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Issues involved: Interpretation of whether relief under section 35B of the Income Tax Act can be granted through rectification under section 154 even if not claimed in the original assessment proceedings.
Summary: The High Court of Madhya Pradesh addressed a reference made by the Income-tax Appellate Tribunal regarding the entitlement to relief under section 35B of the Income Tax Act through rectification under section 154. In the assessment proceedings for the year 1972-73, the assessee did not claim export markets development allowance under section 35B. The Income Tax Officer (ITO) initiated rectification proceedings under section 154 for a different matter, but the assessee argued for the relief under section 35B. The ITO refused, stating the claim was not made initially. However, the Appellate Authority Commission (AAC) ruled in favor of the assessee, emphasizing the apparent error in not granting the relief. The Tribunal upheld this view, asserting that the ITO's jurisdiction under section 154 is not limited to the return but extends to the entire assessment record. The High Court disagreed with previous decisions from the Allahabad High Court, emphasizing that the assessment record includes all relevant material, not just the return. They supported the Gujarat High Court's stance that if an assessee is entitled to relief, it can be rectified under section 154 even if not claimed initially. The Court rejected the Department's argument that the entitlement to relief under section 35B was not apparent from the record. They clarified that the question must be answered based on the assumption that the assessee was indeed entitled to the relief. Consequently, the Court held that relief under section 35B can be granted through rectification under section 154, even if not claimed in the original assessment proceedings. No costs were awarded in this reference.
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