TMI Blog1976 (3) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,49,863. The assessment order for the assessment year 1968-69 was passed on February 14, 1969, and the total income computed was Rs. 1,57,570. On February 27, 1970, the assessee applied to the Income-tax Officer praying that the assessments for these two years should be rectified so as to grant relief to the assessee under section 84 of the Income-tax Act, 1961, so far as the assessment year 1967-68 was concerned and under section 80J so far as the assessment year 1968-69 was concerned. The contention of the assessee in that application was that all the conditions which would justify the granting of the relief under section 84 prior to its repeal and under section 80J were satisfied in their case. The assessee-firm also contended that the relief was granted to the assessee-firm by way of depreciation allowance and development rebate and they claimed that relief under section 84 calculated at six per cent. of the capital employed would be Rs. 30,543 so far as the assessment year 1967-68 was concerned and under section 80J for the assessment year 1968-69 the relief would be Rs. 31,020. The application was, therefore, for the purpose of deduction of Rs. 30,543 and Rs. 31,020 for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so held that none of the conditions required for granting of the relief under section 80J was specifically satisfied by the assessee in the course of the assessment proceedings under section 143(3) of the Act and the Tribunal found that the Income-tax Officer would have had to cull out all the material from the information given to him by the assessee and even after gathering that material from the record, the Income-tax Officer may perhaps have to debate the matter with the assessee, with the result that it would be possible that the Income-tax Officer might ultimately not agree with the assessee that the assessee was entitled to relief under section 80J of the Act. Ultimately, the Tribunal held that no mistake apparent from the record was brought to the notice of the Income-tax Officer and hence the Income-tax Officer could not exercise the power given to him under section 154 of the Act. The Tribunal, therefore, dismissed the appeals of the assessee for the two assessment years and, thereafter, at the instance of the assessee, the question set out hereinabove has been referred to us for our opinion. It must be pointed out that the language of section 84 of the Act as it stood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear from sub-section (3) of section 80J which provides for carry-forward and set-off of the deductions and under sub-section (4) it has been provided that section 80J applied to any industrial undertaking which fulfils all of the following conditions, namely, (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence ; (ii) it is not formed by the transfer to a new business of a building (not being a building taken on rent or lease), machinery or plant previously used for any purpose ; (iii) it manufactures or produces articles, or operates one or more cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of twenty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the official Gazette, specify with reference to any particular industrial undertaking ; and (iv) in a case where the industrial undertaking manufactures or produces articles, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking or of the business of the hotel to which the said section 80J applies shall first be ascertained in the case of assets entitled to depreciation, their written down value ; in the case of assets acquired by purchase and not entitled to depreciation, their actual cost to the assessee ; in the case of assets acquired otherwise than by purchase and not entitled to depreciation, the value of the assets when they became assets of the business, etc. Thus, same provision as in rule 19 has been made applicable. Provision similar to sub-rule (5) of rule 19 is not to be found in rule 19A. Mr. Shah's contention has been that all the computations required to be made for the purpose of arriving at the figure of capital employed in this particular industrial undertaking in the relevant previous year could have been made from materials available with the Income-tax Officer. The records of the Income-tax Officer would show, according to Mr. Shah, the year of installation of this machinery, namely, 1963, and, therefore, it would enable him to ascertain up to what period the relief under section 84 or section 80J was available to this particular assessee. Mr. Shah also contends that all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stop at the written down value of the previous year but extends up to the figure of the original cost, and the method enjoined by section 10(5)(b) of the Indian Income-tax Act of 1922 is not that the Income-tax Officer should merely scale down the written down value of the previous year, but that he should take into consideration the actual cost, determining it for himself, if necessary, take also into consideration the allowances granted in the past, and then make his own computation as to the written down value for the assessment year with which he is concerned. It cannot be said that merely because under section 35 some written down value and the depreciation amount have been determined they are a final determination binding for all times to come ; nor does the determination operate as estoppel or res judicata for the following years. Mr. Shah also contended in this connection that not to give relief under section 80J or section 84, as the case might be, when due, only because it is not claimed, is a mistake apparent on the face of the record. Mr. Shah has relied in this connection on the following circular of the Central Board of Revenue issued in June, 1955. The circular is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... February 20, 1970, were already on the record of the Income-tax Officer at the time of the original assessment, the assessee would be entitled to relief under section 80J and in view of this circular, it was obligatory on the part of the Income-tax Officer to draw the attention of the assessee to the relief under section 80J. The assessee-firm started its refinery in February, 1963. It was a new refinery and the business was started from February 27, 1963. Since development rebate and depreciation allowance in connection with the installation of these machinery were being granted from time to time, it is obvious that this was a new industry and it had installed new machinery for the purpose of the