1997 (12) TMI 72 - HC - Income Tax

High Court Directs Tribunal to Seek Opinion on Income Classification for Deduction

Commissioner Of Income-Tax Versus Nahar Spinning Mills Ltd.

The High Court directed the Tribunal to formulate a statement of the case and refer the questions outlined in the application for the court's opinion, ... Prima Facie Adjustment U/S. 143(1)(a), Question Of Law Issues:1. Interpretation of Section 143(1)(a) of the Income-tax Act, 1961 regarding prima facie adjustment.2. Classification of income from non-trade investments for deduction under Section 80HHC.Analysis:The High Court of Punjab and Haryana addressed an application by the Commissioner of Income-tax regarding the interpretation of Section 143(1)(a) of the Income-tax Act, 1961. The case involved the assessee-company filing a return of income for the assessment year 1992-93, claiming deduction under Section 80HHC. The Assessing Officer found discrepancies in the claim, specifically related to income from non-trade investments being included as business income. Consequently, the Assessing Officer restricted the deduction under Section 80HHC and issued an intimation under Section 145(1)(a) of the Act on January 11, 1994.In response to the Assessing Officer's actions, the assessee sought rectification under Section 154, which was denied. The matter proceeded to the Tribunal, where the assessee's appeal was successful in having the claim under Section 80HHC allowed. The Department, represented by Shri R. P. Sawhney, contended that the Assessing Officer was justified in his actions and argued for the permissibility of prima facie adjustments under Section 143(1)(a). On the other hand, Shri B. S. Gupta, representing the assessee, opposed this stance, asserting that the Tribunal rightfully canceled the intimation, and raised concerns regarding the timing of the intimation concerning the notice under Section 143(2) issued earlier.The High Court delved into the issue of whether the intimation under Section 143(1)(a) could be issued after a notice under Section 143(2) had been sent to the assessee. The court noted the differing circumstances in previous judgments but emphasized the need for clarity on this matter. It was argued that the Tribunal had examined the issue of prima facie adjustment and ruled in favor of the assessee, highlighting discrepancies in the Assessing Officer's actions. The court acknowledged the need to address the questions raised in the Tribunal's order, directing the Tribunal to refer the questions for the court's opinion.Further, the court analyzed the treatment of income from non-trade investments as business income and the Assessing Officer's jurisdiction in making adjustments. The contention revolved around the nature of the income and whether the presentation in the balance-sheet affected the Assessing Officer's actions. The court deemed it necessary to scrutinize the questions raised for reference, emphasizing the importance of clarifying the controversy surrounding the adjustments made by the Assessing Officer.In conclusion, the High Court directed the Tribunal to formulate a statement of the case and refer the questions outlined in the application for the court's opinion, recognizing the significance of resolving the issues surrounding the interpretation of Section 143(1)(a) and the classification of income for deduction under Section 80HHC.