TMI Blog2006 (1) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act on 30th March, 1988. Notice under s. 148 was served on assessee on 4th March, 1994 and time given for filing of the return was "within 30 days of service of notice". Another notice dt. 28th Feb., 1996 was served on the assessee and the time given for filing the return was "within 35 days of service of notice". A reply dt. 12th March, 1996 was filed before the AO, by the counsel of the assessee, contending that order of assessment has not been passed in pursuance of the original notice under s. 148, the second notice issued on the same facts is invalid. The AO was of the view as per para 2, p. 2 of his order as under: "As the first notice was technically defective (gave less than 30 days' time for filing of return), the second notice was issued, whereby the time given was as prescribed by law. It has been held by the Hon'ble Supreme Court that if a notice is technically defective, then another can be issued (on same facts), more so if the time limit for completion of assessment, in pursuance of the first notice is not over. The counsel has cited the decision of the Supreme Court in CIT vs. Rao Thakur Narayan Singh (1965) 56 ITR 234 (SC) wherein it was held that once reass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 148 served on me assessee can require him to furnish within such period, as may be specified in the notice, a return of income, etc. 8. Under s. 149(1)(b) of the Act, as per amended provisions as applicable on date of issue of the notice, the notice under s. 148 shall not be issued for the relevant assessment year if seven years, but not more than 10 years, have elapsed from the end of the relevant assessment year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 50,000 or more for that year. The limitation in the present case, for issue of notice under s. 148 r/w s. 149(1)(b) of the Act expires on 31st March, 1997. Under the unamended law, applicable before 1st April, 1989, the notice could have been issued within 8 years from the end of the relevant assessment year, but as a result of amendment under s. 149, such notice can be issued within 10 years from the end of relevant assessment year, as enlarged period of limitation became effective before the expiry of the then existing period of limitation. 9. In the present case, the assessee had been given a time for filing of return within 30 days of service of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthy (1967) 65 ITR 607 (SC). In the present case, the proceedings of reassessment are pending. Therefore, second notice issued on 28th Feb., 1996 is invalid. Therefore, the invalidity of second notice does not invalidate the first notice dt. 3rd March, 1994, which has been held to be legal, as discussed above. Therefore, the assessment made by the AO in the present case cannot be held to be without jurisdiction. Thus, ground 2 of the assessee is dismissed. 11. In ground No. 3, the assessee is aggrieved as under: That the learned CIT(A) has erred in holding that the assessee was not entitled to claim deduction of investment allowance and has erred in confirming the action of the AO in withdrawing the investment allowance. The said action is illegal. The assessee was clearly entitled to deduction under s. 32A. 12. The facts in this ground are as per pp. 2 to 5 of AO's order as under: "The assessee-firm derives income from manufacture and sale of aerated and mineral water made from different types of concentrates. The concentrates are purchased from 'Parle' group at Ahmedabad. For the year under consideration the assessee has claimed 'investment allowance' amounting to Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture any items specified in Schedule Eleventh of the IT Act. The 5th item of the Schedule mentions 'manufacture of aerated water' to be on the activities against which the investment allowance deduction is not admissible. The counsel has vide his letter dt. 17th Jan., 1996 submitted that the 'assessee is manufacturing aerated water containing added sugar and the same are being manufactured from non-alcoholic beverage base supplied by Parle Export Ltd. and Bislery Beverage (P) Ltd. The assessee is also manufacturing soda...' It is observed that the non-alcoholic beverage base are the blended flavouring concentrates which when mixed with the aerated water result in production of Gold Spot, Thumsup, Limca, etc. Therefore, there is little doubt of the fact that as the business activity of the assessee is manufacture of items specified in the Eleventh Schedule, the assessee is not eligible for the deduction: The counsel has in his abovereferred letter, further stated that the explanation to item No. 5 has been added w.e.f. 1st April, 1988 and hence does not apply to the assessee's case for the asst. yr. 1986-87. Against this assertion, it is observed that insertion of the explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s