ORDER
B.L. Chhibber, A.M.
1. Following two effective grounds have been raised in this appeal by the assessee :
“(1) On facts and circumstances prevailing in the case and as per provisions of law, it be held that, the additions/disallowances made Rs. 4,21,262 being provisions of retirement benefits and leave encashment charges in terms of provisions of Section 143(1)(a)/154 of the Act is beyond the scope of such section. It further be held that no such disallowance/additions could have been made in terms of provisions of Section 154 of the Act. The additions so made be deleted.
(2) On facts and circumstances prevailing in the case and as per provisions of law it be held that, addition of Rs. 4,53,86,124 being the amount received in settlement of dispute with AEGAIK-Germany claimed by the appellant-company as not forming part of the taxable receipt in processing of the return under Section 143(1)(a) is beyond the scope of such provision. It further be held that addition made in terms of such provision is mistake apparent from records and the same should have been rectified by the AO. It further be held that not accepting the contention of the appellant in this respect for carrying the required rectification in terms of provisions of Section 154 is contrary to the provisions of the law, The additions so made be deleted, Just arid proper relief be granted to the appellant in this respect.”
2. The assessee is a closely-held limited company engaged in the business of manufacturing of dispersants, biocides and organophosphonate, that is to say, water treatment chemicals. With a view to diversifying its activity, it had entered into an agreement in October, 1989, with AEGAIK a German company (AIK for short) for supply of technical know-how for manufacture of fire retardant chemicals consisting of coating materials (for coating electrical wires, etc.) and scaling materials (scaling openings through which wires pass). These chemicals are designed to be fire resistant and were being manufactured by AIK Germany. These chemicals are having particular interest for fire industry. Technical know-how could have enabled the assessee-company to acquire a new source of income of manufacturing a new item for the purpose of manufacture. The company had decided to get the project at Pirangut where sufficient place was available. It had made out a project for the purpose and got the approval from SICOM and WDC for project loan and sales-tax benefit of Maharashtra Government. The German company was paid first instalment of technical know-how fees and in return the German company supplied certain technical information and drawings to the assessee. Since the information provided by AIK was not sufficient, the assessee-company could not start its manufacturing activities of fire retardant chemicals. Even after repeated requests, AIK refused to divulge any further information and took the stand that it had supplied all the necessary information. Discussion between the assessee and the German company having come to a deadlock, the assessee had no alternative but to go in for arbitration as per the technical know-how agreement. Accordingly, reference was made to the International Court of Arbitration. For the breach of contract committed by the German company, the assessee-company had sought compensation. As per the agreement, arbitration expenses were to be borne by the assessee-company. These were incurred in the asst. yr. 1997-98. The arbitration award was received in the asst. yr. 1998-99 according to which the assessee received a sum of Rs. 4,53,86,123 towards settlement of the dispute.
3. The assessee-company filed its original return of income on 30th Nov., 1998, declaring loss of Rs. 2,70,24,054 (copy given on pp. 4 to 6 of the paper book). This return was revised on 18th Feb., 1999, and revised loss was shown at Rs. 2,65,06,648. The revision in loss was mainly necessitated because of the claim of deduction for scientific research. Along with the return of income, the assessee had filed its printed balance sheet and P&L a/c (pp. 10 to 41 of the paper book). In their audit notes, the company auditors had noted as follows (p. 35 of the paper book) :
“(b) Revenue Recognition
(1) ……..
(2) ……..
(3) The amount of Rs. 4,53,86,123.61 received from AEGAIK, Germany, towards settlement of disputes is treated as capital receipt. The relevant papers have not been produced for our verification hence we cannot comment whether such receipt is capital receipt or revenue receipt or is partly capital or partly revenue receipt.”
The assessee had also enclosed tax audit report and in a note given the tax auditors had stated as under (p. 83 of the paper book) :
“(1) The company received sum of Rs. 4,53,86,124 being the amount awarded by way of settlement of disputes between the company and AEGAIK, Germany. The amount so received is treated as capital receipt by the company and has not been offered as taxable income for the purpose of the IT Act and is not considered while computing the income for the asst. yr. 1998-99.”
These were the only two materials filed with the return of income in regard to the sum of Rs. 4,53,86,124.
