Rajasthan State Mines and Minerals Ltd. vs Commissioner of Income Tax

Mr. Bhandawat is directed to accept notices for the Commissioner of Income Tax, Jaipur, as standing counsel for the Revenue.

This is an application u/s 256(2) of the Income Tax Act, 1961, for requiring the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur, to refer the following question of law said to be arising out of the order of the Tribunal in I. T. A. No. 1764/JP of 1992 for the assessment year 1991-92, dated September 10, 1998, affirming the adjustment made u/s 143(1)(a) by disallowing the deduction claimed by the assessee on account of liability incurred for payment of charges under the prospecting licence and expenses incurred in respect of the guest-house :

"Whether, on the facts and circumstances of the case and in law, the Tribunal was right in holding that the Assessing Officer was justified in making prima facie adjustment u/s 143(1)(a) in respect of prospecting charges payable to the Government of Rajasthan, Rs. 2,96,00,000 and rest house expenses amounting to Rs. 50,748 ?"

The Income Tax Officer acting u/s 143(1)(a) without requiring the presence of the assessee has disallowed the deduction claimed by the assessee by treating the same to be prima facie inadmissible for want of any information about the details of such expenses in the books of account submitted by the assessee along with the returns about the amount payable under the prospecting licence and expenses incurred in respect of maintenance of guesthouse. The assessee challenged that order successively before the Commissioner of Income Tax (Appeals). He moved an application before the Tribunal u/s 256(1) of the Income Tax Act, 1961, requiring the Tribunal to refer the aforesaid question for the opinion of this court, which has been rejected by the Tribunal by holding that the finding has been reached on the basis of material available on record which is a finding of fact and no question of law arises.

Having heard learned counsel for the parties, we are of the opinion that the order of the Tribunal rejecting the application u/s 256(1) is erroneous.

In our opinion, the order of the Tribunal upholding the expenses claimed by the assessee as deductible expenses as prima facie inadmissible do give rise to a question of law, whether, in the facts and circumstances of the case, the adjustment could be made by disallowing the expenses claimed by the asses-see deductible on account of prospecting licence charges and expenses ? However, the question whether expenses incurred for maintenance of guest-house is allowable or not is prima facie inadmissible in view of the specific provision of the Income Tax Act.

Accordingly, this application is allowed and we direct the Tribunal to refer the following question of law which arises out of this appeal :

"Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the Assessing Officer was justified in making prima facie adjustment u/s 143(1)(a) in respect of prospecting charges payable to the Government of Rajasthan amounting to Rs. 2 crores and 96 lakhs ?"

No order as to costs.