TMI Blog1994 (5) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... , as per the department this is the second revised return and the assessee in fact filed a revised return on 12-2-1985 showing a loss of Rs. 11,59,726. The intervening revised return showing loss assumes significance inasmuch as if no intervening return was filed by the assessee, assessment in respect of the assessment year 1982-83 as prescribed by section 153(1)(a) of the Income-tax Act should have been made before the 31st March, 1985, i.e., within two years from the end of the assessment year in which the income was first assessable. However, if as stated by the department, loss returned was filed by the assessee before the expiry of the aforesaid period, viz., 31-3- 1985, limitation for the completion of the assessment would get extended by one year, i.e., up to 31-3-1986 as envisaged by clause (b) of sub-section (1) of section 153 of the Income-tax Act. In the first event, the assessment order would be untenable in law while in the second situation devoid of any jurisdictional lapse, the assessment having been rendered on the 10th February, 1986. 3. Before, however, we proceed to take up the appeals one by one, it appears relevant to state about their chronology and the back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the ld. CIT(A) (refer to his order dated 3-7-1986 directing de novo assessment). 8. And thirdly, if the assessee failed on both these submissions, on merits such amount was not exigible to tax as the receipt was not revenue in nature and, inter alia, related to compensate the assessee towards the losses suffered by it in running the units transferred as per the directions of the Madhya Pradesh Government which facts would be dealt with elaborately in the paragraphs hereinafter. 9. On behalf of the department, the learned Departmental Representative vehemently contested all the three points and submitted that neither the assessment was time barred nor the jurisdiction of the Assessing Officer was ousted in the facts and circumstances of the case from dealing with the receipt of Rs. 27,88,000 in the fresh assessment and lastly in his submission, the amount in question was clearly a payment received by the assessee towards interest and alternatively a remission of the assessee's liability to pay interest to the State Government and, therefore, clearly taxable under the Income-tax Act. 10. Before we deal with the rival submissions/contentions, facts that are necessary fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts inception. It may be pointed out that this objection was not taken by the assessee before the ld. CIT(A) during the first innings as a result of which the assessment was set aside to be done de novo, but was raised for the first time in the second innings and that too before the CIT(A) and not during the course of assessment under section 143(3). However, the objection was considered by the CIT(A), but overruled. 17. Facts necessary to determine this issue are that the assessee firstly filed their return on 30-6-1982 showing an income of Rs. 68,79,940 as already pointed out earlier. Similarly, a revised return dated 7-2-1986 at an income of Rs. 53,28,234 also exists. The dispute is only in relation to the return allegedly filed by the assessee on 12-2-1985, by which the department got a fresh lease to complete the assessment up to 12-2-1986 as contemplated by clause (c) of sub-section (1) of section 153 of the Act. While the assessee clearly denies the filing of this intermediary return, as per the department, it places reliance on the order sheet dated 15-3-1985 duly signed by the Assessing Officer. It reads as under:--- "The original return was filed on 30-6-1982 and it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of papers received and retained by the department and may even go to show a lapse on their part in properly preserving important documents, but it does not militate against the positive material on record to show that such return was filed by the assessee. Order sheet dated 15-3-1985 is part of the quasi-judicial proceedings conducted by the ITO under the statutory authority vested in him by the Income-tax Act, 1961. Till such time, anything to the contrary was proved, we are unable to doubt its veracity, genuineness much less its existence. As pointed out, this order sheet is on a paper which contains the records of the other dates in the assessee's case and some of the order sheets are signed on behalf of the assessee and, therefore, this document also for a very vital reason that the order sheet in question confines itself only to the filing of the revised return by the assessee makes it a wholly contemporaneous document. 20. In the result, we overrule the objection taken by the assessee that no intermediary revised return was filed by them on 12-2-1985 and adopting the reasoning of the ld. CIT(A) as of our own we hold that the assessee did file a revised return on 12-2-1985 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make any mention whatsoever about the receipt of Rs. 27,88,000 which fact was fairly conceded by their learned authorised representative appearing before us. He, however, added in the same breath that this was notified by the assessee to the department in the advance tax estimate submitted in Form No. 29 on 14/15-12-1981 in the form of a note and that being so, it was the duty of the Assessing Officer to have taken into consideration this information even while completing a best judgment assessment. This argument is repelled on behalf of the department with which we agree. 