The Assessing Officer's powers under Section 143(1)(a) of the Income Tax Act, 1961 are limited to making adjustments on a prima facie scrutiny of the return and accompanying documents filed by the assessee.

Per S.A. Bobde, J.–This appeal was admitted on the following substantial question of law:

"A. Whether on the facts and in the circumstances of the case, the ITAT was justified in deleting the prima facie adjustment of Rs.9,00,000/- on account of provision for doubtful debt carried out by the Assessing Officer in the light of the explanation added to Section 36(1)(vii) by Finance Act, 2001 with retrospective effect from 1.4.1989?"

2. Mr. Sonak, learned Counsel for the respondent No. 1, submitted that the substantial question of law was framed at the time of admission without hearing the respondents and does not address the main issue involved in the case. According to learned Counsel, the substantial question of law may said to arise in the matter ought to have the following :

"Whether on the facts and in the circumstances of the case, the ITAT was right in holding that the adjustment carried out by the Assessing Officer in relation to assessee's claim for provision of bad and doubtful debt is clearly outside the ambit of prima facie adjustment envisaged in Section 143(1)(a) of the Income Tax Act, 1961 ?"

3. We have examined the matter and we are of the view that the substantial question of law which needs to be decided is the question herein above.

4. This case arises out of an intimation given by the Assessing Officer under Section 143 (1)(a) of the Income Tax Act, 1961 to respondent No. 1 assessee purporting to determine the income tax payable by the assessee as amounting to Rs.11,23,131/- by disallowing respondent No. 1's claim for deduction of provision of bad and doubtful debts to the extent of Rs.9,00,000/- under Section 36(1)(vii) of the Income Tax Act, 1961.

5. In appeal, the Commissioner of Income Tax ( Appeals ) confirmed the order of the Assessing Officer and held that the additional tax has been rightly charged by the Assessing Officer under Section 143(1)(a) of the Act on the addition made in the appellant's/ respondent No. 1's income as prima facie adjustment under Section 143(1)(a) of the Act. In other words, the Commissioner of Income Tax (Appeals) held that the action of the Assessing Officer for disallowing the provision of bad and doubtful debts claimed by the assessee and adding the said amount to the appellant's/respondent No. 1's income as prima facie adjustment is correct.

6. In appeal, the Income Tax Appellate Tribunal (ITAT) took a view that the findings of the Assessing Officer that the assessee's claim for provision of bad and doubtful debts is clearly outside the ambit of prima facie adjustment envisaged in Section 143(1)(a) of the Income Tax Act, 1961 and that the Assessing Officer did not have sufficient material to hold that the said claim was inadmissible. The ITAT held that under the provisions of Section 143(1)(a), the Assessing Officer is not entitled to allow or disallow the claim but can only make adjustment on a prima facie scrutiny of the return and the accompanying documents filed by the assessee. Section 143(1)(a) if read for the assessment year 1993-1994 which reads as follows :

"143(1)(a) Where a return has been made under Section 139, or in response to a notice under sub-section (1) of Section 142–

(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub- section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under Section 156 and all the provisions of this Act shall apply accordingly;

(ii) if any refund is due on the basis of such return, it shall be granted to the assessee;

Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely :–

(i) any arithmetical errors in the return, acc