ITR No. 192 of 1999 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No. 192 of 1999 Date of Decision: 10.9.2010 Commissioner of Income Tax, Chandigarh ....Petitioner. Versus M/s Punjab Agro Industries Corporation Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Advocate for the petitioner. ADARSH KUMAR GOEL, J. 1. The Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as “the Tribunal”) has referred for opinion of this Court following question of law under Section 256(1) of the Income Tax Act, 1961 (in short “the Act”) arising out of its order dated 24.9.1998 in ITA No. 1883/Chandi/91 in respect of assessment year 1990-91:- “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance /adjustment of Rs.1,86,444/- made by the AO in respect of expenditure relating to earlier years by holding that such disallowance was outside the scope of Section 143(1)(a)?” ITR No. 192 of 1999 -2- 2. While processing the return of the assessee under Section 143(1)(a), the Assessing Officer made various adjustments which included expenditure incurred for the earlier years. The amount of adjustment was later reduced on an application of the assessee under Section 154 of the Act which was upheld by the CIT (A). On further appeal, the Tribunal upheld the plea of the assessee that adjustments were beyond the scope of Section 143(1)(a) which was limited to arithmetical calculation or incorrect claim which may be apparent from the income mentioned in the return. The Tribunal held as under:- “After considering the rival submissions we held that there is substantial merit in the arguments advanced by the ld. counsel on behalf of the appellant. Their Lordships of the Hon'ble Bombay High Court have discussed each and every aspect of the matter at length viz-a-viz provisions of section 143(1)(a) and in doing so have followed the judgment of the Hon'ble Delhi High Court reported in S.R.F. Charitable Trust Vs. Union of India and others, 193 ITR 95 and the judgment of the Hon'ble Madhya Pradesh High Court reported in Kamal Textiles and others Vs. ITO and others, 189 ITR 339. It has been held that various types of adjustments, as outlined in the order before their Lordships, are outside the scope of section 143 (1)(a) and these items also include the amount debited to profit and loss account pertaining to earlier years. According to their Lordships an adjustment ITR No. 192 of 1999 -3- can not be made by an unilateral act where the issue is of such a nature that it requires some verifications and a view can not be taken without giving a hearing to the assessee. It has also been held that the ITO can not go beyond the return and the documents annexed to it. In our opinion the decision of the Hon'ble Bombay High Court squarely applies and respectfully following the same, we delete the addition of Rs.1,86,444/-.” 3. We have heard learned counsel for the revenue. 4. Learned counsel for the revenue submits that the claim of the assessee was patently incorrect and, therefore, adjustment under Section 143(1)(a) was justified. Reliance has been placed on the order of the Assessing Officer to the following effect:- “The assessee company has filed its written submission regarding this prima-facie adjustment. The assessee has admitted that the net result of earlier year's adjustments comes to Rs.1,86,444/-. The submissions of the assessee co. have been carefully considered and found that in fact the prima- facie adjustment works out to Rs.1,86,444/- instead of Rs.4,49,169/-.” 5. In view of the fact that the assessee itself admitted that claim of the assessee for deduction was incorrect which was apparent from the information in the return, it could not be held that the adjustment was beyond the scope of Section 143(1)(a). ITR No. 192 of 1999 -4- 6. In this view of the matter, observation in the order of the Tribunal quoted above that the adjustment was an unilateral act is factually incorrect. The judgments relied upon in the order of the Tribunal to the effect that unilateral adjustments could not be made under Section 143(1)(a) are distinguishable on facts. 7. In view of the above, the question referred is answered in favour of the revenue. (ADARSH KUMAR GOEL) JUDGE September 10, 2010 (AJAY KUMAR MITTAL) gbs JUDGE