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Jaipur Metals and Electricals Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1984)8ITD579(Mum.)
AppellantJaipur Metals and Electricals
Respondentincome-tax Officer
Excerpt:
.....year shall be set off before setting off the deficiency in relation to a later assessment year. shri mukherji pointed out that proviso (ii) would have no meaning whatsoever if the carry forward of all the deficiencies, irrespective of the assessment year to which they related, was to be limited to seven assessment years as reckoned from the end of the initial assessment year and viewed in this context proviso (/) should be interpreted as 'reckoned from the end of the initial assessment year and so on. for each later year'. in this connection, shri mukherji referred to an analogous provision in section 33a(2) of the act where it was not only laid down that the unabsorbed development allowance of an earlier assessment year shall first be set off before allowance of unabsorbed.....
Judgment:
1. This is an appeal filed by the assessee against the order of the Commissioner (Appeals).

2. The assessee is a limited company. In the course of proceedings for the assessment year 1965-66, the assessee claimed for the first time that its ACSR Division was a newly established industrial undertaking and on the capital employed in this newly established industrial undertaking, the assessee-company was entitled to the deduction as laid down under Section 84 of the Income-tax Act, 1961 ('the Act'), as it then stood. This claim of the assessee was accepted by the ITO while making the assessment for 1965-66. We were given to understand at the time of hearing of the appeal that for the subsequent assessment years also, the assessee was allowed deduction on the capital employed on this newly established industrial undertaking and for the assessment years 1967-68 and 1969-70, since the profits were not enough for allowance of this deduction, a deficiency was worked out which amounted to Rs. 1,55,354 for the assessment year 1967-68 and Rs. 2,96,292 for the assessment year 1969-70. For the assessment year 1972-73, under appeal before us, the ITO while making the assessment by assessment order dated 22-3-1975 allowed the assessee's claim of deduction of this deficiency for the assessment years 1967-68 and 1969-70, aggregating to Rs. 4,51,646 in working out the business income. Subsequently, however, the ITO found that there were a number of mistakes apparent from the record in the assessment order. He, therefore, issued a show-cause notice pointing out, among other mistakes, the mistake of deduction of deficiency of Rs. 4,51,646 which had been wrongly allowed and asked the assessee to show cause why these mistakes, which were apparent from the record, should not be rectified. In response to this show-cause notice, the assessee objected only to the withdrawal of deduction of deficiency amounting to Rs. 4,51,646 and not the other mistakes. The ITO, therefore, by order under Section 154 of the Act not only rectified the mistake of excess allowance of depreciation amounting to Rs. 7,549 but also withdrew the deduction of deficiency of Rs. 4,51,646 which was wrongly allowed in the assessment order. The assessee was aggrieved by this order of the ITO under Section 154 and, therefore, went up in appeal before the Commissioner (Appeals.) The Commissioner (Appeals), on consideration of the balance sheets and the directors' reports, came to a finding that the production in the ACSR division, which was claimed to be a newly established industrial undertaking, commenced in the year 1963, i.e., during the previous year relevant to the assessment year 1964-65, which was also admitted by the assessee's authorised representative, Shri H.R. Kamdar, and not in the earlier year relevant to the assessment year 1963-64 as wrongly held by the ITO. On this basis, the Commissioner (Appeals) held that the deduction on account of capital employed in this newly established industrial undertaking was available to the assessee for the assessment year 1964-65 and the four subsequent assessment years, i.e., 1965-66, 1966-67, 1967-68 and 1968-69. He, therefore, came to the conclusion that the deficiency for the assessment year 1969-70 was wrongly worked out by the ITO in the assessment order for 1969-70. In these circumstances, according to the Commissioner (Appeals), there was no question of the set off of this deficiency against the business income for the assessment year 1972-73 under consideration before him. He further held that since the commencement of production of the newly established industrial undertaking under consideration here was in the previous year relevant to the assessment year 1964-65, the initial assessment year for this newly established industrial undertaking was the assessment year 1964-65 and, therefore, the deficiency, if any, in respect of this newly established industrial undertaking could not be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year. He, therefore, concluded that the question of set off of deficiency for any assessment year in respect of this newly established industrial undertaking could only be considered up to the assessment year 1971-72 and not beyond. The Commissioner (Appeals), therefore, agreed with the ITO that the allowance of the claim of deduction of deficiency aggregating to Rs. 4,51,646 in respect of this newly established industrial undertaking in working out the business income for the assessment year 1972-73 was a mistake apparent from the record and the ITO rightly rectified this mistake by order under Section 154. The assessee's appeal was, therefore, dismissed. The assessee has, therefore, come up in the present appeal before us.

