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Deputy Commissioner of Vs. Turnkey International Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Kolkata
Decided On
Judge
Reported in(2001)77ITD119Cal
AppellantDeputy Commissioner of
RespondentTurnkey International Ltd.
Excerpt:
.....of income tax (appeals)-lv, calcutta erred in law as well as on facts in holding that the assessing officer was not justified in adding back rs. 90,80,314 under section 40a(3) while processing the return under section 143(1)(a) and in that view directed the assessing officer to delete the said disallowances by passing order under section 154 of the income-tax act, 1961." 2. the facts of the case arc that the assessee filed its return of income showing loss of rs. 19,72,210. this was processed under section 143(1)(a) in which addition of an amount of rs, 90,80,314 was made under section 40a{3) and the total income was thus determined at rs. 75,84,700. it appears that annexure vi of the tax audit report enclosed along with the return was not there originally and that the assessing.....
Judgment:
1. The ground taken by the Department in this appeal filed by it is as follows :-- "That, on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals)-lV, Calcutta erred in law as well as on facts in holding that the Assessing Officer was not justified in adding back Rs. 90,80,314 under section 40A(3) while processing the return under section 143(1)(a) and in that view directed the Assessing Officer to delete the said disallowances by passing order under section 154 of the Income-tax Act, 1961." 2. The facts of the case arc that the assessee filed its return of income showing loss of Rs. 19,72,210. This was processed under section 143(1)(a) in which addition of an amount of Rs, 90,80,314 was made under section 40A{3) and the total income was thus determined at Rs. 75,84,700. It appears that Annexure VI of the Tax Audit Report enclosed along with the return was not there originally and that the Assessing Officer asked for a copy of the same from the Auditors concerned, got the same and found that the Auditors had mentioned an amount of Rs. 90,80,314 to be the aggregate amount of cash payments in excess of Rs. 10,000 on each occasion, along with the full details thereof. This particular Annexure VI as received by the Assessing Officer was not again signed by the Auditors. The addition of this amount seems to have been made on the basis of the report of the Auditors as contained in this particular Annexure.

3. The assessee made several bunglings with regard to this matter.

Originally the assessee took up the point that the actual figure as per Annexure VI should be Rs. 90,803 only and not Rs. 90,80,314. Later on, the assessee filed a petition under section 154 along with which the assessee produced another Audit Report from a different Auditor in which the total amount of cash payments in excess of Rs. 10,000 was shown to be Rs. 4,88,095. In any way, the assessee claimed that no addition could be made during the process of adjustment under section 143(1)(a) and that the addition as already made should be deleted by passing a rectificatory -order under section 154. The Assessing Officer, however, rejected the claim of the assessee on the ground that different figures had been produced by the assessee at different points of time and also that the assessee had not exactly challenged the addition itself during the course of the intimation under section 143(1)(a). The Assessing Officer thus passed an order rejecting the application made by the assessee under section 154.

4. The assessee appealed against this order before the Commissioner (Appeals). The Commissioner (Appeals) noted that the Assessing Officer appeared to have called for the Annexure VI of the Tax Audit Report, especially from the earlier Auditors, which he was not justified to do.

She was of the opinion that at best the Assessing Officer could have asked for certain clarifications or details from the assessee itself.

The Commis- sioner (Appeals) also commented on the unsigned status of the aforesaid Annexure VI collected by the Assessing Officer and was of the opinion that this Annexure collected later on did not have any value towards processing the return. The Commissioner (Appeals) ultimately held that the Assessing Officer had gone beyond his jurisdiction firstly in making the addition under section 40A(3) in the prima facie adjustment made under section 143(1) (a), and secondly in rejecting the petition for rectification. The Commissioner (Appeals) was of the opinion that, inasmuch as, the assessee-company itself had not added back any amount as disallowable under section 40A(3) in the computation of income made by it, it was not within the powers of the Assessing Officer to have made such addition during the course of the prima facie adjustment. The Commissioner (Appeals) thus decided the issue in favour of the assessee and directed the Assessing Officer to rectify the adjustment by deleting the entire addition of Rs. 90,80,314.

5. At the stage of the hearing of the Departmental appeal before us, the ld. D.R. contends that the Auditors' report clearly showed that the amount of Rs. 90,80,314 represented the amount disallowable under section 40A(3) and hence, the Assessing Officer was perfectly within his jurisdiction to add back this amount even in the prima jade adjustment.

6. On the other hand, the ld. counsel for the assessee points out that at the time of processing the return, this particular Annexure VI was not there on the record of the Assessing Officer. He argues that the Assessing Officer did not have any authority to call for this relevant information from the Auditors and to act upon the same in the course of the prima facie adjustment. In support of this contention, he relies on a judgment of the Bombay High Court in the case of Khatau Junkar Ltd. v. K.S. Pathania [ 1992] 196 ITR 55. We find ample force in this contention of the ld. counsel for the assessee. The Assessing Officer is certainly not within his powers to call for some informations which were not there before him along with the return, at the back of the Assessing Officer and to act upon the same and that too being an unsigned and unverified statement.

7. Again, we are of the view that even the presence of the Annexure VI along with the return originally, would not have made any difference to the situation. The Annexure VI merely lists the particulars of payments in excess of Rs. 10,000 made otherwise than by the crossed cheque or crossed Bank Draft. Although there is no doubt about the fact that this information is required to be furnished by the Auditors in connection with examination of allowability/disallowability under section 40A(3), at the same time again, it cannot at all be said that the payments enlisted under this Annexure have necessarily got to be added back under section 40A(3). There is no statutory provision in this regard at all. Before making an addition, it is required of the Assessing Officer to allow a chance to the assessee to come forward with its case, as to whether some of the cash payments would be exempted under rule 6DD or not. That would come within the ambit of a debatable issue requiring quite a long process of examination and discussion. No addition on that account can, therefore, be made in a prima facie adjustment under section 143(1)(a) as has been held by the Calcutta High Court in the case of Modern Fibotex India Ltd. v. Dy, CIT [1995] 212 ITR 496, 8. Again, an order founded on mistaken assumption can be rectified under section 154. The assessde has relied on a judgment of the Delhi High Court in the case of CIT v. Shakutala Rajeshwar [1986] 160 ITR 840 and of the Karnataka High Court in the case of Neeta S. Shah v. CIT [1991] 191 ITR 77, 80 in support of this contention.

Taking into consideration all these aspects, therefore, we are of the opinion that the Assessing Officer should not have made the addition of the amount of Rs. 90,80,314 in the prima facie adjustment in the first place, and secondly when the assesses moved for a rectification in that regard, the Assessing Officer should have passed a rectificatory order deleting that addition. We, therefore, uphold the order of the Commissioner (Appeals) on this issue.


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