1992 (6) TMI 73 - AT - Income Tax

Tribunal cancels addition under IT Act, stresses resolution via regular assessment, not section 143(1)(a).

The Tribunal allowed the appeal, directing the cancellation of the addition made by the Deputy Commissioner under section 143(1)(a) of the IT Act. It ... Assessing Officer, Mistake Apparent From Record, Purchase Price, Words And Phrases Issues Involved:1. Legality of adjustments made under section 143(1)(a) of the IT Act.2. Inclusion of Nirgam Mulya, Octroi, and Rum purchase price in the 'purchase price' for section 44AC.3. Applicability of rectification under section 154 of the IT Act.Issue-wise Detailed Analysis:1. Legality of Adjustments Made Under Section 143(1)(a) of the IT Act:The assessee, assessed as an Association of Persons (AOP), returned its income from its liquor business at Rs. 50,05,190 for A.Y. 1990-91. The Deputy Commissioner (DC) increased this to Rs. 1,55,44,250 by adding Rs. 1,05,39,059 under section 143(1)(a), citing that the profit shown was less than 40% of receipts. The assessee objected, arguing that such a substantial addition was not permissible under section 143(1)(a), which allows adjustments only for arithmetical errors or prima facie inadmissible claims. The Tribunal agreed, noting that section 143(1)(a) is intended for speeding up tax collection in non-disputed cases and should not be used for substantial points of dispute, which require a detailed assessment under section 143(2).2. Inclusion of Nirgam Mulya, Octroi, and Rum Purchase Price in the 'Purchase Price' for Section 44AC:The DC included Nirgam Mulya, Octroi, and Rum purchase price in the purchase price calculation, resulting in the disputed addition. The assessee argued that these should not be included, referencing CBDT's letter dated 30-11-1988, which excluded Nirgam Mulya from the purchase price for section 44AC purposes. However, the DC relied on Circular No. 585 dated 27-11-1990, which included these elements in the purchase price. The Tribunal found that the differing interpretations indicated a substantial dispute, inappropriate for resolution under section 143(1)(a). The Tribunal noted that the DC himself recognized a mistake by excluding the Rum purchase price in a subsequent order, reinforcing the view that the initial adjustment was erroneous.3. Applicability of Rectification Under Section 154 of the IT Act:The assessee filed an application under section 154 to rectify the alleged mistake in the adjustment, which the DC rejected, citing Circulars No. 528 and 585. The Tribunal held that the DC's adjustment involved a substantial point of dispute, not an arithmetical error, making it rectifiable under section 154. The Tribunal directed the cancellation of the Rs. 1,05,39,059 addition, emphasizing that section 143(1) adjustments should not cover substantial disputes, which are better addressed through regular assessment proceedings under section 143(2).Conclusion:The appeal was allowed, and the Tribunal directed the cancellation of the addition made by the DC. The Tribunal clarified that this decision does not affect the merits of any points involved in the ongoing regular assessment, where the Assessing Officer can determine the income and tax after giving the assessee an opportunity to present its case.