3. The assessee's learned counsel, Shri Mukherji, submitted to us that when the ITO had proceeded on the basis that the initial assessment year was 1963-64, it was not open to the Commissioner (Appeals) to substitute for the assessment year 1963-64 as the initial assessment year, the assessment year, 1964-65. Proceeding further, Shri Mukherji submitted that if the deficiency under Section 80J of the Act was wrongly worked out for the assessment year 1969-70 in the assessment order, it was for the ITO to correct this mistake or in any case this mistake could only be corrected in an order in the proceedings relevant to the assessment year 1969-70 and not in the proceedings relating to the assessment year 1972-73 under appeal before us. Elaborating on his arguments Shri Mukherji submitted that as for the reopening of the assessment under Section 147 of the Act or for the revision under Section 263 of the Act of an order prejudicial to the interest of the revenue, the action has to be justified by the reasons recorded or mentioned in the order and not anything beyond it. Reference in this connection, was made by him to the ruling of the Hon'ble Allahabad High Court in the case of Hakim Uddin Khan v. ITO [1960] 40 ITR 402, wherein their Lordships of the Hon'ble Allahabad High Court laid down that the jurisdiction for the rectification of a mistake has to be adjudged from what was specified in the notice for showing cause and not from any extraneous material which would justify the order of rectification by the ITO. Mention was also made by him to the rulings of the Hon'ble Supreme Court in the case of Johri Lal (HUF) v. CIT [1973] 88 ITR 439, the Hon'ble Andhra Pradesh High Court in the case of Mrs. Freny Rashid Chenai v. ACED [1973] 90 ITR 31 and the Hon'ble Punjab and Haryana High Court in the case of CIT v. Jagadhri Electric Supply & Industrial Co.

[1983] 140 ITR 490 in support of the contentions that the jurisdiction for the rectification of the assessment has to be judged on the basis of the findings of the ITO in his order or the show-cause notice requiring the assessee to show cause why the mistake apparent from the record should not be rectified and it was not open to the appellate authorities to improve upon the case of the revenue by considering other material which was not considered earlier while initiating the action and assuming jurisdiction under Section 154. Proceeding further, Shri Mukherji submitted, relying on the rulings of the Hon'ble Bombay High Court in the cases of CIT v. Hindustan Antibiotics Ltd. [1974] 93 ITR 548 and J.M. Shah v. J.M. Bhatia [1974] 94 ITR 519 that the commencement of production can only be from the time the product could be sold in the market and not when the trial run was started and the product was being tested before sale in the market and a mistake on a debatable point of law on which there may be conceivably two opinions is not a mistake apparent from the record which may be rectified by order under Section 154. Elaborating on his argument, Shri Mukherji pointed out that the requirements of Section 154 were not met in the present case and, therefore, even on the basis of the findings of the Commissioner (Appeals), the order of the ITO under Section 154 ought to have been cancelled, there being no error on the face of the record which could be rectified. Coming to the provisions of Section 80J(3), Shri Mukherji submitted that the proviso (i) thereof limiting a period of seven years from the end of the initial assessment year for carry forward of deficiency has to be construed and interpreted taking into consideration proviso (ii) also, which has laid down that where there was more than one deficiency and each such deficiency relates to a different assessment year, the deficiency which relates to the earlier assessment year shall be set off before setting off the deficiency in relation to a later assessment year. Shri Mukherji pointed out that proviso (ii) would have no meaning whatsoever if the carry forward of all the deficiencies, irrespective of the assessment year to which they related, was to be limited to seven assessment years as reckoned from the end of the initial assessment year and viewed in this context proviso (/) should be interpreted as 'reckoned from the end of the initial assessment year and so on. for each later year'. In this connection, Shri Mukherji referred to an analogous provision in Section 33A(2) of the Act where it was not only laid down that the unabsorbed development allowance of an earlier assessment year shall first be set off before allowance of unabsorbed development allowance of a subsequent assessment year, it was also laid down that the carry forward of unabsorbed development allowance shall be up to eight assessment years succeeding the assessment year in which the deduction was first allowable. Shri Mukherjee, therefore, vehemently argued that the deficiency worked out for the assessment year 1967-68 and for the assessment year 1969-70 could be carried forward for seven years from the end of these assessment years and, therefore, the deficiency worked out for both of these assessment years could be carried forward and set off in working out the business income for the assessment year 1972-73 under appeal before us. Shri Mukherji filed before us a copy of the order of the Tribunal, Ahmedabad Bench 'A' in the case of B. Engg. Ltd. v. ITO [CO. No. 136 (Ahd.) of 1971-72] where the Tribunal upheld the contention of the assessee that if there was a mistake in an order for an earlier year that mistake could only be corrected in the proceedings relating to that assessment year and not in the proceedings relating to a subsequent assessment year. Summing up, Shri Mukherji vehemently argued before us that the order of the Commissioner (Appeals) was erroneous and should be reversed.

