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TMI Blog2008 (11) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... ces and the claim under section 80J of the Income-tax Act, and after adjusting the carry forward business loss to the extent of Rs. 10,86,03,271 and the unabsorbed depreciation carried forward to the extent of Rs 5,19,269, declared its total assessable income as "nil". Subsequently, on December 11, 1980, it filed a revised return, again showing "nil" income, but the difference between the original return filed and the revised return filed on December 11, 1980, related to withdrawal of depreciation claimed under various heads and by carrying forward the loss of the earlier years to a greater extent. 3. The Department proposed to pass a draft assessment order granting depreciation allowance which was not claimed by the appellant and referred the matter to the Inspecting Assistant Commissioner under section 144B(4) of the Act and by this procedure, took advantage of an extended time limit for completion of the assessment order and it is thus that the assessment order was passed on August 24, 1983. According to the assessee, for the assessment year 1980-81, the assessment should have been completed on or before March 31, 1983, and the present assessment order passed on August 24, 1983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il by the Commissioner of Income-tax (Appeals) and it did not deserve interference. 6. Section 144B of the Income-tax Act, 1961, reads as follows: "144B. Approval of draft assessment order by Deputy Commissioner. - This section, which was in force from the assessment year 1976-77 and was deleted by the Direct Tax Laws (Amendment) Act, 1987, is dealt with ante under section 143, 'Assessment-Scope of the section' and 'Assessing Officer'. The section applies where the Assessing Officer proposes to make, before 1st October, 1984, any variation, adverse to the assessee, in the income or loss returned, and the amount of such variation exceeds the amount fixed by the Board. By an order dated 23rd December 1975, the Board fixed the amount at Rs. 1,00,000. This is a procedural section any procedural omission or irregularity would not render the assessment order a nullity. The draft assessment order need not be signed or dated. The section does not permit the Assessing Officer to make more than one draft assessment order. The power of the Deputy Commissioner to issue directions to the Assessing Officer under sub-section (4) is confined only to 'the matters covered by the objections' and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -77 1,52,82,822 1977-78 9,52,28,351 11,11,05,812 Balance business income: Nil Income from HP and OS: 9,02,339 Less : Unabsorbed depreciation 1976-77 9,02,339 Balance income Nil Total assessed income Nil Therefore, it is undisputed that the income returned as per the assessee's revised return and as per the draft order proposed by the Income-tax Officer was both nil. The Commissioner of Income-tax (Appeals) had recorded that the decrease of seven crores in the annual business income is mainly due to the fact that the Income-tax Officer had thrust the allowance of depreciation. The action of the Income-tax Officer was found to be against the spirit of the instructions of the Board Circular, which provided that when no claim for depreciation had been made, no depreciation should be allowed by the Income-tax Officer. Therefore, the Commissioner of Income-tax (Appeals) held that this allowance of some deduction cannot be said to be prejudicial to the assessee. After referring to New India Investment Corporation Ltd. v. ITO [1983] 143 ITR 909 (Cal), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly question is with regard to the justifiability of invocation of section 144B. 10. In Mahendra Mills' case [2000] 243 ITR 56, the Supreme Court has considered the views of various High Courts on this issue of allowance of depreciation. We will refer to some of the extracts (pages 67, 68, 69, 70): "(a) In Beco Engineering Co. Ltd. v. CIT [1984] 148 ITR 478 (P&H), the assessee claimed depreciation in its original return. Later he filed a revised return in which he withdrew the claim for depreciation. The Income-tax Officer was of the view that it was statutorily binding upon him to compute the total income which must take into consideration the deduction of depreciation allowance. The High Court held that in case the assessee had not claimed depreciation allowance he could not be granted the same by the Income-tax Officer. In regard to the revised return the High Court took the view that the original return could not be adverted to." This was approved. "(b) In CIT v. Friends Corporation[1989] 180 ITR 334 (P&H), it was held that there is no gainsaying that allowance for depreciation is a benefit available to the assessee to claim, but not one that can be thrust upon him against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid provisions that the assessee should have made a claim for deduction under the said provisions to enable the Income-tax Officer to consider the same." "It is difficult to accept this argument for, under the scheme of the Act, income is to be charged regardless of depreciation on the value of the assets and it is only by way of an exception that section 32(1) grants an allowance in respect of depreciation on the value of the capital assets enumerated therein. It may appear intriguing on the part of the assessee as to why it does not claim the benefit of deduction from its taxable income, but the choice is dearly its. Where the assessee does not want the benefit, it cannot be thrust upon it. There is no provision which makes it compulsory on the part of the Income-tax Officer to make deductions in all cases. If it were incumbent on the Income-tax Officer to make compulsory deductions irrespective of whether the assessee claimed or not, the statutory requirement of making the claim along with necessary particulars and the provision for 'allowing' it would be unnecessary." This was also confirmed. 11. Similarly, the decision in CIT v. Machine Tool Corporation of India Ltd. (1993} ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation which is illegal or impermissible will cause prejudice per se. No one can take advantage of one's own illegal act or an act which is not legally sustainable. For this, we do not think we need authorities. Therefore, on this score alone, the invocation of section 144B is impermissible. 13. Further, if Parliament intended that imposition of any variation which is prejudicial to the assessee gave the Income-tax Officer the power to invoke the provisions of section 144B, then it need not have included the words "in the income or loss returned". It would have been sufficient to merely say "any variation which is prejudicial to the assessee". 14. We will also look at it from another perspective, whether the words "income or loss returned" refer to the total income and total loss returned or whether it is variation in specific heads of income. 15. In V. C. Gupta v. CIT [1988] 174 ITR 513 (MP) the assessee was a Hindu undivided family. It filed a return and the Income-tax Officer for warded a draft order for approval under section 144B. There, the assessee contended that for invoking the provisions of section 144B, the variation in the individual heads of income should exceed rupe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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