26. No doubt, the completion of an assessment under section 144 is not an arbitrary affair with the ITO. However, what he is supposed to consider is 'all relevant material which he has gathered on the basis of which he shall make the assessment of the total income or loss to the best of his judgment'. We are unable to extend the obligation of the Assessing Officer to go into the three estimates which an assessee makes during an accounting year for the payment of advance tax. In saying so, we do not mean that the Assessing Officer cannot use the information called out from these estimates, yet there is a differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the audit report. The receipt of the disputed amount of Rs. 27,88,000 was not before the Assessing Officer. On appeal, the CIT(A) abundantly made it clear that the determination of the assessee's income at Rs. 75 lakhs was not justified and that before the income of the assessee was determined, they should be given a fair and reasonable opportunity. Finally, the ITO was directed to complete the assessment afresh on the basis of the material furnished by the assessee which was obviously inclusive of the audit report and providing them an opportunity of being heard. In these circumstances, as has been narrated by us, it would be a travesty of facts if we agree that the Assessing Officer was trying to add any new source of income in the fresh assessment. In fact, it was only for the first time in the new assessment under section 143(3) that the sources of income of the assessee whatsoever they were, were gathered on the basis of the material produced by the assessee and assessment completed. Thirdly, this or any other source of income which stood disclosed by the consideration of the material, evidence and papers for which the Assessing Officer was under a legal obligation in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledge of the assessee which needless to state should have been proved by them before us as a fact of special knowledge as envisaged by the Indian Evidence Act. We equally discard the plea raised before us on behalf of the assessee that since all/most of the public sector undertakings/Corporations were running/returning huge losses the assessee-Corporation did not stand as an exception and the theory advanced that the amount of Rs. 27.88 lakhs be treated as reimbursement of the loss suffered by the assessee in running the nine units till 1971, be accepted. Such a pessimist and bleak state of affairs, we are afraid, we cannot subscribe to. 33. In fact what is clearly borne out from the State Government's communication dated 28-10-1980 is that it had advanced a sum of Rs. 73.50 lakhs to the assessee-Corporation for running its village and small industries. An interest rate not known, amounting to Rs. 27.09 lakhs accrued thereon and, therefore, payable by the assessee to the Government. This amount had to be adjusted. The assessees were entitled to a sum of Rs. 72.71 lakhs as the cost of the nine units transferred to the Industries Corporation. The State Government thought it fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not make any difference whatsoever in law. 35. The learned CIT(A) has rightly held that the above facts demonstrated that the Madhya Pradesh Government was a debtor to the assessee for a sum of Rs. 72.71 lakhs while it was a creditor to them for a sum of Rs. 100.59 lakhs. Further, the assessee is a person as defined by sub-clause (31) of section 2 of the Income-tax Act, 1961. The excess of Rs. 27.88 lakhs whether it is grant or given any other name was an amount received by the assessee by way of compensation for the transfer of these nine units. 36. In the circumstances, we are unable to agree with the assessee that the receipt of Rs. 27.88 lacs was in the nature of a capital receipt and, therefore, not liable to be taxed. It was clearly a revenue receipt and liable to be taxed. 37. It may also be pointed out that there is also sufficient force in the view taken by the learned CIT(A) that in the alternative the transaction of adjustment of which the payment of Rs. 27.88 lacs by the State Government to the assessee is a part, to the extent that it extinguished the assessee's liabilities of payment of interest of Rs. 27.09 lacs, it amounted to a remission of liability. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment's appeal ITA No. 930/Ind/89 is concerned, the same stands dismissed as the only ground taken therein pertaining to the assessee's claim of weighted deduction under section 35B stands already covered in the assessee's appeal, ITA No. 849/Ind/89. Thus, ITA No. 930/Ind/89 also stands dismissed. 43. Taking up cross-objection No. 6/Ind/90 filed by the assessee, the same also stands dismissed as it was filed by them in response to the department's appeal and in fact misconceived as the ld. CIT(A) had not granted any relief to the assessee in respect of the addition of Rs. 27.88 lacs or in relation to the assessee's claim under section 35B of the Income-tax Act and in any event of the matter, the assessee's appeal on these two issues did exist as ITA No. 849/Ind/89. Thus, the cross-objection No. 6/Ind/90 stands dismissed. 44. We now take up the assessee's appeal for the assessment year 1985-86. 45. The basic grievance of the assessee revolves round the payment of sales-tax made by them to which they were entitled. 46. The Assessing Officer on scrutiny of sales-tax account found that the assessee had made the following payments which related to different year all earlier to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider the appellant's claim if it is found that the liability had been incurred, during the year under appeal, he should entertain the claim and dispose of the same on merits. This direction should be complied with while giving effect to this order." 50. As would be seen, the CIT(A) has directed that if after going through the sales-tax orders it was found that a particular liability had been incurred by the assessee during the current accounting period, the assessee's claim should be entertained and disposed of on merits. If despite the assessee's following mercantile system of accounting, provision made by them in respect of the payment of sales-tax in the past years were disallowed, we see no reason as to why the payments towards sales-tax made by the assessee during 1985-86 by them pertaining to the past years could be disallowed. The invocation of the provisions of section 43B of the Income-tax Act by the Assessing Officer is misconceived. Even if the actual payment exceeded the amount of provision which was disallowed, the assessee would be entitled to claim it on the basis of payment made during the year. To this extent, the directions of the ld. CIT(A) are expanded. 51. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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