4. On the other hand, the learned departmental representative, Shri Kashyap, pointed out to us that whether the initial assessment year in respect of the newly established industrial undertaking under consideration here was the assessment year 1963-64 as taken by the ITO or the assessment year 1964-65 as taken by the Commissioner (Appeals), the assessment year 1972-73 under consideration here is beyond seven years from the end of the initial assessment year up to which the deficiency could be carried forward and, therefore, nothing turns on the controversy whether the initial assessment year should be taken as the assessment year 1963-64 as taken by the ITO or the assessment year 1964-65 as taken by the Commissioner (Appeals). He further submitted that the reopening of the assessment under Section 147 or the revision of an order of the ITO under Section 263 on the ground that the order was erroneous and prejudicial to the interest of the revenue, are different from the rectification of assessment by the ITO on the ground of a mistake apparent from the record. He further submitted that Sub-section (1) of Section 80J read with Sub-section (2) thereof laid down that the deduction on account of capital employed in a newly established industrial undertaking was available for the assessment year, during the previous year relevant to which the newly established industrial undertaking commenced manufacture or production of articles which, as mentioned in Sub-section (2) itself, was described as the initial assessment year and for each of the four immediately succeeding assessment years. He, therefore, vehemently argued that whether the initial assessment year was 1963-64 or 1964-65, there was no question of deficiency in respect of this newly established industrial undertaking having been worked out for the assessment year 1969-70.

Elaborating on his arguments, Shri Kashyap submitted that while under Section 33A(2), mention of which was made by the assessee's learned counsel, Shri Mukherji, in his arguments, the words used are that the unabsorbed development allowance shall be carried forward to the following assessment year and so on up to the eight assessment years immediately succeeding the assessment year in which the deduction was first allowable, proviso (i) of Sub-section (3) of Section 80J clearly lays down that the deficiency or any part thereof shall not be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year. Shri Kashyap vehemently contended that the function of the judicial authorities is to interpret the law as framed by the Legislature and not to add words thereto and, therefore, argued that the addition of the words 'and so on for each later year', suggested by the assessee's learned counsel, Shri Mukherji, was not justified. Shri Kashyap clarified that the proviso (n) to Section 80J(3), which laid down that where there is more than one deficiency relating to different assessment years, the deficiency which relates to earlier assessment year shall be set off first before the deficiency for a later assessment year is set off, is not in conflict with the proviso (i) which laid down that in no case the deficiency or any part thereof shall be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year and, therefore, there is no justification or reason why the plain words of proviso (i) to Section 80J(3) should not be given their natural meaning. Another point made out by Shri Kashyap was that once there is a mistake on facts or on law, it is open to any authority to find out the correct facts and, therefore, if the Commissioner (Appeals) held that even the working of deficiency for the assessment year 1969-70 was incorrect, there was no excess of jurisdiction by the Commissioner (Appeals).

Summing up, Shri Kashyap justified the order of the Commissioner (Appeals) and submitted that there was no merit in the assessee's appeal.

