IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 30TH JANUARY 2008 / 10TH MAGHA 1929 ITA.No. 130 of 2001() --------------------- AGAINST THE ORDER DATED 16/03/2001 IN COCH. IN ITA.309/1996 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT:- --------------------------------------- THE COMMISSIONER OF INCOMETAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON(SR.),SC FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENT/APPELLANT:- --------------------------------------- KERALA STATE ROAD TRANSPORT CORPORATION, THIRUVANANTHAPURAM. BY ADV. SRI.N.JAMES KOSHY FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 30/01/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & T.R.RAMACHANDRAN NAIR, JJ. ============================ I.T.Appeal No.130 of 2001. ============================ Dated this the 30th day of January, 2008. C.N.Ramachandran Nair, J. J U D G M E N T The appeal filed by the Revenue is against the order of the Tribunal holding that the dis-allowance based on auditor's opinion made under Sec.143(1)(a) of the Income Tax Act is tenable. The respondent is a transport corporation under the control of the Government which has disclosed a loss of about 30 Crores. In the audit report filed along with the return a sum of Rs.19,20,384/- shown as paid to the Staff Welfare Fund is not allowable under Section 40A(9) of the Income Tax Act. Based on this opinion of the auditor, the assessing officer dis-allowed the claim while issuing proceedings under Section 143(1)(a) of the Act. Even though the first appeal was unsuccessful, the Tribunal held that the assessee's claim was allowable as it falls under the exception clause, because the payment was made under agreement with the Unions and the same was approved by the Government. In the I.T.Appeal No.130 of 2001. 2 circumstances, we are of the view that the Tribunal was right in holding that the dis-allowance could not have been made in proceedings under Sec.143(1)(a) of the Income Tax Act. The assessing officer should not have adopted this shortcut method but issued notice and dis-allowance made if the assessee's claim is not tenable under Sec.143(3) of the Income Tax Act. The appeal is therefore dismissed. C.N.RAMACHANDRAN NAIR, JUDGE. T.R.RAMACHANDRAN NAIR, JUDGE. kvs/-