4. The returns filed by the assessee-company were processed by the AO and an intimation was issued computing the adjusted total income at Rs. 11,88,79,474 (copy of the intimation given on pp. 1 to 3 of the paper book). In the adjustment explanatory sheet, it was shown that two additions were made; one of Rs. 4,53,86,124 and the other was of Rs. 10 crores. In regard to the first item, the reasons given for the addition are that the amount received by way of settlement of disputes between the assessee-company and AEGAIK being revenue receipt. The assessee had not submitted any specific reason for claiming the amount as capital receipt and excluding the same from the total income. Moreover, as seen from Schedule 15 of the audited balance sheet, the assessee had been claiming arbitration expenses in its P&L a/c in the earlier years which itself goes to prove that the amount received after the settlement of arbitration is of revenue nature. The other amount of Rs. 10 crores was added with a narration that lump sum amount received for assignment of business being revenue in nature.
5. The assessee-company filed appeal against said intimation on 28th June, 1999, and it also made an application under Section 154 to the AO.
6. The AO passed the order under Section 154 disposing of the assessee’s application under Section 154 which is the subject-matter of the present appeal.
7. In the order under Section 154, the AO not only dealt with the application made by the assessee under Section 154, he also had issued a notice under Section 154 on 26th July, 1999, seeking to rectify and add some more amounts in the intimation under Section 143(1)(a). This order passed by the AO under Section 154 was a combined order on the application made by the assessee under Section 154 and also on the notice issued by him under Section 154.
8. In its application under Section 154, the assessee had challenged both the additions of Rs. 4,53,86,124 and of Rs. 10 crores. The AO accepted the mistake in addition of Rs. 10 crores, but did not accept the mistake of addition of Rs. 4,53,86,124. The assessee had stated before him that the point regarding the addition of Rs. 4,53,86,124 was a highly debatable issue and could not be considered in the issues covered for the purpose of prima facie adjustments in terms of Section 143(1)(a). For this purpose, the assessee had relied on the decision of the Hon’ble Madhya Pradesh High Court in the case of Kamal Textiles v. ITO (1991) 59 Taxman 555 (MP), decision of the Hon’ble Bombay High Court in Khatau Junkar Ltd. v. K.S. Pathania (1992) 196 ITR 55 (Bom), J.K. Employees Welfare Fund v. ITO (1993) 199 ITR 765 (Raj) and Modern Fibotex India Ltd. v. Dy. CIT (1995) 212 ITR 496 (Cal). According to the AO, the auditors report filed along with the return was not clear about the exact nature of receipt of Rs. 4,53,86,124. Relevant papers also had not been produced for verification before the auditors and, therefore, no clear findings could be given by them. In view of this and also for the reasons recorded in the adjustment explanatory sheet, the contention of the assessee was not accepted and the receipt was held to be receipt of revenue nature. Incidentally, the AO also observed that the assessee-company had claimed expenses of Rs. 36,10,250 on arbitration expenses in asst. yr. 1997-98 was clear from Schedule 15 to the P&L a/c filed with the return of income for asst. yr. 1998-99. According to the AO, the receipt was clearly of revenue nature and not capital nature and the contention of the assessee was rejected.
9. Dealing with his own notice under Section 154, the AO observed that the provision made by the assessee on account of retirement benefit and leave encashment of Rs. 4,21,262 was not allowable. Though it was stated before him by the assessee that these amounts were actually paid subsequently, in June/July, 1998, the AO held that the amount was outstanding as on 31st March, 1998, and since the liability, of leave encashment was of contingent nature, it could not be allowed as deduction unless it was paid. With these remarks, he added a sum of Rs. 4,21,462.
10. Aggrieved by the order under Section 154, the assessee filed an appeal separately against the order under Section 154. The assessee’s appeal against the intimation under Section 143(1) and its appeal against order under Section 154 both were heard together by the CIT(A). He has, however, passed the order only in appeal against the order under Section 154 against which the present appeal has been filed.
11. In dealing with the addition of Rs. 4,21,262 on account of leave encashment, the CIT(A) held that in view of binding decision of the Bombay High Court in the case of CIT v. Rajkumar Mills (1971) 80 ITR 244 (Bom) and Standard Mills Ltd v. CIT (1998) 229 ITR 366 (Bom) provision for leave encashment was a contingent liability which could not be deducted in computing taxable income. In view of these binding decisions, it could not be said that there was any dispute in the matter; the CIT(A) accordingly confirmed the addition.
