A. Kalyanasundharam, Accountant Member -
(1.) THE assessee, a limited company, has filed this appeal, aggrieved by the order of CIT (Appeals)-XII, New Delhi, dated 31-12-1993, by which it was held that the assessment proceedings had been validly initiated, and validly made, as contrary to the pleadings of the assessee that the proceedings are illegal and arbitrary. THE assessee has also raised several other grounds on various additions and disallowances and on levy of interest under Section 234B of the Act. We shall deal with the issue of the legality of the assessment for which purpose we narrate the facts in brief below.
(2.) The assessee had filed a return declaring an income of Rs. 6,72,160. This income was so declared under Section 115J of the Act, indicating that the income as computed under the other provisions of the Act was nil. The Assessing Officer (AO) on 11-3-1991 prepared an intimation under Section 143(1)(a) of the Act, accepting the income returned based on Section 115J of the Act. He attached a sheet called 'Adjustment Explanatory Statement' to this intimation. He noted in this sheet the various adjustments giving reasons for each of such adjustments. The claim of the assessee is that the adjustments so made are not in the nature of prima facie adjustments and therefore, though, the Assessing Officer had stated it as an intimation under Section 143(1)(a), it has to be treated as an assessment framed under Section 143(3). Accordingly, the claim advanced had been that the Assessing Officer could not subsequently issue a notice under Section 143(2) for purposes of framing of the assessment. Therefore, the present assessment order is illegal and should be quashed. The content of the said sheet is therefore reproduced below for the sake of convenience and for appreciating the controversy:
The Assessing Officer issued a notice under Section 143(2) of the Act, dated 14-6-1991, to which the authorised representative of the assessee, responded and on that basis, after considering the evidence and other material on record, the assessment under Section 143(3) of the Act, was framed on 30-3-1993. The Assessing Officer, in this order; had started with the examination of the determination of the book profits under Section 115J of the Act. He objected to the deduction of arrears of depreciation from the book profits, because, it pertained to earlier years, while, the profit and loss account, that was required to be prepared according to the provisions contained in Parts II & III of Schedule VI of the Companies Act, was for a particular year only. He also considered the deduction allowed of bad debt, which he observed is not allowable, because, it related to a business, whose assets and liabilities were taken over only, and since, the income was not included in the hands of the assessee, in an earlier year, the irrecoverable debt, could not be allowed to be deducted from the computation of the income of the assessee. The Assessing Officer accordingly observed that the book profits have been improperly computed.
(3.) THE Assessing Officer proceeded to examine the various aspects of income, deductions, as are necessary, in the making of the computation of the income from business, under the provisions of Sections 28 to 43A of the Act. He accordingly computed the income from business at a figure of Rs. 2,68,82,870. He compared this income with the figure of book profit under Section 115J of the Act, which he arrived at Rs. 60,19,900, by adding back the arrears of depreciation only. Finding that the income as computed under the provisions of Sections 28 to 43A of the Act, and after allowing of deductions under Sections 80G & 80M of the Act, and setting off the brought forward losses, he concluded that the total income of the assessee-company was higher, on which the assessee was liable to pay income-tax, was Rs. 2,68,82,870.;