1995 (6) TMI 37 - AT - Income Tax

Assessing Officer, Assessment Order, Assessment Year, Deductions In Respect, Orders Passed, Orders Prejudicial To Interests, Original Assessment

Issues Involved:
1. Validity of the orders under section 263 due to limitation of time.
2. Merits of the deductions under section 80J.
3. Merits of the deductions under section 35B.
4. Merits of the deductions related to interest expenditure and land revenue tax.

Detailed Analysis:

1. Validity of the Orders under Section 263 Due to Limitation of Time:
The primary issue is whether the orders under section 263 for the assessment years 1979-80 and 1980-81 are barred by the limitation of time. The assessee argued that the orders are time-barred as per the provisions of section 263 as they existed before 1-10-1984. The CIT contended that the amended provisions effective from 1-10-1984, which extended the limitation period, should apply.

The Tribunal concluded that the assumption of jurisdiction by the CIT under section 263 for the assessment years 1979-80 and 1980-81, concerning the deduction under section 80J, is barred by limitation. The errors in the original assessments made in 1981 could not be revised after two years from their dates. However, the Tribunal found that the orders under section 263 related to the deduction under section 35B were within the limitation period as per the amended law, which allowed orders to be made up to 31-3-1987.

2. Merits of the Deductions under Section 80J:
The CIT observed that the capital employed in the new industrial undertaking should be computed according to the various clauses in section 80J. The CIT noted that the ITO did not properly scrutinize the relevant details while allowing the deduction under section 80J, making the original assessment orders erroneous and prejudicial to the interest of revenue.

The Tribunal upheld the CIT's view that the computation of deduction under section 80J was required to be made as per the provisions of law contained in section 80J(1A). The Assessing Officer had not made proper enquiries or applied the relevant provisions of law, rendering the original assessments for 1981-82 and 1982-83 erroneous and prejudicial to the revenue.

3. Merits of the Deductions under Section 35B:
The CIT observed that part of the printing and stationery expenses qualifies for weighted deduction under section 35B but should be apportioned in the ratio of export sales to total sales unless the assessee provides concrete evidence for a higher allocation.

The Tribunal found that the ITO allowed the weighted deduction under section 35B in the second assessment order without making necessary enquiries or considering the relevant provisions of law. The CIT's direction to the ITO to re-examine this point was deemed reasonable and within jurisdiction.

4. Merits of the Deductions Related to Interest Expenditure and Land Revenue Tax:
The CIT noted that the ITO allowed deductions for interest expenditure and land revenue tax without making proper enquiries or ascertaining basic facts, making the assessment for 1981-82 erroneous and prejudicial to the interest of revenue.

The Tribunal agreed with the CIT's decision to set aside the original assessment orders and directed the ITO to reconsider these points afresh, ensuring all relevant facts and provisions of law are taken into account.

Conclusion:
The Tribunal partially allowed the appeals for the assessment years 1979-80 and 1980-81, setting aside the CIT's orders under section 263 regarding the deduction under section 80J due to being time-barred. However, the Tribunal upheld the CIT's orders concerning the deduction under section 35B for these years. The appeals for the assessment years 1981-82 and 1982-83 were dismissed, confirming the CIT's orders under section 263 for these years.

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