12. In regard to the second point regarding addition of Rs. 4,53,86,124, the assessee had contended before him that the said amount was a capital receipt and in any case, the issue was arguable and could not be subject-matter of prima facie adjustment. According to the assessee, in order to form an opinion whether the amount received is of capital or revenue nature requires detailed examination of facts and application of principles enunciated by various Courts and therefore, obviously, this issue could not be covered by provisions of Section 143(1)(a) of the Act. The assessee also relied on Board’s circular No. 689 dt, 24th Aug., 1994, issued by the CBDT which required obtaining of approval of the CIT before making any prima facie adjustments not covered in any of the circumstances mentioned in the circular. The assessee further had relied on four decisions which were quoted before the AO (cited supra). The CIT(A), however, did not accept the contention of the assessee and went into the merits of the assessee’s claim that the receipt was capital in nature. He also went through the arbitrator’s award which was filed before him as per his direction. He also perused the terms of the award and observed in para 9 of his order that the amount of compensation had been received by the assessee in lieu of profits and not because the assessee’s profit-earning apparatus was affected. According to the CIT(A), had the assessee received damages for injury affected to the profit-earning apparatus, the assessee might have had some case to treat the receipts as capital receipt. However, it was clear from the facts of the case that the amount had been received by the assessee in lieu of profits. The CIT(A) accordingly held that the amount of Rs. 4,53,86,124 was clearly in the nature of revenue receipt. He further observed that perusal of the arbitration award clearly mentioned that the amount had been received by the assessee in lieu of profit or on account of loss of profit. The amount was, therefore, clearly in the nature of revenue receipt. According to the learned CIT(A), all the facts being available on record, the AO need not have made any investigation to find out the nature of the receipt as it is a basic principle of law that the amount received in lieu of profit is nothing but a revenue receipt. The CIT(A), therefore, agreed with the AO that the addition of Rs. 4,53,86,124 was in the nature of prima facie adjustment. He accordingly confirmed the addition. Aggrieved by the above findings of the CIT(A), the assessee is in appeal before this Tribunal.
Ground No. 1
13. According to Shri K.A. Sathe, the learned counsel for the assessee, the addition of Rs. 4,21,262 cannot be subject-matter of prima facie adjustment in view of the decision of the Hon’ble Supreme Court in the case of Bharat Earth Movers Ltd v. CIT (2000) 245 ITR 428 (SC).
14. Shri K. Srinivasan, the learned Departmental Representative submitted that in the light of the Hon’ble Supreme Court decision in the case of Bharat Earth Movers Ltd. (supra), the issue needs to be re-examined and, therefore, the matter may be sent back to the AO to ascertain whether provision is made on scientific basis and in the light of the guidelines given by the Hon’ble Supreme Court and thereafter regulate the allowability thereof.
15. We have considered the rival submissions and perused the facts on record. The Hon’ble Supreme Court in the case of Bharat Earth Movers Ltd. (supra) has held that if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied, the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. So observing, the Hon’ble apex Court has held that the provision made for leave encashment was not a contingent liability and the same was allowable in the accounting year during which the provision was made. For this purpose, the Hon’ble Supreme Court has followed its earlier decision in Metal Box Co. of India Ltd. v. Their Workmen (1970) 75 ITR 53 (SC) and Calcutta Co. Ltd. v. CIT (1959) 37 ITR 1 (SC).
16. It is well-settled that the Supreme Court does not make the law, but it interprets law as it is. In this behalf, reference may be made to the CBDT’s Circular No. 68, dt. 17th Nov., 1971 (reproduced on p. 5336 of Chaturvedi & Pithisaria Vol. 3-5th Edn.). The said circular is to the following effect :
“The Board are advised that a mistake arising as a result of subsequent interpretation of law by the Supreme Court would constitute ‘a mistake apparent from the record’ and rectificatory action under Section 35/154 of the IT Act, 1922/1961 would be in order. It has, therefore, been decided that where an assessee moves in application under Section 154 pointing out that in the light of a later decision of the Supreme Court pronouncing the correct legal position, a mistake has occurred in any of the completed assessments in his case, the application shall be acted upon, provided the same has been filed within time and is otherwise in order. Where any such applications have already been rejected and the assessee files fresh applications within the statutory time-limit, the same may also be treated on par with the applications which may either be pending or received after the issue of this circular.”
