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income-tax Officer Vs. Oswal Woollen Mills - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Chandigarh
Decided On
Judge
Reported in(1985)14ITD191(Chd.)
Appellantincome-tax Officer
RespondentOswal Woollen Mills
Excerpt:
.....act.2. the assessment year involved is 1980-81. after the income-tax return was filed by the assessee, provisional assessment was framed by the ito under section 141a(3) of the income-tax act, 1961 ('the act') and a refund was granted. the ito in the course of framing the provisional assessment had made certain disallowances on account of deduction under section 80j of the act. the assessee considering that the said adjustment regarding relief under section 80j in the form of reducing the relief was not prima facie a deduction which should not have been allowed, application under section 154 of the act for rectification of the provisional assessment was moved, which was rejected by the ito.3. when the assessee came in appeal before the commissioner (appeals) against the said order.....
Judgment:
1. That the learned Commissioner (Appeals) erred both in law and on facts in holding that the disallowance of Rs. 29,87,768 made while computing relief under Section 80J, read with Rule 19A, was not prima facie inadmissible in view of the provisions contained in Section 141A(3) of the Income-tax Act, 1961.

2. That the learned Commissioner (Appeals) erred both in law and on facts in holding that a mistake of law apparent from the record within the meaning of Section 154 of the Income-tax Act has occurred in the above noted case while making a provisional assessment under Section 141A of the Income-tax Act.

2. The assessment year involved is 1980-81. After the income-tax return was filed by the assessee, provisional assessment was framed by the ITO under Section 141A(3) of the Income-tax Act, 1961 ('the Act') and a refund was granted. The ITO in the course of framing the provisional assessment had made certain disallowances on account of deduction under Section 80J of the Act. The assessee considering that the said adjustment regarding relief under Section 80J in the form of reducing the relief was not prima facie a deduction which should not have been allowed, application under Section 154 of the Act for rectification of the provisional assessment was moved, which was rejected by the ITO.3. When the assessee came in appeal before the Commissioner (Appeals) against the said order of the ITO under Section 154 in respect of rectification of provisional assessment framed under Section 141 A(3), the Commissioner (Appeals) accepting the contention of the assessee, though partly, granted relief to the assessee mainly in respect of deduction under Section 80J. It is this action of the Commissioner (Appeals) which is disputed by the revenue before us.

4. The learned senior departmental representative, Shri R.K. Bali, with an exclamation to start with, gave certain dates and facts suggesting that all was not well with the claim of the assessee. He submitted that the assessment year involved was 1980-81 and strangely enough, according to him, return was filed on 1-4-1980 and provisional assessment was framed on 8-4-1980, as a consequence, of which refund of Rs. 1,04,51,994 granted. The assessee filed its claim of refund in a sum of Rs. 1,24,86,018 and in that respect filed an application for rectification dated 9-4-1980 on 15-4-1980. One of the claims in the application, under Section 154, of the assessee was that borrowed capital should have been taken into account for relief under Section 80J. The rectification order was passed on 19-4-1980, though vide order of the ITO rectification application was fixed for hearing for 23-4-1980 vide the ITO's letter dated 19-4-1980 but its hearing was advanced on request of the assessee's counsel for 19-4-1980. No sooner the ITO rejected the assessee's claim on 19-4-1980, on that very date appeal was filed and on request of the assessee's counsel for an early hearing, the appeal was heard on 21-4-1980 and decided on 28-4-1980. He was, however, fair enough to admit that regular assessment in this case was framed on 25-3-1983 and in that case the revenue has accepted the assessee's claim on merit regarding relief under Section 80J on the basis of contentions made in the application under Section 154. He submitted that whatever claim was made by the assessee in rectification application was in respect of an issue which was not free from debate and in that connection, he relied on the cases of T.S. Balaram, ITO v.Volkart Bros. [1971] 82 ITR 50 (SC) and R.A. Boga v. AAC [1977] 110 ITR 1 (Punj. & Har.) (FB).

