1990 (12) TMI 19 - HC - Income Tax

Summary

Issues:
- Whether the rectification order dated September 10, 1985, was barred by limitation?

Comprehensive Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, for the assessment year 1979-80. The primary issue was whether the rectification order dated September 10, 1985, was barred by limitation. The Income-tax Officer had initially allowed weighted deduction under section 35B on various items of expenditure, including bank interest and packing expenses. However, in the rectification order, the Income-tax Officer withdrew the weighted deduction on bank interest and packing expenses, citing excess deduction under section 40(c). The Commissioner of Income-tax (Appeals) upheld the rectification order regarding section 40(c) but canceled it concerning the weighted deduction under section 35B. Both parties then appealed to the Tribunal.

In the Tribunal, the assessee contended that the rectification order was time-barred, relying on the law in force during the assessment year 1979-80. The Department argued that the amended section 154(7) governed the limitation period, allowing the rectification order to be within the extended time limit. The Tribunal rejected the assessee's contention, stating that the rectification order was not barred by limitation.

The High Court analyzed the law of limitation, emphasizing that the amended section 154(7) dictated the time frame for rectification. The court noted that the rectification order dated September 10, 1985, fell within the four-year period from the end of the financial year in which the original assessment order was passed. Referring to the Supreme Court decision in S. Sankappa v. ITO [1968] 68 ITR 760, the court highlighted that rectification proceedings are part of the assessment process. The court concluded that the rectification order was well within the limitation period under the amended law.

Ultimately, the High Court answered the reference question in the negative, favoring the Revenue. The judgment was a unanimous decision, with both judges concurring. No costs were awarded in the case.