In view of these clear directions of the CBDT on the effect of the Supreme Court decision, the direction of the AO that an amount of Rs. 4,21,262 should have been added as prima facie adjustment in issuing intimation under Section 143(1)(a) is patently wrong and required to be quashed. If the prima facie adjustment had been made under Section 143(1)(a) adding an amount of Rs. 4,21,262, even on application by the assessee under Section 154, the addition should have been required to be deleted in view of the said circular of the CBDT. Same should be the result when an appeal is filed against an order under Section 154 and a binding decision of the Supreme Court is pointed out. Accordingly, we do not find any merit on the contention of the learned Departmental Representative that the matter may be restored back to the AO for further verification because the matter had been finally decided by the apex Court. The addition of Rs. 4,21,262 as a prima facie adjustment under Section 143(1)(a) is patently wrong and the same is accordingly deleted. This ground accordingly succeeds.
Ground No. 2
17. Shri K.A. Sathe, the learned counsel for the assessee, submitted that the AO’s action in refusing to rectify the intimation under Section 143(1)(a) by deleting the addition of Rs. 4,53,85,124 is contrary to law for the following reasons :
(i) Income adjustment as made by the AO was clearly outside the scope of prima facie adjustment under Section 143(1)(a) as held by the Bombay High Court in Adamas Gem Industries Ltd. v. Asstt. CIT (1993) 203 ITR 737 (Bom) and the Gauhati High Court in Namdang Tea Co. (I) Ltd. v. Dy. CIT (1997) 226 ITR 867 (Gau) and Makum Tea Co. (I) Ltd. v. (1999) 235 TTR 484 (Gau).
(ii) Prima facie adjustment sought to be made is on an issue which requires further evidence and was of debatable nature. The scope of prima facie adjustment cannot cover such type of adjustment. In support of this contention, the learned counsel relied upon the judgment of the Bombay High Court in the case of Khatau Junkar Ltd. v. K.S. Pathania (supra).
(iii) The learned CIT(A) was wrong in going beyond his jurisdiction in examining the material which was not available while issuing intimation under Section 143(1)(a) and deciding an issue on merits by pre-empting the judgment of the AO to be made under Section 143(3) of the Act.
18. Shri K. Srinivasan, the learned Departmental Representative strongly supported the orders of the authorities below. He stated that the present appeal was invalid insofar as the assessee sought to claim rectification in Section 143(1)(a) proceedings on the matters which were highly debatable. The assessee ought to have preferred an appeal against Section 143(1)(a) and not an application under Section 154 which had a limited scope.
19. We have considered the rival submissions and perused the facts on record. In the first place, the scope of prima facie adjustment is restricted only to disallowance of “a deduction, allowance or relief claimed in return”. The AO in issuing intimation under Section 143(1)(a) has no power in making an income adjustment. Reliance is placed in this behalf on the decision of the Hon’ble Bombay High Court in the case of Admas Gem Industries Ltd. (supra). In this case, the AO had issued an intimation under Section 143(1)(a) seeking to add an amount received by way of compensation from the vendor for delay in completing the sale of office premises. It was held by the Hon’ble Bombay High Court that the said adjustment did not fall within the parameters of the proviso, Clause (iii) to Section 143(1)(a). The intimation and consequent claim for additional tax were held to be invalid. To the similar effect are the decisions of the Gauhati High Court in the case of Namdang Tea Co. (I) Ltd. (supra) and Makum Tea Co. (I) Ltd. (supra), and relied upon by the learned counsel for the assessee. Both these decisions have held that in intimation under Section 143(1)(a) income additions cannot be made. The decision of the Hon’ble Bombay High Court has been followed by this Tribunal in the case of Mutha Kulkarni & Co. v. ITO in ITA No. 788/Pn/1994, dt. 26th May, 2000. Thus, prima facie adjustment made by the AO was patently outside the parameters of Section 143(1)(a) and, therefore, the application of the assessee that this constituted a mistake apparent from the record was fully justified. The AO therefore, should have accepted the contention and deleted the adjustment.
20. The adjustment made under Section 143(1)(a) was patently wrong on two grounds, viz. (i) addition could be made only after calling for certain more information, and (ii) it related to a point which was highly debatable and such dispute could not have been resolved on the material available along with the return. In this behalf, the AO was required only to consider the return which was before him and the accompanying documents and no other papers on record.
