:1: IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 44 OF 2002 The Commissioner of Income Tax, having office at Aayakar Bhavan, Patto, Plaza, Panaji Goa. … Appellant V e r s u s 1. M/s. Phil Corporation Ltd., Tivim, Mapusa Goa. 2. The Income Tax Appellate Tribunal Panaji Bench, Aayakar Bhavan, Patto Plaza, Panaji Goa. … Respondents Ms. Asha Dessai, Advocate for the appellant. Mr. M. S. Sonak, Advocate for the respondent no.1. CORAM : S. A. BOBDE & F. M. REIS, JJ. DATE : 28 th JUNE, 2011 . ORAL JUDGMENT ( Per S. A. BOBDE, J) This appeal was admitted on the following substantial question of law : “A. Whether on the facts and in the circumstances of the case, the ITAT was justified in deleting the prima facie :2: adjustment of Rs.9,00,000/- on account of provision for doubtful debt carried out by the Assessing Officer in the light of the explanation added to Section 36(1)(vii) by Finance Act, 2001 with retrospective effect from 1.4.1989 ?” 2. Mr. Sonak, learned Counsel for the respondent no.1, submitted that the substantial question of law was framed at the time of admission without hearing the respondents and does not address the main issue involved in the case. According to learned Counsel, the substantial question of law may said to arise in the matter ought to have the following : “Whether on the facts and in the circumstances of the case, the ITAT was right in holding that the adjustment carried out by the Assessing Officer in relation to assessee's claim for provision of bad and doubtful debt is clearly outside the ambit of prima facie adjustment envisaged in Section 143(1)(a) of the Income Tax Act, 1961 ?” 3. We have examined the matter and we are of the view that the substantial question of law which needs to be decided is the question herein above. :3: 4. This case arises out of an intimation given by the Assessing Officer under Section 143 (1)(a) of the Income Tax Act, 1961 to respondent no.1 – assessee purporting to determine the income tax payable by the assessee as amounting to Rs.11,23,131/- by disallowing respondent no.1's claim for deduction of provision of bad and doubtful debts to the extent of Rs.9,00,000/- under Section 36(1)(vii) of the Income Tax Act, 1961. 5. In appeal, the Commissioner of Income Tax ( Appeals ) confirmed the order of the Assessing Officer and held that the additional tax has been rightly charged by the Assessing Officer under Section 143(1)(a) of the Act on the addition made in the appellant's/respondent no.1's income as prima facie adjustment under Section 143(1)(a) of the Act. In other words, the Commissioner of Income Tax (Appeals) held that the action of the Assessing Officer for disallowing the provision of bad and doubtful debts claimed by the assessee and adding the said amount to the appellant's/respondent no.1's income as prima facie adjustment is correct. 6. In appeal, the Income Tax Appellate Tribunal ( ITAT ) took a view that the findings of the Assessing Officer :4: that the assessee's claim for provision of bad and doubtful debts is clearly outside the ambit of prima facie adjustment envisaged in Section 143(1)(a) of the Income Tax Act, 1961 and that the Assessing Officer did not have sufficient material to hold that the said claim was inadmissible. The ITAT held that under the provisions of Section 143(1)(a), the Assessing Officer is not entitled to allow or disallow the claim but can only make adjustment on a prima facie scrutiny of the return and the accompanying documents filed by the assessee. Section 143(1)(a) if read for the assessment year 1993-1994 which reads as follows : “143(1)(a) Where a return has been made under Section 139, or in response to a notice under sub- section (1) of Section 142- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act :5: shall apply accordingly; ii) if any refund is due on the basis of such return, it shall be granted to the assessee; Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely :- (i) any arithmetical errors in the return, accounts, or documents accompanying it shall be rectified; (ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed; (iii) any loss, carried forward, deductions, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed; Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments”. :6: 7. Mr. Sonak, learned Counsel for respondent no.1, relied on the interpretation of the provision by the Division Bench of this Court in the case of Khatau Junkar Limited and another V/s K. S. Pathania and another, reported in 1992 (1) Bom. C.R. 550 wherein at para 7, this Court observed as follows : “7. On a plain reading of Section 143(1)(a) of the Act, therefore, it is clear that if on the basis of the return which is filed by the assessee, any tax or interest is found due after adjustments, as set out in the section, an intimation shall be sent to the assessee specifying the sum so payable. Similarly, if any, refund is due to the assessee, on the basis of such return, it shall be granted to the assessee. Therefore, such an intimation can be sent to the assessee only on the basis of the return. The proviso, however, to the section, permits certain adjustments to be made while calculating the tax or interest payable or while granting a refund. These permissible adjustments are : (1) any arithmetical error in the return, accounts or documents accompanying it, can be rectified; (2) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, :7: accounts or documents, is prima facie admissible but is not claimed in the return, can be allowed; and similarly (3) any such loss carried forward, deductions, allowance or relief, which is claimed in the return, but which, on the basis of the information available in such return, accounts of documents, is prima facie inadmissible, shall be disallowed. Apart from these provisions, sub-section (2) of section 143 empowers the Income Tax Officer, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid the tax in any manner, to serve on the assessee a notice requiring him to produce before him any evidence on which the assessee may rely in support of the return. Thereafter, under sub-section (3) he can proceed to make a regular assessment. The other relevant provision of section 143 is sub-section (1-a) under which, where, after making the adjustments under section 143(1)(a), it is found that the total income exceeds the income declared in the return by any amount, the Assessing Officer shall further increase the amount of tax payable by an additional income tax calculated at the rate of twenty percent of the tax payable on :8: such excess amount. This additional income tax shall be specified in the intimation which is to be sent under section 143(1)(a).” 8. We find that applying the ratio of the said decision, the order of the ITAT in appeal must be upheld. Indeed, the Assessing Officer has disallowed the claim for deduction made by the assessee by going into the merits of the claim, which could have only been done by the process of assessment under the Act for which it would be necessary for the Assessing Officer to issue a notice and call for the particulars to enable them to assess or adjudicate the claim. That not having been done, the ITAT was right in holding that the Assessing Officer travelled beyond the scope of the powers conferred upon him by Section 143(1)(a) of the Act and thus wrongly disallowed the claim itself. 9. In this view of the matter, there is no merit in the appeal which is hereby dismissed. No order as to costs. S. A. BOBDE, J F. M. REIS, J at*