SECTION 143(1)( a) – PRIMA FACIE ADJUSTMENTS
- Scope of prima facie disallowances under section 143(1)(a)
owSection 143(1)(a) authorises, with effect from assessment year 1989-90, inter alia, disallowance of any loss carried forward, deduction, allowance or relief claimed which, on the basis of information available in the return or the accompanying accounts or documents, isprima facie inadmissible. The earlier instructions of the Board were to the effect that no disallance should be made of items on which two opinions are possible. The matter has been further considered by the Board in the light of the recommendations of the Tax Reforms Committee headed by Prof. Raja J. Chelliah and it has been decided that prima facie disallowance shall be made only in respect of the following types of claims :
(a) an incorrect claim, if such incorrect claim is apparent from the existence of other information in the return or the accompanying accounts or documents.
EXAMPLE
If a deduction has been claimed under the head Capital Gains under section 54F, and if there is information in the return of income or the accompanying accounts or documents to show that the unutilised net consideration had not been deposited in an account specified in the notified scheme as stipulated under section 54F(4), the claim is incorrect and can be disallowed as a prima facie adjustment.
(b) any claim in respect of which there is an omission of information which is required, under the specific provisions of the Act or the Rules, to be furnished along with the return to substantiate such claim :
EXAMPLE
If the audit report specified under section 80HHC(4), which is required to be filed along with the return of income, is not so filed, the deduction claimed under that section can be disallowed as a prima facie adjustment. Some more examples in this regard are the non-filing of audit reports or other evidence along with the return of income as required under section 12A(b), 33AB(2), 35E(6), 43B (first proviso), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 80HHB(3), 80HHD(6), 80HHE(4), 80-I(7), 80-IA(8) and the like. But if evidence is subsequently furnished, rectification under section 154 should be carried out to the extent permitted by Board’s Circular No. 669, dated 25-10-1993. No prima facie disallowance shall however be made if any evidence, required to be filed along with the return of income only in pursuance of the non-statutory guidance notes for filling in the return of income, is not so filed.
(c) A claim for deduction or rebate of any amount which exceeds statutory limit imposed, if such limit is expressed either as a specific mandatory amount or as a percentage, ratio or a fraction, and if the information relevant to application of the statutory limits appear in the return or the accompanying accounts or documents.
EXAMPLE
(i) If under section 24(1)(i) the deduction in respect of repairs and collection charges to claimed in excess of 1/5th of the annual value (applicable with effect from assessment year 1993-94), such excess can be disallowed as a prima facie adjustment.
(ii) If the rebate on contribution eligible under section 88 is claimed in excess of 20 per cent of such contribution, the excess can be disallowed, provided there is indication of the total amount of such contribution in the return or the accompanying accounts or documents.
(d) Any claim which is patently inadmissible in law.
EXAMPLE
Deduction of items like income-tax, wealth-tax, personal expenses, depreciation claimed on conveyance under the head salary, depreciation claimed under the head house property and the like. The items of disallowance should be such that no two opinions are possible on their inadmissibility.
- The Board desires that no otherprima facie disallowance should be made except with the previous approval of the Commissioner of Income-tax who will, after according approval in suitable cases, bring the same to the notice of the Board.
- The above procedure applies to all returns pending processing under section 143(1) on the date of issue of this Circular.
Circular : No. 689, dated 24-8-1994.
JUDICIAL ANALYSIS
In Kamaljeet Singh Ahluwalia v. Dy. CIT [2000] 113 Taxman 120 (Jp. – Trib.) (Mag.) it was held that Circular No. 689 being benevolent in nature is binding on the revenue.
EXPLAINED IN – ACIT v. R.R. Hosiery (P.) Ltd. [1999] 68 ITD 25 (Mum. – Trib.) in following words:
“The Board had issued a Circular No. 689, dated 24-8-1994 which permits the Assessing Officer to take into consideration the evidence furnished subsequent to the passing of the intimation under section 143(1)(a ).
It may be observed that the above Circular No. 669 permits the Assessing Officer to entertain evidence furnished along with the application for rectification under section 154 even after completion of the assessment under section 143(3). We are of the view that these beneficial circulars have to be given due effect.” (pp. 30 & 31)
EXPLAINED IN – ITO v. Mandira D. Vakharia [2001] 250 ITR 432 (Kar.), in following words :
“The intention of the Board is clear (in Circular No. 689, dated 24-8-1994). The illustrations and instances referred to in the Board circular are qualified by the words “… and the like”. The illustrations and instances given by the Board are not exhaustive. The intention behind the Board circular is that in case the audit report required to be filed, was not furnished with the return of income, then the deduction claimed can be disallowed as a prima facie adjustment. But, if it is furnished subsequently, then rectification should be carried out to the extent permitted by the Board Circular No. 669, dated October 25, 1993. The illustrations given in the Board circular, being not exhaustive, it would include provisions like sections 80HHE and 80GG as well. The assessee has claimed the same relief as would have been admissible to an assessee who was claiming deduction under section 80HHC(4) and other sections mentioned in the Board’s circular. The assessee claiming deduction under sections 80HHE and 80GG of the Act would be similarly situated as an assessee claiming deduction under section 80HHC(4) of the Act or other provisions mentioned in the Board circular. The use of the words “…and the like”, in the Board circular, would include the assessees who are claiming a similar relief although the provision of the Act is not specifically mentioned in the Board circular.” (p. 435)
CLARIFICATION ONE
In the context of the legal position as outlined above, it follows that it will not be permissible for the Assessing Officer to disallow a claim for deduction, allowance or relief in case where the claim is made on the basis of the decision of any High Court, Appellate Tribunal or other Appellate Authority, even though a contrary view in the matter may have been expressed by another High Court or another Bench of the Tribunal or any other appellate authority. The fact that the claim is based on a decision which had not been accepted by the Board will also not make any difference to this position.
Instruction : No. 1814, dated 4-4-1989. [Asstt. CIT v. Smt. Geeta Mayor [2000] 74 ITD 321 (Ahd.)
