TMI Blog1993 (1) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... not restricting the assessee's claim for deduction of gratuity to 8 per cent. of the wage bill of the current year?" I T. R. No. 93 of 1988 Whether, on the facts and in the circumstances of the case, the reassessment is valid ? " The respondent is the same assessee in both the cases. The respondent is an assessee to income-tax. We are concerned with the assessment year 1974-75. The accounting year is the calendar year 1973. The assessee had provided in its books an amount of Rs. 5,17,363 as liability for gratuity. The Income-tax Officer effected the assessment on November 30, 1974, and disallowed the said amount claimed. According to him, there was no approved gratuity fund. Actually, the assessee had created a gratuity fund. The Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved by the order of the Commissioner of Income-tax (Appeals), the Revenue filed second appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal found that the reopening of the assessment was solely on the basis of an audit note which claimed that the ceiling amount had to be calculated on the basis of the wages paid during the relevant accounting year. The Appellate Tribunal found that the reopening of the assessment was not valid. On the merits, it was found that the Central Board of Direct Taxes had clarified that the ceiling of 8 per cent. of the salary is to be applied with respect to salary to the current salary. Even on the merits, no addition was called for. It is only thereafter at the instance of the Revenue, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated clause 5 of the trust deed by providing more than 8 per cent. of the salary and wages paid during any year, derecognition of the fund has also to be considered in the light of rule 3 read with rule 9 of the Fourth Schedule to the Income-tax Act, 1961. The file was checked by SAP. But this aspect was not pointed out. It is evident that the audit, besides mentioning the provision of law which escaped the notice of the Income-tax Officer, elucidated the law and pointed out the error in the application of the statutory provisions. In paragraph 8 of the order dated March 26, 1985, the Appellate Tribunal has found thus " The reopening of the assessment, which is under section 147(b), is also not sustainable under law for the reason th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical adoption of the audit report by the Income-tax Officer is impermissible. We are of the view that the ratio of decision of the Supreme Court in Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 at pages 1003 and 1005, to the effect that the opinion of the audit party in enunciating and elucidating a point of law cannot be regarded as information for the purpose of section 147(b) is applicable in this case. We are also of the view that this is not a case where the audit merely drew the attention of the Income-tax Officer regarding the provisions of law which had escaped his notice. The audit party mentioned the relevant statutory provision which had escaped the notice of the Income-tax Officer, further elucidated its implica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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