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IN THE HIGH COURT OF BOMBAY
Mrs. Sujata Manohar , JJ.
Khatau Junkar Limited and another... Petitioners.
Versus
K.S. Pathania and another... Respondents.
Writ Petition No. 2587 of 1991 with W.P. No. 2850 of 1991, decided on 7-2-1992.
Advocates appeared :
Dr. S.E. Dastur with A.V. Sande, i/b Desai, Berjia Chinoy, for the petitioners in W.P. No. 2587 of 1991 and W.P. No. 2850 of 1991.
G.S. Jetly with Dr. V. Subramaniyam, P.S. Jetly and K.C. Sidhwa, for the respond ents in W.P. No. 2587 of 1991 and W.P. No. 2850 of 1991.
In the first place, Section 32-A does not say that investment allowance would be disallowed unless the supporting evidence is attached. The Section itself does not refer to any supporting evidence at all. Sub-section (4) of Section 32-A merely requires that the assessee should furnish particulars relating to the machinery or plant in question. Thus, the assessee has done in its tabulated statement. Neither the section or the notes which are attached to the Income Tax Form No.1 say that unless these particulars are attached to the return the claim of the assessee for investment allowance will be disallowed At the highest, all that can be said is, if the Income Tax Officer was not satisfied with the statement which the assessee had attached to its return, he could have given a notice to the assessee and asked the assessee to produce evidence in support of the claim.
Incidentally, it is a little surprising that the same particulars which the Income-Tax Officer found sufficient while allowing a claim for depreciation, were found by him to be insufficient for the purpose of allowing investment allowance. Any way, in the absence of any specific provision under which a claim for investment allowance on the face of it, can be disallowed if the assessee does not furnish evidence in support of the claim, the claim for investment allowance cannot be disallowed by the Income Tax Officer by an intimation under Section 143 (1) (a). There is nothing prima facie on the record before the Income Tax Officer which would permit him to disallow such a claim.
Section 40-A (3) Income Tax Rules 1962-Rule 6-DD(j)-Expenditure on purchases in a sum of exceeding Rs. 10,000/- Payment mane otherwise that by cross cheque drawn on a bank or by crossed bank draft-Such expenditure not to be allowed as deduction Assessee, however, claiming deduction-Proviso to Scion 40-A (3) permits certain cases and circumstances to be prescribed under which such payment can be allowed as deduction –Under Rule 6-DD such case and circumstances have been prescribed.
Under sub-clause (j) of Rule 6-DD, in any case other that the ones earlier specified in that rule, where the assessee satisfies the Assessing Officer that the payment could not be mane by a crossed cheque or by a crossed bank draft due to exceptional or unavoidable circumstances, or because payment in this manner was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof, and also furnishes evidence to the satisfaction of the Assessing Officer as to the genuineness of the payment and the identity of the payee, a deduction can be allowed.
Section 143- Expenditure of previous year-Income of previous year included in current year-Whether expenditure of previous year should be allowed as deduction.
Held-If income of previous year could be included in current year, there is no reason why expenditures of previous year should not be allowed.
Section 143(1) (a)-Deduction-When to be disallowed-ITO can not disallow a claim for deduction because in his view, adequate evidence in support of such claim of deduction is not before him-He can disallow such claim if satisfied that on basis of material before him assessee is not entitled to such deduction-Phrase ‘prima facie admissible’ and ‘prima facie in admissible’- Meaning of.
Rule 6-DD (j)
See Income-tax Act, 1961, Section 40-A (3)
Prima facie Admissible and -Prima facie inadmissible Meaning of See Income-tax Act, 1961, Section 143 (1) (a).
Mrs. SUJATA MANOHAR, J.:---Writ Petition No. 2587 of 1991.
The first petitioner is a public limited company. In this petition the 1st petitioner has challenged an intimation sent to it under section 143(1)(a) of the Income Tax Act demanding income tax and additional tax under section 143(1-a) of the Income Tax Act for the assessment year 1990-91.
2. For the assessment year 1990-91 the first petitioner filed its return of income declaring a total income of Rs. 41,64,600/- consisting of income chargeable under the head "business of profession". Along with the return of income, the first petitioner also filed a tax audit report in Form No. 3-CD as required under the provisions of section 44-AB of the Income Tax Act. The first petitioner claimed various deductions in the return of income.
3. On 16th May, 1991 the first petitioner received an intimation under section 143(1)(a) of the Income Tax Act dated 18th March 1991. Along with the intimation, an adjustment explanatory sheet was annexed. In that sheet the first respondent had determined a total income of Rs. 68,81,158/- as against the returned income of Rs. 41,64,596/-. The addition of Rs. 27,16,562/- was on account of the following :
(a) The first petitioner had purchased during the relevant period new machinery of the value of Rs. 1,25,28,140/- and had claimed a deduction under section 32-A of the Act on account of investment allowance amounting to Rs. 25,05,658/-. The first petitioner had made the required reserve and had fulfilled all the conditions required under the Act for the grant of deduction under section 32-A. The first respondent added back the claim on the ground that nonproof of purchase of new machinery is enclosed with the return of income;
(b) The first respondent added back an amount of Rs. 26,505/-, being the value of presentation articles not bearing the logo of the 1st petitioner. The 1st petitioner had claimed that these articles were not covered under Rule 6-B of the Income Tax Rules, 1962 and hence the first petitioner was entitled to a deduction of this amount as business expenses;
(c) The first respondent also disallowed a sum of Rs. 75,165/-, being ex-gratia payment to employees drawing more than Rs. 2,500/- per month. The first petitioner had stated that the ex-gratia payment was not bonus or commission payable to employees covered under the Bonus Act, 1965. It was, therefore, allowable under the provisions of section 37. The first respondent added back the amount on the ground that no proof of payment of ex-gratia amount was enclosed with the return;
(d) The first petitioner had made certain payment which were in excess of Rs. 10,000/- by cash. These were to the extent of Rs. 25,663/-. The first petitioners claimed that these payments were made under the exception specified in Rule 6-DD(j) of the Income Tax Rules and hence they should not be disallowed under the provisions of section 40-A(3). This amount was disallowed by the first respondent. He has stated against this amount "under section 43-B of the Act as per tax audit report".
(e) The first petitioner had debited an amount of Rs. 83,631/- in the profit and loss account of the relevant previous year. This pertained to expenditure which pertained to an earlier year, although the bills were received and the amount was paid in the relevant year. It was the contention of the first petitioner that although the expenditure related to an earlier previous year, it was expenditure which had accrued or arisen during the relevant previous year i.e. to say the year ending on 31st March, 1990. This amount was added back by the first respondent on the ground that the first petitioner was following the mercantile system of accounting.
4. Thus, adding back a total of Rs. 27,16,562/- to the income, the first respondent determined the first petitioner's total income at Rs. 68,81,158/-. He further proceeded to levy additional tax under section 143(1-a) of the Act amounting to Rs. 2,93,388/-.
5. Without prejudice
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