B. N. KIRPAL, J. (Oral)

( 1 ) ENACTMENT of new provisions in the Income-tax Act instead of reducing, more often than not. increases litigation. This is either because of the ambiguity or lack of clarity in the provision enacted or the manger in which the provision newly enacted is applied. The present case falls in the second category as we shall presently sec.

( 2 ) IN respect of the assessment year 1989-90 the petitioner company filed a return of loss declaring a loss of Rs. 1,36. 83. 23. 142 and claimed a refund of Rs. 1,64,013 which was a tax deducted at source. This return was filed on 28th December, 1989 and, according to the petitioner, the same was accompanied by all the necessary annexures, documents, statements, annual reports etc.

( 3 ) THE Deputy Commissioner of Income-tax (Assessment), on 30th August. 1990 intimated to the petitioner that this return of loss, subject to adjustments, had been accepted. The Deputy Commissioner disallowed expenses to the tune of Rs. 3,86,00,759 and the reason for this disallowance was contained in the adjustment explanatory sheet annexed to the said intimation sent undersection 143 (1) (a) of the Income-tax Act. The said sheet disclosed three items of disallowance. The first was of Rs. 3,32,24. 375 which was a claim made under Section 43b This was disallowed for want of proof of payment as the proof was allegedly not enclosed. According to the petitioner at the time when the return was filed, the duly audited balance-sheet alongwith the tax audit report had been enclosed and that itself tantamounted to a proof of payment. The second item which was disollowed was of a sum of Rs. 1,55,860. The reason of the disallowance was "cost of individual items of presentation exceeding Rs. 50". The third item disallowed was of Rs. 52,20. 524 which was the investment allowance which was claimed and the said disallowance was for the reason that the reserve had not been created.

( 4 ) FOR the view which we are taking it is not necessary for us to go into the correctness or legality of the aforesaid disallowances specially for the reason that proceedings under Section 143 (3) in respect of assessment year 1989-90, for which the aforesaid return was filed, have now been initiated by the Assessing Authority on the issuance of a notice under Section 143 (2 ). The question as to whether the disallowances were rightly made or not would be gone into in the regular assessment which is being framed.

( 5 ) PURSUANT to the Assessing Authority having determined She amount of loss admissible, which came to a figure of Rs. 1,32. 97,22,383, the Deputy Commissioner proceeded to invoke and applied the provisions of Section 143 (1a) and came to the conclusion that the additional, tax of Rs. 38,60,075 was payable by the petitioner. It is this demand which has been challenged before us.

( 6 ) ON a return being filed under Section 139 or in response to a notice under sub-section (1) of Section 142, the Assessing Officer has an option to frame an assessment under sub-section (1 ) of Section 143 on the basis of the return filed. The Aessessing Officer, is entitled to make adjustments in the income or loss declarpd. The adjustments which can be made are referred to in the first proviso to Section 143 (1 ).

( 7 ) SUB-SECTION (1a) was inserted w. e. f. 1st April, 1989. Sub-clause (a) of the said provision reads as follows :

"143 (1a) (a) : Where, in the case of any person, the total income, as a result of the adjustments made under the first proviso to clause (a) of sub- section (1), exceeds the total income declared in the return by any amount, the Assessing Officer shall. :-

(I) further increase the amount of tax payable under sub-section (1) by an additional income-tax calculated at the rate of twenty per cent of the tax payable on such excess amount and specify the additional income-tax in the intimation to be sent under sub-clause (1) of clause (a) of sub-section (1);

(II) where any refund is due under sub-section (1), redu

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