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Aroor Udyog (P.) Ltd. Vs. First Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Bangalore
Decided On
Judge
Reported in(1984)9ITD789(Bang.)
AppellantAroor Udyog (P.) Ltd.
RespondentFirst Income-tax Officer
Excerpt:
.....gross capital as allowed in the original assessments. the assessee appealed to the commissioner (appeals). in view of the amendment to the provisions of section 80j, he confirmed the orders of the ito made under section 154. against the same, these appeals are preferred.2. the learned counsel for the assessee strongly urged that when the ito passed the order under section 154 on 6-3-1980, he had no jurisdiction as the amended provisions of section 80j came into effect from 21-8-1980. prior to that, the case law was in favour of the assessee and the ito could not have rectified the assessment under section 154 when he had no jurisdiction on 6-3-1980. subsequent amendment of section 80j cannot be applied by the appellate authority.the very retrospective effect of the amendment of section.....
Judgment:
1. The assessee had claimed relief under Section 80J of the Income-tax Act, 1961 ('the Act') on the gross value of the assets without deducting liabilities. The ITO had allowed the claim in these two years and completed the assessments accordingly. Subsequently, the ITO rectified the assessments under Section 154 of the Act and allowed relief on the net capital employed in the business and not on the gross capital as allowed in the original assessments. The assessee appealed to the Commissioner (Appeals). In view of the amendment to the provisions of Section 80J, he confirmed the orders of the ITO made under Section 154. Against the same, these appeals are preferred.

2. The learned Counsel for the assessee strongly urged that when the ITO passed the order under Section 154 on 6-3-1980, he had no jurisdiction as the amended provisions of Section 80J came into effect from 21-8-1980. Prior to that, the case law was in favour of the assessee and the ITO could not have rectified the assessment under Section 154 when he had no jurisdiction on 6-3-1980. Subsequent amendment of Section 80J cannot be applied by the appellate authority.

The very retrospective effect of the amendment of Section 80J itself is open to debate and this is evident from the fact that the Supreme Court has admitted the writ petitions challenging the validity of the amendment. He further urged that the very applicability of the amendment of Section 80J with retrospective effect to a completed assessment is a debatable one and so, the provisions of Section 154 cannot be invoked. He relied on a decision in J.M. Shah v. J.M. Bhatia, AAC [1974] 94 ITR 519 (Bom.). The learned departmental representative submitted that when the appeal was taken up by the Commissioner (Appeals), the amended provision of Section 80J with retrospective effect was on the statute book and so, he was perfectly justified, in applying that provision. In view of the above amendment, no debatable issue arises. Thus, he supported the orders of the lower authorities.

3. We have considered the rival submissions. It is no doubt true that on 6-3-1980 when the ITO passed order under Section 154, he had no jurisdiction to invoke the provisions of Section 154 as the case law was in favour of the assessee on that date. Once the issue is a debatable one, he could not have rectified the mistake under Section 154 on that date. But when the Commissioner (Appeals) passed the order on 20-8-1981, the amended provision of Section 80J with retrospective effect was on the statute book. The Commissioner (Appeals) had the power to apply the amended provisions. In our view, he has rightly applied the said provision. In view of the said amendment of Section 80J, the order under Section 154 made by the ITO is to be upheld. If any amendment comes in with retrospective effect pending an appeal, it must be given effect by the appellate authority.In M.K. Venkatachalam, ITO v. Bombay Dyeing & Mfg. Co. Ltd. [1958] 34 ITR 143 (SC), by Section 13 of the Indian Income-tax (Amendment) Act, 1953, which came into force from 24-5-1953, a proviso was added to Section 18A(5) of the Indian Income-tax Act, 1922 ('the 1922 Act') with effect from 1-4-1952. The ITO exercised his power under Section 35 of the 1922 Act and rectified the mistake. On those facts, the Supreme Court held that there can be no doubt that the effect of the retrospective operation of the Indian Income-tax (Amendment) Act is that the proviso inserted by the said section in Section 18A(5), would, for all legal purposes, have to be deemed to have been included in the 1922 Act as from 1-4-1952. The ratio laid down therein squarely applies to the instant case. The amendment of Section 80J by the Finance (No.2) Act, 1980, with retrospective effect is applicable to these two years. In view of the above amendment, the Commissioner (Appeals) had power in confirming the order of the ITO made under Section 154 as there is a mistake in the assessment order in view of the above amendment. The decision of the Bombay High Court in J.M. Shah's case (supra) is distinguishable. Thus, we uphold the order of the Commissioner (Appeals).


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