1977 (11) TMI 46 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the Income-tax Officer under section 154 of the Income-tax Act, 1961
2. Rectification of assessment order for the year 1959-60 under section 154 of the Income-tax Act, 1961

Jurisdiction of the Income-tax Officer under section 154:
The High Court of Bombay addressed a reference initiated by the Commissioner under section 256(1) of the Income-tax Act, 1961. The Tribunal referred two questions to the court, one at the instance of the Commissioner and the other at the instance of the assessee. The primary issue was whether the Income-tax Officer had the jurisdiction to act under section 154 of the Income-tax Act, 1961. The case involved a dispute regarding the allowance of development rebate on machinery, tools, structurals, and a motor car during the assessment year 1959-60. The successor Income-tax Officer sought to rectify the grant of development rebate, leading to a legal challenge by the assessee. The Appellate Assistant Commissioner upheld the Income-tax Officer's order, prompting the assessee to appeal to the Tribunal.

Rectification of assessment order under section 154:
The Tribunal examined the contentions raised by both parties. It was argued that the circumstances did not authorize the Income-tax Officer to proceed under section 154. The Tribunal acknowledged that section 154 could apply to old assessments and that the Income-tax Officer's action could have been upheld under section 35. However, the Tribunal concluded that there was no error warranting rectification under section 154 in the present case. The Tribunal found that the revised balance-sheet filed by the assessee prior to the completion of assessment indicated compliance with the legal requirements for claiming development rebate. The Tribunal also held that the second Income-tax Officer lacked justification to dispute the eligibility of tools, structurals, and the motor car for development rebate. Ultimately, the Tribunal allowed the appeal, canceling the order under section 154.

Conclusion:
The High Court concurred with the Tribunal's decision, emphasizing that the original Income-tax Officer's acceptance of the revised balance-sheet supported the assessee's position. The Court agreed with the Tribunal's assessment that the second Income-tax Officer lacked the necessary grounds to rectify the assessment order under section 154. Consequently, the Court ruled in favor of the assessee on the jurisdictional issue and deemed it unnecessary to address the second question raised by the assessee. The Court directed the Commissioner to bear the costs of the reference proceedings.