felt the relevant assessment year and certificate to that fact is already there with the authorities below, therefore, in the books of account even if the value of plant and machinery on the last date of previous year is more than Rs. 35 lakhs, cannot exclude the unit being an SSI, since the appropriate authority in this regard is Director of Industries and not the income-tax law. 15. In this regard, the Hyderabad Bench of Tribunal in the case of Electrolytic Foil Ltd. vs. ITO (1984) 7 ITD 635 (Hyd) have held that assessee's claim for investment allowance was disallowed because it was declared as SSI under Industrial Development (Regulation) Act and it did not satisfy conditions prescribed in IT Act because the value exceeded Rs. 7.5 lakhs and IT Act has its own definition of SSI, the lower authorities were justified in rejecting assessee's claim. Also in UBS Publishers Distributors Ltd. vs. IAC (1991) 41 TTJ (Del) 499 : (1991) 36 ITD 457 (Del), the Tribunal held that letter from Ministry of Industry is not relevant and the assessee has not satisfied conditions laid down in the IT Act. 16. But in the case of Indian Communication Network Ltd. vs. IAC (1994) 50 ITD 411 (Del), r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The definition of the term 'small-scale industrial unit' not only was borrowed as recognized by the Ministry of Industry, but, it was retained as it is, under the IT Act, with the only addition of the words 'as at the end of the previous year' which was necessary to keep in line with the provisions of the Act, which determined the income for the assessment year with reference to the income of the previous year. In the absence of any specific explanation or provision for the determination of the aggregate value of machinery and plant, under the IT Act, it would be only proper that, the manner of computation of the aggregate value of the machinery and plant as recognized by that Ministry is also adopted, so that, uniformity for the same class or category, under different Acts could be maintained. In our view, such uniformity of the view, is what is intended by the legislature and would only be proper, for achieving the objective of the growth of these units and their contributions to the overall economic development of this country and last but not the least, to reduce avoidable litigation. We have to observe that, we have arrived at the above conclusion, by considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as SSI by the Director of Industries and has been allowed investment allowance by treating the assessee as SSI unit, for the purpose of allowing investment allowance.. Therefore, the assessee shall be treated as an SSI unit irrespective of value of plant and machinery and items being manufactured by the assessee. Therefore, following the decision in the case of Indian Communication Network Ltd. vs. IAC the assessee is entitled to the deduction of investment allowance under s. 32A of the Act. The AO has not examined the allowability of the investment allowance and creation of investment allowance reserve. Therefore, the AO has to examine and satisfy himself which of the plant and machinery has to be taken into account for allowability of the investment allowance. Hence, the matter is reserved to the file of the AO who will examine the matter as directed and allow the investment allowance as per directions given above. Thus, the ground No. 3 of the assessee is allowed for statistical purposes. 17. In ground No. 4, the assessee is aggrieved as under: That the learned CIT(A) has erred in holding that the appellant was not entitled to make claim for 100 per cent depreciation on bott ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64 of the Act. Therefore the original assessment will be taken as concluded assessment and s. 147 proceedings are for the benefit of the Revenue and not for the assessee and therefore, the assessee cannot make a fresh claim which have not been earlier made in the original assessment since the assessee cannot be permitted to convert the reassessment proceedings into appeal or revision. Therefore, the assessee cannot be allowed the depreciation amounting to Rs. 20,44,183 as claimed. Thus, ground No. 4 of the assessee is also dismissed. 22. In ground No. 5 the assessee is aggrieved as under: That the learned CIT(A) has erred in holding that the AO was justified in withdrawing excess depreciation on generator. The said finding is illegal. The depreciation was correctly allowed to the assessee in the original assessment proceedings. 