreme Court in the case of Govind Lal Chaggan Lal Patel v. Agriculture Produce Market Committee AIR 1976 SC 263, 267 :
The question as to whether a statute is mandatory or directory depends upon the intent of the Legislature and not upon the language in which the intent is clothed. The meaning and intention of the Legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also while considering its nature, its design, and the consequences which would follow construing it the one way or the other.
8. The principle that if by holding an enactment mandatory, serious general inconvenience will be created to innocent persons without very much furthering the object of enactment, the same will be construed as directory, as also been approved by the Hon'ble Supreme Court. In this connection reference may be made to State of U.P. v. Manbodhan Lal Srivastava AIR 1957 SC 912, 917.
9. The intent and purpose of Section 43B is to bring to an end the practice of such taxpayers who do not discharge their statutory liability for long periods of time and claim the liability as deduction on the ground that they maintain accounts on mercantile basis. Thus, the essence of the provision is the payment. It is convenient for the tax authorities to allow the claim of deduction in a case the evidence of payment is filed along with the return, but it should not be taken that in case the assessee has failed to file evidence of payment along with the return, he is debarred from claiming the same for all the time to come. One has to consider the complicated provisions of the Income-tax Act along with the practical difficulties and there could not possibly be instance of strict compliance of filing the evidence of payment along with the return. If it is strictly interpretated, the result would be that on one hand the assessee has made the payment and on the other he is unable to get the deduction thereof. If such strict construction is placed upon proviso to Section 43B, it is likely to result in injustice. So far as the filing of evidence along with the return is concerned, it should be interpretated as directory and not mandatory. The assessee has since filed the evidence of payment at a later stage, it deserves to be allowed particularly when there is no doubt about the genuineness with the said evidence. The Assessing Officer is, therefore, directed to allow deduction of Rs. 14,939.
It is claimed by the assessee that the payment of bonus of Rs. 5,282 was made on 13-4-1989, 20-4-1989 and 1-5-1989. It is supported by the evidence of payment. The Assessing Officer is, therefore, directed to allow the deduction of Rs. 5,282.
10. Ground No. (ii) :
Because of certain erasures and over-writing in the books of accounts, the Assessing Officer rejected the book results and applied gross profit rate of 27 per cent. However, on appeal, the CIT (A) set aside the said issue with the direction to the Assessing Officer to verify the genuineness of the entries said to be erased and to pass fresh order after giving due opportunity of being heard to the assessee. After having heard the Id. representatives of the parties and perusing the record, we find no infirmity in the order of the CIT(A). It is sustained.
11. Ground No. (iii):
The assessee claimed that it had maintained a branch office at Delhi and had thereby incurred expenditure of Rs. 33,000 on salary of staff, interest and maintenance of vehicle. On enquiry, the Assessing Officer found that in the queries made to the assessee it had not furnished the address of the branch office and had not claimed that there was any branch office at Delhi. He also found the salary of the employees was claimed oh daily basis. In his finding, the car was maintained at Delhi for the personal uses of the partners and not for the employees engaged on daily basis. The Assessing Officer, therefore, made disallowance of Rs. 33,000 claimed as a loss at Delhi branch. The assessee went in appeal before the CIT (A), who examined this issue in detail and allowed the relief of Rs. 1,040 only in respect of interest and bank charges and disallowed the balance of Rs. 31,960.
12. We have been taken through the order of the CIT(A) by the 1d. representatives of the parties. We find no flaw therein. The disallowance of Rs. 31,960 is sustained.
13. Ground No. (iv) :
After having heard the 1d. representatives of the parties as to the disallowance of l/4th of the expenses and depreciation on maintenance of car, we find that the same is reasonable and does not call for any interference.
14. Ground No. (v) :
Disallowance of Rs. 1,000 out of premises maintenance expenses sustained by the CIT (A) does not call for any interference, since no details of the same have been furnished. The disallowance of Rs. 1,000 is, therefore, sustained.
15. In the result, the I.T.A. No. 294/Ind./91 is dismissed as infructuous and the I.T.A. No. 410/Ind./92 is partly allowed.