1984 (6) TMI 49 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the order u/s 154 of the I.T. Act withdrawing the extra-shift allowance.
2. Legality of reassessment proceedings u/s 147 of the I.T. Act.
3. Propriety of excluding indirect charges from the actual cost of fixed assets.
4. Allowance of extra-shift depreciation on electrical machinery.

Summary:

1. Validity of the order u/s 154 of the I.T. Act withdrawing the extra-shift allowance:
The Tribunal held that the ITO's order granting extra-shift allowance, which was independent of the AAC's order, could not be revoked u/s 154 as it was not a mistake apparent from the record. The High Court disagreed, stating that the mistake was apparent when considering the entire assessment files, thus making the rectification u/s 154 valid.

2. Legality of reassessment proceedings u/s 147 of the I.T. Act:
The AAC upheld the reassessment proceedings initiated by the ITO for the assessment years 1963-64 to 1965-66, rejecting the assessee's contention regarding their validity.

3. Propriety of excluding indirect charges from the actual cost of fixed assets:
The AAC directed the ITO to recompute depreciation and development rebate by capitalizing the bulk of the pre-production expenses, excluding specific sums, and distributing the remaining amount among the fixed assets.

4. Allowance of extra-shift depreciation on electrical machinery:
The High Court noted that the statutory rules explicitly prohibit extra-shift allowance on electrical machinery. The ITO's grant of such allowance was contrary to these rules, making it a mistake apparent from the record and rectifiable u/s 154. The court emphasized that the statutory prohibition is clear and not debatable, thus supporting the rectification.

Conclusion:
The High Court answered the common question in the negative, against the assessee, and upheld the Revenue's right to rectify the mistake u/s 154. The court awarded costs to the Revenue, with counsel's fee set at Rs. 500.