Prima facie adjustments under section 143(1)(a) in respect of disallowance under section 43B and nature of evidence to be enclosed with the returns in support of actual payment

1. Reference is invited to Circular No. 581 dated 28-9-1990 issued by the Board in respect of prima facie adjustments under section 143(1)(a) and the scope of section 154. It was clarified in the said circular that where an evidence in support of a deduction claimed under section 43B, or in support of certain other exemptions and deductions, is required to be attached along with the return of income, but is not so attached, the said deduction/exemption shall be disallowed under section 143(1)(a) and a subsequent rectification under section 154 will not be possible in respect of the same, even if the assessee later on furnishes evidence in support thereof.

2. In terms of section 43B, the following deductions are allowed only in the previous year in which payments in respect thereof have actually been made:

    (a)   any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force; or

    (b)   any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees; or

    (c)   any sum referred to in clause (ii) of sub-section (1) of section 36; or

    (d)   any sum payable by the assessee’s interest on any loan or borrowing from any Public Financial Institution or a State Financial Corporation or a State Industrial Investment Corpora­tion, in accordance with the terms and conditions of the agree­ment governing such loan or borrowing.

3. The first proviso to section 43B stipulates that the deduction in terms of clauses (a), (c) and (d ) above, even if the related payment is not made during the previous year would still be allowable if the amounts have actually been paid before the due date for filing the return of income for that year under section 139(1) and the evidence of such payment is furnished along with the return.

4. It has been brought to the notice of the Board that difficul­ties often arise in enclosing evidence in terms of clauses (a), (c ) and (d) of section 43B because of the voluminous nature of the evidence or where no such evidence can be submitted due to certain reasons.

5. As far as evidence of payments under clause (a) is concerned, there should normally be no difficulty as the assessee can en­close the challan, etc., evidencing the payment. In case this is not possible, for any reason, then he must submit, along with the return of income, a certificate from an accountant, as defined in the Explanation to section 288 of the Act. The accountant should verify that the payment of tax, etc., mentioned in clause (a ) and claimed as a deduction, has been made by due date for the filing of return under sub-section (1) of section 139 of the Act.

6. As regards evidence of payment under clause (c), the evidence required will be a certificate from an accountant as defined in the Explanation to section 288 of the Act.

7. For payments of the type referred to in clause (d), the evi­dence required would either be a certificate from the institution concerned, or a certificate from an accountant as defined in the Explanation to section 288 of the Act.

8. The evidence mentioned in paragraphs 5 to 7 above considered sufficient for the purposes of making prima facie adjustments under section 143(1)(a). However, in cases selected for scrutiny and assessment under section 143(3), further evidence can be called for if necessary.

Circular : No. 601, dated 4-6-1991.

JUDICIAL ANALYSIS

EXPLAINED IN – In Sri Jawahar Lal Gupta v. ITO [1993] 199 ITR 726 (All.), it was observed that a perusal of Circular No. 601, dated 4-6-1991, issued by the CBDT makes it clear that as far as the evidence of payment of tax is concerned, a certified copy of the accountant might be sufficient for the purpose of making prima facie adjust­ment in regard to assessments made under section 143(1)(a).

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