1988 (8) TMI 118 - AT - Income Tax

Summary

Issues:
Withdrawal of part of interest granted to the assessee under section 214 of the Act by passing order under section 154 of the Act.

Detailed Analysis:

1. The appeal involved the withdrawal of a part of the interest granted to the assessee under section 214 of the Act by passing an order under section 154 of the Act. The assessee, a company, had claimed deductions under section 80J of the Act for Unit No. 2, with a dispute arising regarding the treatment of liabilities in computing "capital employed." The original assessment accepted the assessee's claim due to a stay granted by the Supreme Court against the amended provisions. However, a subsequent Supreme Court decision led to the ITO passing an order under section 154, increasing the total income and raising additional demands, including withdrawal of part of the interest initially granted.

2. The assessee contended that any reduction in interest under section 214 could only occur at the time of regular assessment and not through a section 154 order. The CIT (A) upheld the ITO's action, stating that the order under section 154 was part of the regular assessment process and within the ITO's powers. The Tribunal noted the difference in deductions between the original assessment and the section 154 order, leading to increased total income and additional demands.

3. The assessee argued before the Tribunal that the ITO lacked justification for withdrawing part of the interest under section 214 through the section 154 order, as there was no apparent mistake. The assessee highlighted the retrospective nature of the amendment in section 214 and cited relevant court decisions to support their position. The department, however, supported the IT authorities' actions, emphasizing the necessity of the section 154 order post-Supreme Court decision and the binding nature of the Gujarat High Court's ruling.

4. The Tribunal observed that the ITO had to keep the deduction issue open due to the Supreme Court stay, leading to the original assessment and subsequent section 154 order. The Tribunal upheld the CIT (A)'s decision, noting the binding nature of the Gujarat High Court's decision despite differing views from other High Courts. Ultimately, the Tribunal dismissed the appeal, affirming the validity of the section 154 order and the withdrawal of part of the interest granted to the assessee under section 214.

In conclusion, the Tribunal upheld the withdrawal of the interest by the ITO through the section 154 order, considering the circumstances and the binding court decisions, leading to the dismissal of the appeal.