Law:

Section:

Section 143, read with section 43B, of the Income-tax Act, 1961 - Assessment - Prima facie adjustment - Assessment year 1990-91 - Assessee filed return declaring net loss - Return was examined under section 143(1)(a) and an addition was made on ground that assessee had failed to furnish any evidence in support of deduction claimed under section 43B - Whether if no proof in support of claim was available with ITO, he could have issued a notice under section 143(2) but he could not have unilaterally made disallowance under section 43B by seeking to invoke provisions of first proviso to section 143(1) - Held, yes Circulars and notifications - CBDT Circular No. 549, dated 31-10-1989 FACTS The assessee filed its return of income declaring net loss for the assessment year 1990-91. The return was examined under section 143(1)(a) and an addition was made on the ground that the assessee failed to furnish any evidence in support of deduction claimed under section 43B. The assessee made an application under section 154 which was dismissed. The Commissioner (Appeals) on appeal remanded the matter to the Assessing Officer to obtain proof of payment and allow deduction if permissible under the provisions of law. On second appeal, the Tribunal, in view of High Court decision in India Carbon Ltd. v. IAC [1993] 200 ITR 759 (Gauhati), held that no disallowance could have been made. On the revenue's appeal : HELD When the information was available on record and payments were made in the prescribed form but no proof was furnished by the assessee, then the only course left with the Assessing Officer was to call for the information by issuing a notice to the assessee. This is imperative in consonance with the principles of natural justice. This opportunity could have been given to the assessee even at the time of disposing of the application under section 154. In view of the of S.R.F. Charitable Trust v. Union of India [1992] 193 ITR 95 (Delhi), it was to be held that the stage of furnishing of proof is reached as and when the proof is demanded by the ITO by a notice issued under section 143(2). If no proof in support of the claim was available with the ITO, he could have issued a…

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