23. The brief facts of this ground are that the assessee has claimed depreciation @ 30 per cent on generators and extra-shift depreciation was also claimed at higher rate. The normal rate of depreciation is 15 per cent and the higher rate of depreciation i.e., 30 per cent is admissible only if the generators are on non-conventional sources of energy i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o electric generators. Even grammatically neither, nor the word 'both' is used after the word 'pumps' in the relevant entry and this also clarifies that the condition running on wind energy is only attached to the word 'pumps' and not to the electric generators. A further reading of the entry shows that it is inclusive, it refers to two different items, namely, electric generators and secondly, the pumps running on wind energy. Thus, in our view, electric generator clearly falls under renewable energy devices and the Tribunal has rightly allowed the depreciation at the rate of 30 per cent on the basis of item (10A), cl. (xiii) of Appendix I to the IT Rules, 1962. The reference is accordingly answered in favour of the assessee and against the Revenue." 26. By reading the relevant entry at cl. (xiii) of item (10A) of Appendix I to IT Rules and following the judgment of the jurisdictional High Court in the case of Agarwal Transformers (P) Ltd., we are of the view that the electric generators fall under renewal of energy devices and a depreciation @ 30 per cent is allowable to the assessee. Therefore, the AO has wrongly withdrawn the depreciation allowed by him in the original asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided for the same. The Allahabad High Court in CIT vs. Smt. Jagjit Kaur (1980) 126 ITR 540 (All) held that the assessments made under s. 147(a) r/w s. 143(3) were not 'regular assessments' within the meaning of s. 273(b) r/w s 212(3) and, therefore, the levy of penalty was not valid. We are in agreement with the aforesaid view and hold that we cannot read the words 'regular assessment' as occurring in s. 273 as justifying the levy of penalty in the proceedings under s. 147(b). The same view was taken by the Punjab Haryana High Court in Smt. Kamala Vati vs. CIT (1978) 111 ITR 248 (P H) and by the Patna High Court in the case of CIT vs. Ram Chandra Singh (1976) 104 ITR 77 (Pat). In CIT vs. Mannalal Nirmal Kumar (1992) 106 CTR (Raj) 144 : (1992) 198 ITR 556 (Raj), a question though different but having some resemblance, came up for consideration before this Court. The question was whether s. 217 of the Act applies to reassessment proceedings as well. The view taken was that since interest was payable only in regular assessment, the same could not be applied to reassessment proceedings under s. 147 of the Act. Consequently, the question referred is answered in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is similar to the issue in the assessee's own case for the asst. yr. 1986-87 and has been dealt with in ITA No. 473/Jp/2000 of even date where it has been held that notice under s. 148 is valid and the assessment made under s. 147 is within the jurisdiction of the AO. The only difference in this case is that the original assessment has been made under s. 143(3) of the Act where proviso to s. 147 shall be applicable. Since, as per the reasons recorded by the AO, it is clear that income of the assessee chargeable to tax has escaped assessment, therefore, the decision taken in the assessee's own case for the asst. yr. 1986-87 is applicable to the assessee in the impugned year. Therefore, following the decision for the asst. yr. 1986-87 in the assessee's own case in ITA No. 473/Jp/2000 of even date, the proceedings initiated by the AO under s. 148 are valid and assessment framed under s. 147 r/w s. 143(3) for asst. yr. 1987-88 are within the jurisdiction of the AO. Thus, ground No. 1 of the assessee is dismissed. 33. In ground No. 2, the assessee is aggrieved as under: "That the learned CIT(A) has erred in holding that the assessee was not entitled to investment allowance and up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has justified in withdrawing excess depreciation on generator. The said finding is illegal. The depreciation was correctly allowed to the assessee in the original assessment proceedings." 38. The brief facts of this ground are that the assessee has been allowed higher depreciation on generators @ 30 per cent in the original assessment whereas in the reassessment proceedings, the AO was of the view that it is allowable @ 15 per cent and accordingly, withdrawn the depreciation at the higher rate and allowed the same at the normal rate of 15 per cent. This action of the AO was confirmed by the learned CIT(A). This issue has already come up in assessee's own case for the asst. yr. 1986-87 in ITA No. 473/Jp/2000 of even date where the issue has been decided in favour of the assessee. Following the decision in the assessee's own case for the asst. yr. 1986-87, the assessee's claim for higher depreciation @ 30 per cent should be allowed to the assessee and the AO has wrongly withdrawn the higher rate of depreciation. Hence, we reverse the decision of the learned CIT(A) in view of the above discussions. Thus, ground No. 4 of the assessee is allowed. 39. During the course of hearing, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
