1990 (4) TMI 82 - AT - Income Tax

Summary

Issues:
- Appeal against order u/s. 263 of the Income-tax Act, 1961 for the assessment year 1983-84.
- Validity of investment allowance of Rs. 7,23,701 allowed to the assessee.
- Determination of whether the assessee was engaged in manufacturing activity or merely processing articles.

Analysis:
1. The appeal was filed against the order u/s. 263 of the Income-tax Act, 1961 for the assessment year 1983-84. The issue revolved around the validity of the investment allowance of Rs. 7,23,701 allowed to the assessee by the I.T.O. The learned C.I.T. found the order erroneous and prejudicial to the Revenue as the machinery used by the assessee was not considered to be utilized for manufacturing processes. The C.I.T. relied on legal precedents to argue that the end-product did not constitute new goods, hence the investment allowance was wrongly allowed.

2. The authorized representative of the assessee argued that the company was engaged in manufacturing lacquered strips, distinct from the raw material used. Supporting documents were submitted to establish the manufacturing activity. Legal precedents were cited to interpret "manufacture" broadly. However, the Departmental Representative supported the C.I.T.'s order, emphasizing the assessing officer's duty to investigate claims. The C.I.T.'s order was deemed justified based on legal principles.

3. Upon review, it was noted that the assessing officer had not thoroughly examined the claim for investment allowance. The nature of the activities conducted by the assessee indicated processing rather than manufacturing. The judicial decisions cited were distinguished from the present case, concluding that the C.I.T.'s order was valid. Precedents highlighted the importance of proper inquiry before passing final orders.

4. The Tribunal found that the C.I.T.'s order under section 263 was justified, dismissing the appeal by the assessee. The decision was based on the lack of evidence supporting manufacturing activities and the failure to thoroughly investigate the investment allowance claim. The legal principles cited supported the C.I.T.'s authority to set aside the original assessment order.