COMMISSIONER OF INCOME TAX ROHTAK vs. M/S CEBON INDIA LTD GURGAON

ITR/1/2004HC Punjab & HaryanaPHHC01051625200413 January 2016Author: MR. JUSTICE RAMESHWAR SINGH MALIK,MR. JUSTICE SURINDER GUPTA4 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Cebon India Limited, filed its return for assessment year 1995-96 declaring nil income. The Assessing Officer (AO), processing the return under Section 143(1)(a), made adjustments to disallow interest payable to IFCI (`22,04,344/-) and sales tax penalty (`13,88,741/-) under Section 43B, citing lack of proof and recoverability respectively. These adjustments increased the taxable income before setting off unabsorbed depreciation. The assessee's appeal to the CIT(A) was dismissed. The Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeal, holding that these adjustments were beyond the scope of Section 143(1)(a) as they were not prima facie adjustments. The revenue's application for reference to the High Court was initially rejected by the ITAT but later directed by the High Court under Section 256(2).

What did the High Court hold?

The High Court held that the view taken by the ITAT was in accordance with law and not illegal or perverse. The Tribunal had correctly observed that Section 143(1)(a) permits summary adjustments only for deductions or reliefs that are prima facie inadmissible based on information available in the return. Debatable issues, requiring further inquiry, do not fall within the scope of prima facie adjustments. For such disallowances, the AO should have followed the procedure under Section 143(2). The ITAT's finding that the adjustments made by the AO concerning interest to IFCI and sales tax penalty were not prima facie adjustments was upheld. The additions made in the intimation under Section 143(1)(a) were therefore not sustainable. The High Court answered the question of law against the revenue and in favour of the assessee, disposing of the reference.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in disallowing the adjustments of interest payable to IFCI and sales tax penalty made by the Assessing Officer under section 43B of the Income Tax Act, 1961 while processing the case under section 143(1)(a) as not being prima facie adjustments? Assessee's Contention: The ITAT correctly held that the adjustments made by the AO were not prima facie adjustments and were beyond the scope of Section 143(1)(a). The ITAT noted that such disallowances would require a more detailed examination, necessitating the procedure under Section 143(2). Revenue's Contention: The revenue contended that the ITAT erred in law by disallowing the adjustments made by the AO under Section 143(1)(a). The revenue likely argued that these adjustments were indeed prima facie and permissible under the said section.

Which sections of the Income-tax Act were involved?

Section 43B,Section 143(1)(a),Section 143(2),Section 256(1),Section 256(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 13.1.2016 Commissioner of Income Tax, Rohtak ……Applicant-revenue Vs. M/s Cebon India Limited, Gurgaon …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MRS. JUSTICE RAJ RAHUL GARG Present: Mr. Tejinder K.Joshi, Advocate for the applicant-revenue. Mr. S.K.Mukhi, Advocate for the assessee. Ajay Kumar Mittal, J.

1.

At the instance of the revenue, the following question of law has been referred for the opinion of this Court by the Income Tax Appellate Tribunal, Delhi Bench, Delhi (in short, “the Tribunal') for the assessment year 1995-96 arising out of its order dated 22.5.1998, Annexure 'C' passed in ITA No.5370(Del) of 1987:- “Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in disallowing the adjustments of interest payable to IFCI and sales tax penalty made by the Assessing Officer under section 43B of the Income Tax Act, 1961 while processing the case under section 143(1)(a) as not being prima facie adjustments?”

2.

A few facts relevant for the decision of the controversy involved as available on

The order continues below.

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