5. Before the fast moment of the matter regarding the assessee's refund, as a consequence of provisional assessment and expeditiously fast hearing of the appeal by the Commissioner (Appeals), could have any effect on our mind, the learned counsel for the assessee, Shri Dinesh Gogna, went into still a deeper background of the issue and submitted that whatever harm has been done by the ITO, the assessee's claim in Section 154 proceedings is just for goodness of the assessee and the co-operation meted out by the assessee to the department. He submitted that nothing may turn on what he is going to submit but the fact is that accounting year relevant for the assessment year 1980-81 was not ending 31-3-1980 but it was 30-6-1979. He submitted that after 15-3-1980, some time in third week, the assessee was requested by the ITO to deposit some amount in order to complete his budget and the assessee, to be nice to the department and in order to co-operate, deposited about Rs. 75 lakhs in fag end of March 1980. Naturally, since the said amount was deposited with a view to complete the budget as it was not advance tax nor its payment was warranted under any provision of the Act, the assessee, in order to get back its money, had to file the return on 1-4-1980 and naturally, was in hurry to get back its refund, which was more than a crore, to be specific it was Rs. 1,24,86,108. With this submission in the background, the learned counsel for the assessee submitted that there was nothing wrong if the assessee hurried the disposal of the matter at both the stages, before the ITO for provisional assessment and rectification and before the Commissioner (Appeals). He submitted that there is no question of debate in respect of issues raised by the assessee in rectification application. Actually, if Section 141A is read carefully, it is only certain types of additions which, are warranted thereunder. Denial of relief under Section 80J in a way the ITO has resorted to, is not prima facie a disallowance which could be made. Therefore, on the basis of these facts and placing his reliance on the order of the Commissioner (Appeals), he also placed his reliance on the case of CIT v. Simpson & Co: [1980] 122 ITR 283 (Mad.) and submitted that special leave petition in respect of said case stands dismissed, as reported in CIT v. Simpson & Co. Ltd. [1983] 141 ITR (St.) 50.

6. After taking into consideration the interesting part of the arguments, respectively projected both by the revenue and the assessee, regarding the issue under dispute and appreciating by carefully perusing the facts on record, we are unable to interfere in the finding of the Commissioner (Appeals). The fast moment of the assessee before the ITO in respect of provisional assessment and application for rectification proceedings and before the Commissioner (Appeals) in respect of its first appeal, preferred against Section 154 order of the ITO, as pleaded by the learned senior departmental representative, failed miserably to prejudice us against the assessee's claims, the moment we go through its co-operative attitude and attempt to help the revenue for completion of its budget, which is neither warranted under the Act nor is an obligation of the assessee. It is just normally due by the assessee for the sake of goodwill. If the ITO, for its own purpose of completing the budget, was good enough to ask for heavy deposits in fag end of the relevant year, there was nothing wrong for the assessee to claim its refund, as a consequence of the provisional assessment, which is very common, as normally is considered as a deal.

What we are surprised to look at is that in the course of provisional assessment, as well detailed by the Commissioner (Appeals) in paras 11 to 13 of his order and going through the said section carefully, which is also extracted and placed by the Commissioner (Appeals) in his order, denial of relief to the extent of Rs. 28,68,073 on account of relief under Section 80J was not a prima facie disallowance. As observed by the Commissioner (Appeals) in para 12(c) of his order, the said amount comprised of two disallowances : (i) On account of reason given at serial Nos. (v) of para 5, Rs. 1,73,469 mentioned by the Commissioner (Appeals) in his order.

(ii) On account of reason given at serial Nos. (i) to (iii) of para 5 Rs. 26,94,604 mentioned by the Commissioner (Appeals) in his order.

With these two disallowances, the Commissioner (Appeals) in his order has dealt with at length and correctly. We, therefore, confirm the action of the Commissioner (Appeals) that there was nothing prima facie from the return of the assessee that certain disallowance of the type regarding denial of relief under Section 80J should have been refused by the ITO. It is rightly beyond the purview of Section 140A and disallowance of Rs. 26,94,604 should not have been made. If the disallowance was against law, naturally it was a mistake apparent from record and, as observed by the Commissioner (Appeals) in paras 14 to 16 of his order, mistake was apparent and there was no question of any debate about the same.

7. We need not even go to the law relied upon by both the parties in order to adjudicate the issue because it is apparent from the facts in the background and by mere reading of Section 141A that no relief under Section 80J should have been denied by the ITO in the course of provisional assessment, as it was not a prima facie disallowance.

Anyway, there of the learned senior departmental representative on the case of Volkart Bros, (supra) is misplaced. When we take into considerate Section 154 proceedings, we find that mistake was apparent from record, which was not only obvious but patent one. To establish the same, no long drawn process of reasoning on points on which there could be two Sons could be there. Since the claim raised by the assessee in Section 154 proceedings was free from debate, the said case could not be fatal to he lessee's claim. The other case was that of R.A. Boga (supra), relied upon by the learned senior departmental representative finding in which was that the provisional assessment was not meant to merge in the regular assessment. This case, also cannot come to the rescue of the revenue because of distinction in facts. If this judgment is gone through carefully it on the other hand, supports the contention of the assessee. Regarding the other part of the assessee's contention that computation of relief employed for Section 80J relief could not be on proportionate basis, Ws s true that in the case of Simpson & Co. (supra), as per flash available at [1983] 141 ITR (St) 50, even special leave petition stands dismissed. But these cases support the contention of the assessee so far merit is concerned .

8. Here in short, to summarise the finding and issue in the background is' at in the course of provisional assessment proceedings deduction whit was not prima facie disallowance could not be made and demand record of the same was a mistake apparent from record and there could not be any debate about the same. In the light of above discussion and for the reasons given by the Commissioner (Appeals) in his order, his action is hereby confirmed. 9. In the result, the revenue's appeal is dismissed.


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