COMMISSIONER OF INCOME-TAX Vs. GEI ENGINEERING LTD.

JUDGEMENT

(1.) THE present appeal preferred under Section 260A of the Income -tax Act, 1961 (for brevity 'the Act'), was admitted on the following substantial question of law: Whether the Tribunal has erred in holding that the adjustments (disallowance) made by the Assessing Officer by treating the late delivery damages of Rs. 58,79,839 and penal interest of Rs. 14,69,905 as contingent liabilities were not within the scope of prima facie adjustments under Section 143(1)(a) of the Income -tax Act, 1961?

(2.) THE facts leading to filing of this appeal are that the assessee -respondent filed its return of income for the assessment year 1997 -98 on November 28, 1997, declaring its total income of Rs. 79,58,855. Audit reports as per Section 44AB of the Income -tax Act and as per the provisions of the Companies Act, 1956, were filed along with the return of income. The return was processed under Section 143(1)(a) of the Act as per the intimation dated November 17, 1998, which was served on the assessee on January 4, 1999. The Assessing Officer in the intimation had adjusted the total income at Rs. 1,53,08,599 and an additional tax of Rs. 6,32,077 was levied.

(3.) QUESTIONING the correctness of the order passed by the Tribunal it is submitted by Mr. Rohit Arya, learned senior counsel along with Mr. Sanjay Lai for the appellant that the Tribunal has fallen into grave error by expressing the opinion that the adjustments made by the Assessing Officer are not the kind of adjustments contemplated under Section 143(1)(a) of the Act inasmuch as the perception of the assessee -company was totally erroneous and in view of the material available on record there could not be any shadow of doubt that they were contingent liabilities.