Commissioner of Income Tax vs Ram Niwas Sharma

Jawahar Lal Gupta, J.—The respondent-assessee is working as a Development Officer in the LIC. He filed a return declaring an income of Rs. 68,420. The assessee disclosed that he had received an incentive bonus amounting to Rs. 58,320. He claimed deduction at 40 per cent on account of expenses u/s 16(i) of the income tax Act, 1961 (''the Act''). The Assessing Officer proceeded u/s 143(1)(a) and allowed deduction of Rs. 23,328. The assessee filed an application u/s 154 of the Act. It was rejected vide order dated 26-7-1994. The assessee filed an appeal. It was accepted by the Commissioner (Appeals). The revenue filed an appeal before the Tribunal. The appeal was dismissed on the ground that the addition could have been made only after giving a notice u/s 143(2) of the Act. Since no notice had been given to the assessee, the appeal was dismissed. The petition for reference having been dismissed by the Tribunal, it has filed the present petition with the prayer that the Tribunal be directed to refer the following question for the consideration of this Court : Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that adjustment made in respect of incentive bonus on the basis of documents accompanying the return was outside the scope of section 143(1)(a) of the income tax Act, 1961 and could have been made only after issue of notice u/s 143(2) ?

We have heard Mr. R.P. Sawhney, the learned counsel for the revenue. He contends that the assessing authority had proceeded under the provisions of section 143(1)(a) of the Act. As such, no notice was required to be given to the assessee.

After hearing the learned counsel, we are of the opinion that in the absence of an opportunity to the assessee, the ITO could not have declined his request for deduction. The decision of the authority was ex parte. It has been rightly reversed by the Tribunal on the ground that notice u/s 143(2) should have been given. We find no ground to interfere. The petition is, accordingly, dismissed.