refinery. It is the contention of the assessee in these two applications dated February 27, 1970, that the refinery building, that is, factory, was constructed new ; all the machines were installed brand new, and, therefore, development rebate thereon was allowed ; electric fittings were also new ; similarly, the factory building was also not formerly used for any purpose and the refinery was the first occupant in the said building. The assessee-firm also pointed out that this firm was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax and it is unfortunate that the Commissioner in considering the matter under section 33A assumed that the amending Act 25 of 1953 had no retrospective operation and rejected the claim of the assessee on the ground that at the date when the order of assessment was made, Act 25 of 1953 had not come into operation, and that the Act became effective as from December, 1953, when the rules were framed. In so holding, the Commissioner committed an error of law apparent on the face of the record. The High Court was, therefore, right in setting aside the order which was passed by the Commissioner without considering the proviso to section 18A(6) which was clearly applicable to the case of the assessee and in the light of rule 48 which was enacted in pursuance of that proviso. " (Emphasis supplied). The Supreme Court in this particular case was considering the provisions of section 35 of the Act of 1922 which dealt with rectification and which are reproduced in section 154 of the Act of 1961. The sentence which we have underlined clearly shows that if the Income-tax Officer passed an order without taking note of the law which is deemed to be in force the order must be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the record, which would enable the assessee to resort to section 154 of the Act for relief under section 84. This decision in Anchor Pressings (P.) Ltd. [1975] 100 ITR 347 (All) was followed in Sharda Prasad's case [1975] 100 ITR 373 (All) by another Division Bench of the Allahabad High Court and it was held that in the absence of a claim under section 80J, if the Income-tax Officer does not allow the rebate, it cannot be said that he committed any mistake apparent on the face of the record which could be rectified under section 154 of the Act. With great respect to the learned judges of the Allahabad High Court, we are unable to agree with their conclusions regarding the scope of section 154. In view of the circular of the Central Board of Revenue of 1955, which we have set out hereinabove, although the assessee-firm itself did not claim relief under section 80J and though the responsibility for claiming refund and reliefs rested with the assessee, the Income-tax Officer should have drawn the attention of the assessee to this relief under section 80J to which the assessee appeared to be clearly entitled but which the assessee had omitted to claim for some reason or the othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th their conclusions in Ascharajlal Ram Parkash's case [1973] 90 ITR 477 (All) but, in so far as the decision lays down that whenever any relief is available to an assessee under the provisions of the Act on certain conditions being satisfied, if the Income-tax Officer finds from the materials on record that those conditions are satisfied, he is bound to grant that relief, we agree, but on a different process of reasoning from the reasoning which appealed to the learned judges of the Allahabad High Court who decided Ascharajlal Ram Parkash's case [1973] 90 ITR 477 (All). In support of his contention regarding the scope of rectification proceedings, Mr. Shah has relied upon the decisions of the Supreme Court in Mahendra Mills Ltd. v. P. B. Desai, Appellate Assistant Commissioner of Income-tax [1975] 99 ITR 135 (SC), L. Hirday Narain v. Income-tax Officer [1970] 78 ITR 26 (SC), Income-tax Offirer v. Asok Textiles Ltd. [1961] 41 ITR 732 (SC) and Venkatachalam, Income-tax Officer v. Bombay Dyeing and Mfg. Co. Ltd. [1958] 34 ITR 143 (SC). Now, all these different decisions no doubt turn upon one or the other aspect of rectification proceedings either under section 35 of the Indian Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the record of the assessments of the first respondent." Thus, this decision of the Supreme Court clearly lays down that it is only a mistake apparent from the record, in the sense of being an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions that can be corrected in rectification proceedings under section 154 of the Income-tax Act, 1961. Under these circumstances, in the light of the above discussion, all that we have to ask ourselves is, whether in the original proceedings, relief under section 84 and section 80J for the relevant assessment years could have been granted to the assessee from the materials available to him. Since we are hearing this reference made under section 256 of the Income-tax Act, 1961, we have to take the findings of fact as recorded by the Tribunal unless we find that the findings are perverse or based on no evidence or such as no reasonable person could have ever arrived at. In the instant case, the Tribunal has observed in paragraph 3 of its order : " In the assessee's case, though it is true that the assessee had given informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings under section 143(3) of the Act. In view of these findings of fact by the Tribunal, it is obvious that the Income-tax Officer could not have granted the relief under section 84 or section 80J to the assessee and since this relief could not have been granted at the time of the original assessment proceedings, no question of rectifying the mistake ever arose. It was for the assessee to satisfy the Income-tax Officer that the conditions of section 80J, sub-section (4), each one of those four conditions, was satisfied in this particular case and, further, that the materials for granting the relief under section 80J were available on the record of the case before him. We are not deciding this case against the assessee on the ground that no claim was made by the assessee in the course of the original assessment proceedings for relief under section 84 or section 80J. We are, however, deciding this case purely on the basis of the findings of fact recorded by the Tribunal, namely, that the materials necessary for the purpose of granting the relief under section 80J of the Act were not available with the Income-tax Officer at the time of making the original assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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