21. The law on this point has been laid down by the Hon’ble Bombay High Court in the case of Khatau Junkar Ltd. (supra). Reference may be made to the headnote to the decision on p. 57. The Bombay High Court has observed as under:
“The errors which were mainly required to be corrected were only arithmetical errors. This clearly shows that no substantial adjustments which would require examination of any evidence or which would require a hearing to be given to the assessee are contemplated whenever such a power of making adjustment without hearing the assessee is conferred. ………. such in intimation can be sent to the assessee only on the basis of the return.”
Further, on p. 59, the Bombay High Court’s observations have been summarised as under:
“In the absence of any specific provisions in the IT Act which disallows a deduction because a specific document specified in that section is not annexed to the return, the ITO cannot under Clause (iii) of the proviso to Section 143(1)(a), disallow a claim or a deduction merely because, in his view, adequate evidence in support of such a claim or deduction is not before him.”
On p. 72 of the judgment, the Bombay High Court has considered the decision of the Hon’ble Madhya Pradesh High Court in the case of Kamal Textiles v. ITO (supra) [relied upon by the assessee before the AO and before the CIT(A)). In that context, the Bombay High Court held that “permissible adjustments are, inter alia, only of those claims which are, on the basis of information available in the return, prima facie inadmissible. The assessing authority is not permitted under the guise of making adjustment to adjudicate upon any debatable issue.” In the present case, it has been pointed out that the material before the company auditors was insufficient to come to any definite conclusion whether the receipt of Rs, 4,53,86,123 was a revenue receipt or capital receipt. The note of the tax auditor was also equally insufficient. The question whether a compensation received for breach of contract is a capital or revenue receipt is of highly debatable nature. In coming to the conclusion whether in the circumstances of a particular case the compensation is capital or revenue receipt, many questions have to be asked and answered; what was the scope of the earning apparatus or structure, from physical, financial, commercial and administrative standpoints?
If it was a business of taking agencies how many agencies it had, what was their nature and variety? How were they acquired, how one or some of them were lost and what was the total income they were yielding? If one of them was given up, what was the average income of the agency lost? What was its proportion in relation to the total income of the company? What was the impact of giving it up on the structure of the entire business? Did it amount to a loss of an enduring asset causing an unabsorbed stock dislocating the entire or a part of the earning apparatus or structure? Or was it a loss due to an ordinary incident in the course of business? The answers to these questions would enable one to come to a conclusion whether the loss of a particular agency was incidental to the business or whether it amounted to a loss of an enduring asset–CIT v. Best & Co. (1966) 60 ITR 11 (SC). There are in fact a number of decisions on the point taking one position or the other, much will depend, therefore, on several issues to be decided. In the present case, if we confine ourselves only to the return, obviously no conclusion could be reached. The AO also has not referred to any other material except pointing out to the claim of the assessee in regard to the arbitration expenses. An assessee may claim an expenditure on an entirely different ground. Expenses even to save a capital asset can be held to be revenue in nature, but that does not mean that any arbitration resulting in award of compensation is necessarily revenue in nature. The two questions are entirely different and their decision does not impeach on one another. No conclusive answer could be found merely from the answer that the arbitration expenses were claimed by the assessee in earlier years.
22. The fact that compensation was calculated on the basis of loss of profits by the arbitrators was not relevant to the issue for two reasons. The CIT(A) had for the first time perused the arbitration award which was not before the AO in his intimation proceedings or in Section 154 proceedings and in any case they could not have been looked into. Secondly, the manner in which the compensation is calculated is not decisive to decide the nature of the receipt. Even where a source of income is lost to the assessee, compensation can be arrived at by adopting some measure and it is inevitable that in such process, loss of profit will be calculated. In this behalf, decision of the Bombay High Court in CIT v. Elys Plastics (P) Ltd. (1991) 188 ITR 11 (Bom) is relevant. The question before the Bombay High Court was whether central subsidy was to be reduced from the actual cost of the asset. It was held by the Bombay High Court that only because quantum of subsidy was calculated on the basis of fixed capital investment of the company in land, plant and machinery by itself could not lead to the conclusion that the said subsidy was given to meet the cost of land, plant and machinery. This was only the manner of calculations. Thus, the fact that arbitrators based their compensation on loss of profits was not conclusive of the matter and the real purpose for which compensation was granted was required to be gone into. Such an issue which was of very complex nature could not have been subject-matter of prima facie adjustment. In our opinion, the CIT(A) grossly erred firstly in going into the documents which were not part of the return and then coming to the conclusion that the receipt was clearly revenue in nature and could be subject-matter of prima facie adjustment.
