1980 (2) TMI 7 - HC - Income Tax

Issues Involved:
1. Whether relief under section 80J for the assessment year 1967-68, which was neither claimed nor the deficiency worked out for the purpose of carry forward and set off as provided in section 80J(3) of the Income-tax Act, 1961, could be allowed as a mistake apparent from the record under section 154 for the assessment year 1970-71.
2. Whether the right to claim deduction under section 80J arose to the assessee in the assessment year 1970-71, when the profits were earned for the first time, or in the assessment year 1967-68, to which year the claim actually related.

Detailed Analysis:

Issue 1: Relief under Section 80J as a Mistake Apparent from the Record

The court examined whether the relief under section 80J for the assessment year 1967-68, which was not claimed or worked out for carry forward and set off, could be allowed as a mistake apparent from the record under section 154 for the assessment year 1970-71.

The assessee, a private company, sought rectification of the assessment order for the year 1967-68 under section 154, claiming a set-off of allowance under section 80J. The ITO rejected this application, stating that the claim was belated and should have been made in the year of assessment 1967-68. The AAC upheld this decision, noting that the issue was highly controversial and required deep thought and elaborate discussion. However, the IT Appellate Tribunal decided in favor of the assessee, prompting the Commissioner of Income-tax to seek a reference to the High Court.

The court noted that the conditions required by section 80J were satisfied, and the assessee had been granted relief under this section for the subsequent years 1968-69, 1969-70, and 1970-71. The court emphasized that the right to claim such relief is an absolute right not conditional upon any computation by the ITO. The omission to claim the set-off initially was deemed inconsequential, and the ITO was obligated to notify the assessee and grant the relief.

The court concluded that the mistake was apparent on the face of the record, as the conditions for claiming the deduction were satisfied, and the ITO should have afforded the relief by making the necessary calculations, a ministerial act.

Issue 2: Right to Claim Deduction under Section 80J

The court considered whether the right to claim deduction under section 80J arose in the assessment year 1970-71 when the profits were earned for the first time or in the assessment year 1967-68 to which the claim related.

The court observed that the assessee did not show any profits for the years 1967-68 and subsequent years until 1970-71. Therefore, the right to claim deductions and set off could only arise in the year 1970-71 when the profits were first made. The assessee was allowed set-offs for the years 1968-69, 1969-70, and 1970-71 but not for 1967-68. The court held that the right to claim accrued in 1970-71, making the application timely.

Conclusion:

1. The relief under section 80J for the assessment year 1967-68, though not claimed for carry forward and set off as provided in section 80J(3) of the Income-tax Act in that assessment year, could be allowed as a mistake apparent from the record under section 154 in the assessment for the year 1970-71.
2. The right to claim the deduction under section 80J arose to the assessee in the assessment year 1970-71, when the profits were made for the first time, and not in the assessment year 1967-68, even though the claim related to that year.

The reference was accordingly disposed of.

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