5. We have carefully considered the rival submissions. At the outset it would be necessary to point out that whether the initial assessment year, i.e., the year in which the newly established industrial undertaking under consideration here commenced production was the assessment year 1963-64 or the assessment year 1964-65, the assessment year 1972-73 is beyond the seventh assessment year as reckoned from the end of the initial assessment year and, therefore, nothing turns on the controversy whether the Commissioner (Appeals) had the jurisdiction to substitute for the initial assessment year 1963-64 taken by the ITO, the initial assessment year 1964-65 as found by the Commissioner (Appeals) and admitted by the then authorised representative of the assessee-company. It will also be necessary to point out that while under the provisions of Section 33A(2), unabsorbed development allowance can be carried forward for eight assessment years immediately succeeding the assessment year in which the deduction was first allowable as laid down by Clause (w) of Sub-section (2) of Section 33A, in the case of Section 80J(3), the deficiency cannot be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year. When the wordings of Section 80J(3) are different from the wordings of Section 33A(2), it will be wrong to describe Section 33A(2) as an analogous provision. In fact, the wordings of Section 80J(3) and the proviso thereto are very clear that no deficiency shall be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year and initial assessment year itself has been defined in Sub-section (2) of Section 80J as the assessment year during the previous year relevant to which the newly established industrial undertaking begins to manufacture or produce the articles, etc., etc. According to the ITO, as mentioned by the Commissioner (Appeals), the initial assessment year was the assessment year 1963-64, while according to the Commissioner (Appeals), the initial assessment year was the assessment year 1964-65 and even the then authorised representative of the assessee-company admitted before the Commissioner (Appeals) that the initial assessment year was the assessment year 1964-65. Whichever way the matter is looked into, the assessment year 1972-73 is beyond the seventh assessment year as reckoned from the initial assessment year. It is by now settled law and does not admit of any dispute, as laid down by the Hon'ble Supreme Court in the case of CIT v. Shahzada Nand & Sons [1966] 60 ITR 392, that the meaning and the intention of a provision in the statute must be collected from the clear and unambiguous expression used therein rather than from any notion which may be entertained as to what is just or expedient. Viewed in this context, there can be no doubt that proviso (i) of Sub-section (3) of Section 80J clearly lays down that the deficiency worked out for any assessment year in respect of a newly established industrial undertaking shall not be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year. When the wordings of this provision are so clear and unambiguous, we cannot read into it to mean that the words 'and so on for each later assessment year' should be added to it and the carry forward of the deficiency should be up to the seventh assessment year from the end of the assessment year in which the deficiency was worked out. There can, therefore, be no doubt whatsoever that in respect of the newly established industrial undertaking the deficiency worked out for any assessment year cannot be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year. In these circumstances, when according to the ITO, the initial assessment year was the assessment year 1963-64 and according to the Commissioner (Appeals) and as admitted by the then authorised representative of the assessee-company before him, the initial assessment year was the assessment year 1964-65, there was no question of carry forward of the deficiency for any assessment year after the assessment year 1970-71 or 1971-72, i.e., in any case, there was no question of the carry forward and set off of the deficiency in working out the business income for the assessment year 1972-73 under consideration here. The controversy, therefore, whether the Commissioner (Appeals) was within his jurisdiction to comment that the deficiency for the assessment year 1969-70 was wrongly worked out and determined also, therefore, is immaterial inasmuch as whether the deficiency in the assessment order for the year 1969-70 was correctly worked out or not, it cannot be brought forward and set off in the assessment year 1972-73 under consideration here. It is found from the show-cause notice issued to the assessee by the ITO that among the mistakes apparent from the record which the ITO wanted to rectify by order under Section 154 was deduction under Section 80J of Rs. 4,51,646 which has been wrongly allowed. Even in the order under Section 154 along with another mistake this very mistake had been rectified by the ITO. It cannot, therefore, be said that the jurisdiction of the ITO to rectify the mistake and pass order under Section 154 was not based on the show-cause notice and the order of the ITO but on other extraneous material. Considering all this and looking to the totality of the facts and circumstances, we have no hesitation in coming to the conclusion that the deficiency worked out for the assessment years 1967-68 and 1969-70 aggregating to Rs. 4,51,646 was wrongly brought forward and set off in working out the business income for the assessment year 1972-73, this was a mistake apparent from the record and the mistake was rightly rectified by the ITO by order under Section 154. This action of the ITO, therefore, in our view, was rightly upheld in appeal by the Commissioner (Appeals).


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