TMI Blog1997 (7) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessing authority completed the assessment for the said year under section 143(3) of the Act by its order dated February 26, 1980. In the assessment, the assessing authority allowed deduction under section 35B in respect of certain items, the details of which are furnished herein below : -------------------------------------------------------------------------------------------------------------------------------------------------- Item of expenses Amount (Rs.) Clause under which exemption is claimed under section 35B(1)(b) -------------------------------------------------------------------------------------------------------------------------------------------------- 1. Export commission 1,94,441 (viii) 2. ECGC premia 25,510 (ii) (viii) 3. Postage on samples 13,631 (vi) 4. Foreign cable charges 11,433 (ii), (v) and (vi) 5. Trunk call charges (Overseas) 5,618 -do.- 6. Telex charges 4,032 -do.- 7. Foreign tour expenses 58,291 (vii) 8. Salary to manager and head clerk 47,523 (v) and (vi) -------------------------------------------------------------------------------------------------------------------------------------------------- The deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate. Since the assessee did not satisfy either of the two conditions the assessee was not entitled to claim weighted deduction under section 35B of the Act. Learned senior standing counsel accordingly submitted that weighted deduction has been granted to the assessee only because the assessing authority omitted to notice the provisions of sub-section (1A) introduced with effect from April 1, 1978. If the assessing authority had in mind the provisions of sub-section (1A) of the Act, he would not have granted any weighted deduction. Learned senior standing counsel further submitted that the very approach made by the Appellate Tribunal is faulty as according to him, the Tribunal thought that this is a case of reassessment under section 147 of the Act. Learned senior standing counsel took us through the Tribunal's order particularly paragraph 6 of the said order which reads as follows : "We find that there was full application of mind by the Income-tax Officer when he made the assessment on February 26, 1980, and there is no evidence to show that he was not aware of the provisions of sub-section (1A) of section 35B as being on the statute book. We have abstracted supra the mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclude that the assessee is not entitled to weighted deduction. According to learned counsel, this is beyond the scope of the provisions of section 154 of the Act. Learned counsel in support of his contentions relied on the decision of the Supreme Court in T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 and also the decision of this court in N. Rajamoni Amma v. Deputy CIT [1991] 192 ITR 90. We have considered the matter. The admitted facts in this case are that the assessee is an exporter of tea and spices, that it does not own any estate and that in order to meet the export requirements, the assessee purchased tea and spices from various sources. It is also an admitted fact that the assessee was not a holder of an export house certificate. The assessee contended that it is a small scale industrial unit registered with the Directorate of Industries and, therefore, it can be considered as a small scale exporter. However, the fact that at the relevant time the assessee was not a small scale industrial unit was not disputed. Section 35B(1)(a) provides that where an assessee, being a domestic company or a person, who is resident in India, has incurred after February 29, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of export of goods and is either a small-scale exporter or a holder of an Export House Certificate, or (ii) the business of provision of technical know-how, or the rendering of services in connection with the provision of technical know-how and the expenditure is incurred by the assessee wholly and exclusively for the purposes of the business referred to in sub-clause (i), or sub-clause (ii) of clause (a). The Explanation provides that "a small-scale exporter" means a person who exports goods manufactured or produced in any small-scale industrial undertaking or undertakings owned by him. It also provides that such person does not own any industrial undertaking which is not a small-scale undertaking. Clause (b) of the Explanation also provides that export house certificate means a valid Export House Certificate issued by the Chief Controller of Imports and Exports, Government of India. As already stated, the assessee-company is only engaged in the export of goods purchased by it from various sources. It does not manufacture any goods for export. It does not own any manufacturing units either. As such the assessee-company does not fall under the category of "small-scale e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was entitled to interest not on the whole of the tax paid in advance but only on the difference between the tax so paid and the amount of tax determined on regular assessment. This amending section was deemed to have come into force on April 1, 1952. Under section 18A(5) as amended the respondent was only entitled to a sum of Rs. 21,157 as interest. The Income-tax Officer, thereafter, exercised his power under section 35 of the 1922 Act and rectified the mistake in the order of assessment and demanded payment of the sum of Rs. 29,446. On the application of the respondent, the High Court issued a writ of prohibition against the respondent on the ground that there was no mistake apparent from the record as the order of assessment was valid judged in the light of the law as it stood on the date of the order. On appeal, the Supreme Court held that the effect of the provisions of section 13 of the Amendment Act was that the amendment to section 18A must be deemed to have been included in the principal Act as from April 1, 1952, for all purposes, and, therefore, the proviso must be deemed to be part of section 18A on the date of the passing of the assessment order; consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the record including the evidence and if he discovers any mistake he is entitled to rectify the error provided that if the result is enhancement of assessment or reducing the refund then notice has to be given to the assessee and he should be allowed a reasonable opportunity of being heard." Again the Supreme Court in ITO v. Asok Textiles Ltd. [1961] 41 ITR 732, considered the meaning of the expression "mistake apparent from the record". After adverting to the earlier decisions of the Supreme Court in M. K. Venkatachalam, ITO v. Bombay Dyeing and Manufacturing Co. Ltd. [1958] 34 ITR 143 and Maharana Mills (Pvt.) Ltd. v. ITO [1959] 36 ITR 350, the Supreme Court observed as follows : "This court has held that the discovery of an error on the basis of assessment due to an initial mistake in determining the written down value is a mistake from the record and so is a misapplication of the law even though the law came into operation retrospectively. The Income-tax Officer can, under section 35 of the Act, examine the record and if he discovers that he has made a mistake, he can rectify the error and the error which can be corrected may be an error of fact or of law." Again, the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the taxing authorities is a mistake apparent from the record. It is also a settled position that a decision on a debatable point of law or where the law confers on the taxing authorities a discretion such decision cannot be corrected under section 154 of the Act. In the instant case, we have already found that for the assessment year 1979-80 an assessee who claims relief under section 35B of the Act in order to qualify for such relief must satisfy the mandatory requirements contained in sub-section (1A) of section 35B. Admittedly, the assessee did not satisfy the said requirements. The assessing authority while completing the original assessment has overlooked the mandatory requirements contained in sub-section (1A) of section 35B. This is a patent mistake. No discussion or debate was necessary for arriving at the above conclusion. A mere perusal of the return and the profit and loss account accompanying the said return would be sufficient to arrive at the conclusion that the assessee did not satisfy the requirements of sub-section (1A) of section 35B. This mistake is a mistake apparent from the record and attracts the provisions of section 154 of the Act. The decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition under section 154." The principles discussed above clearly support the view taken by us. Absolutely no further investigation was required to be made by the assessing authority for applying the provisions of section 154 of the Act. What was required to be done by the assessing authority was only to peruse the records and to apply the provisions of sub-section (1A) of section 35B. This is what the assessing authority has done in proceedings under section 154 of the Act. The Income-tax Appellate Tribunal in this case referred to the principles laid down in Volkart Brothers' case [1971] 82 ITR 50 (SC) and said that what is attempted to be done by the assessing authority is exactly what the Supreme Court held to be impermissible in proceedings under section 154 of the Act, viz., to rectify a mistake that could be established only by a long drawn process of reasoning. The Appellate Tribunal also appears to have taken the view that the provision of sub-section (1A) of section 35B is not mandatory and that under the said sub-section the assessing authority has only to apply his mind and either allow or not to allow the relief. The Appellate Tribunal also held that it cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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