MODI CEMENT LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) Enactment of new provisions in the Income-tax Act instead of reducing, more often than not. increases litigation. This is either because of the ambiguity or lack of clarity in the provision enacted or the manger in which the provision newly enacted is applied. The present case falls in the second category as we shall presently sec.

(2.) In respect of the assessment year 1989-90 the petitioner company filed a return of loss declaring a loss of Rs. 1,36.83.23.142 and claimed a refund of Rs. 1,64,013 which was a tax deducted at source. This return was filed on 28th December, 1989 and, according to the petitioner, the same was accompanied by all the necessary annexures, documents, statements, annual reports etc.

(3.) The Deputy Commissioner of Income-tax (Assessment), on 30th August. 1990 intimated to the petitioner that this return of loss, subject to adjustments, had been accepted. The Deputy Commissioner disallowed expenses to the tune of Rs. 3,86,00,759 and the reason for this disallowance was contained in the adjustment explanatory sheet annexed to the said intimation sent undersection 143 (1) (a) of the Income-tax Act. The said sheet disclosed three items of disallowance. The first was of Rs. 3,32,24.375 which was a claim made under Section 43B This was disallowed for want of proof of payment as the proof was allegedly not enclosed. According to the petitioner at the time when the return was filed, the duly audited balance-sheet alongwith the tax audit report had been enclosed and that itself tantamounted to a proof of payment. The second item which was disollowed was of a sum of Rs. 1,55,860. The reason of the disallowance was "cost of individual items of presentation exceeding Rs. 50". The third item disallowed was of Rs. 52,20.524 which was the investment allowance which was claimed and the said disallowance was for the reason that the reserve had not been created.