Commissioner of Income Tax vs The Kallakurichi Co-operative Sugar Mills Ltd.

K. Raviraja Pandian, J.—The revenue is on appeal against the order of the Tribunal, Madras B Bench, dated 25-11-2003 made in ITA No.

921/Mad/1997. The relevant assessment year is 1994-95.

The assessee is a co-operative sugar mill. The assessee filed a return of income claiming interest from Perambalur Sugar Mills Ltd. as exempt u/s

80P(2)(d) of the Income Tax Act. The assessing officer, after issuing intimation u/s 143(1)(a) of the Income Tax Act, while computing the total

income, added back the amount claimed as exemption u/s 80P(2)(d). The correctness of the said addition made by the assessing officer has been

questioned by the assessee by filing an appeal to the Commissioner (Appeals), who allowed the appeal holding that the provisions of Section

143(1)(a) of the Act allow adjustments of arithmetical errors and the facts which are prima facie inadmissible and the adjustment made by the

assessing officer in this case cannot be upheld. The revenue filed an appeal to the Tribunal. The Tribunal upheld the order of the Commissioner

(Appeals) on the ground that the assessees claim for exemption u/s 80P(2)(d) is to be considered after elaborate discussion and the same cannot

be considered for prima facie adjustment. The correctness of the said finding recorded by the Tribunal is canvassed in this appeal by the revenue

by framing the following questions of law:

Whether in the facts and circumstances of the case the Tribunal was right in holding that the exemption claimed u/s 80P(2)(d) cannot be

disallowed by way of a prima facie adjustment u/s 143(1)(a) ?

2.Whether in the facts and circumstances of the case, the assessee which is a co-operative sugar mill is eligible to claim deduction u/s 80P(2)(d) in

respect of interest earned from a loan given to another cooperative society?

We heard the learned Counsel on either side.

On the face of the order, we do not find any illegality in the order of the Commissioner (Appeals), which has been confirmed by the Tribunal, in

the sense, that the assessing officer cannot disallow the exemption claimed by the assessee by way of prima facie adjustment u/s 143(1)(a) of the

Income Tax Act. The scope and amplitude of Section 143(1)(a) of the Act as substituted with effect from 1-4-1998 and prior to the substitution

with effect from 1-6-1999 and its effect from 1-4-1998 has been considered, though in a different context of reopening the assessment by the

Supreme Court in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., , wherein the history of Section

143 of the Act has been elaborately traced and ultimately observed as follows:

What were permissible under the first proviso to Section 143(1)(a) to be adjusted were, (i) only apparent arithmetical errors in the return, accounts

or documents accompanying the return, (ii) loss carried forward, deduction, allowance or relief, which was prima facie admissible on the basis of

information available in the return but not claimed in the return and similarly, (iii) those claims which were on the basis of the information available in

the return, prima facie inadmissible, were to be rectified/allowed/disallowed. What was permissible was correction of errors apparent on the basis

of the documents accompanying the return. The assessing officer had no authority to make adjustments or adjudicate upon any debatable issues. In

other words, the assessing officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions,

allowance or relief.

In the light of the aforesaid decision of the Supreme Court, the first question is answered against the revenue. As we have held the first question

against the revenue, the second question does not arise for consideration at all. Accordingly, the appeal is dismissed.