1989 (11) TMI 30 - HC - Income Tax

Summary

Issues:
1. Validity of reopening assessment under section 147(b) and withdrawal of relief under section 80J for assessment year 1973-74.
2. Justification of upholding the validity of reassessment made under section 147(b).

Analysis:
The judgment of the High Court of Kerala, delivered by K. S. PARIPOORNAN J., addressed the issues raised by the Income-tax Appellate Tribunal regarding the reopening of assessment and withdrawal of relief under section 80J for the assessment year 1973-74. The assessing authority had allowed set off of unabsorbed depreciation and development rebate without giving priority to deduction under section 80J. The assessment was reopened based on an audit note indicating a violation of provisions related to carrying forward relief under section 80J. The Appellate Assistant Commissioner directed the correct amount due under section 80J to be set off before other carried forward amounts. The Income-tax Appellate Tribunal held that unabsorbed depreciation and development rebate take priority over section 80J deduction, and deficiency under section 80J cannot be carried forward beyond the 7th assessment year. Consequently, the reassessment based on the audit report was deemed proper.

The High Court considered the arguments presented by both the assessee's counsel and the Revenue's counsel. The Appellate Tribunal's decision to give priority to development rebate and depreciation allowance, and withdraw the carried forward relief under section 80J for the assessment year 1973-74 was upheld. The Tribunal's finding that the audit objection only alerted the Income-tax Officer and did not constitute an expression of opinion was deemed valid. The High Court affirmed the Tribunal's justification for the validity of reopening the assessment under section 147(b) and the consequential withdrawal of carried forward relief under section 80J. The court rejected the assessee's plea that the reopening of assessment based on a valid objection was untenable, citing the decision in Indian and Eastern Newspaper Society v. CIT. The High Court concluded by answering both questions in the affirmative, against the assessee and in favor of the Revenue, disposing of the reference accordingly.

In summary, the High Court upheld the validity of the reassessment made under section 147(b) for the assessment year 1973-74, emphasizing the priority of unabsorbed depreciation and development rebate over the deduction under section 80J. The court found the reassessment based on the audit report to be proper and rejected the assessee's contention against the reopening of assessment, ultimately ruling in favor of the Revenue.