23. In fact the real issue before the CIT(A) was very limited one, namely, whether a particular item could be subject-matter of prima facie adjustment and, therefore, constituted a mistake apparent from record. In deciding this issue, the CIT(A) was not expected to convert the proceedings under Section 143(1) into those of 143(3) and thereby pre-empting the matters to be really considered in the proceedings under Section 143(3). In this behalf, reference may be made to the decision of the Mumbai Bench of the Tribunal in Mrs. Treety K. Sahni v. ITO (1997) 59 TTJ (Mum) 763 : (1998) 65 ITD 466 (Mum). It was held by the Tribunal in that case that it was not in dispute that the AO could not disallow set off of loss as claimed by the assessee in the prima facie adjustment that he was entitled to make under Section 143(1)(a). It was no doubt true that power of CIT(A) is much wider than that of an ordinary appellate authority, but all the same, he cannot change the subject-matter of appeal and direct the AO to apply a provision which the AO was himself not competent to apply when deductions were given. The CIT(A) could not convert a case of a prima facie adjustment, which is made under Section 143(1)(a) into a case of a regular assessment under Section 143(3). Accordingly, we hold that the CIT(A) was wrong in going beyond his jurisdiction in examining the material which was not available while issuing intimation under Section 143(1)(a) and deciding an issue on merits by pre-empting the judgment of the AO to be made under Section 143(3) of the Act.
24. Coming to the argument of the learned Departmental Representative that the present appeal was invalid insofar as the assessee sought to claim rectification in Section 143(1)(a) proceedings on the matters which were highly debatable and that the assessee ought to have preferred an appeal against 143(l)(a) and not an application under Section 154 which had a limited scope, we do not find any merit in the same because the contentions of the learned Departmental Representative are untenable. The assessee was not seeking to rectify on a debatable issue. In fact, it was urging that on a debatable issue, prima facie adjustment could not have been made as is held by the binding decision of the Bombay High Court. It has been already pointed out earlier that there were two apparent errors in the intimation under Section 143(1)(a). First was the income addition was outside the scope of prima facie adjustment. This position is clear even from the wording of Section 143(1)(a) itself. This is supported by the binding decision of the Bombay High Court in the case of Adamas Gem Industries Ltd. (supra). This constitutes an apparent error. The second apparent error was that it was the AO who was making a prima facie adjustment on an issue which was debatable. Once the Departmental Representative accepted that the issue was debatable, the fact that it was made subject-matter of prima facie adjustment was clearly an error apparent from record and the AO ought to have rectified the same by deleting in Section 154 proceedings.
25. It is true that the assessee had a remedy of appeal against the intimation under Section 143(1)(a). The assessee did file an appeal against the intimation under Section 143(1)(a) on 20th June, 1999. Filing of the appeal did not preclude the assessee from seeking rectification of an apparent error where such a remedy was available in law. In fact, the CIT(A) heard both the appeals together, but chose to pass order only in appeal against the order under Section 154. In this appeal also, the assessee was entitled to agitate the entire issue regarding the propriety and correctness of the prima facie adjustment. In this behalf, reference may be made to Board’s Circular No. 549, dt. 31st Oct., 1989. In para 5.17 (P. 4743 of Chaturvedi & Pithisaria, Vol. 3, 5th Edn.), the Board have observed as under :
“A direct appeal has not been provided against adjustments made under the proviso to Section 143(1)(a) and the consequential charge of additional income-tax under Section 143(1A), because the adjustment are to be made only in respect of arithmetical errors and prima facie admissibles or inadmissibles. Any action of the AO in contravention of these provisions will be clearly a mistake. Therefore, Section 154 relating to rectification of mistake has been amended to bring an intimation/refund issued under Section 143(1) within the purview of that section. Therefore, if an assessee is aggrieved by an adjustment made to the returned income/loss and also the consequential charge of additional income-tax, he can move an application under Section 154 before the AO for rectification of the mistake.”
If, therefore, the Board itself considered that any adjustment made in contravention of the provisions of law constitutes an apparent error, the learned Departmental Representative’s objection in that behalf is totally untenable.
26. In the light of above discussion, we hold that both the adjustments in regard to leave encashment and compensation received are outside the scope of prima facie adjustment under Section 143(1) and accordingly the additions made under Section 143(1)(a) are deleted with consequential levy of additional tax.
27. In the result, the appeal is allowed.