1987 (6) TMI 85 - AT - Income Tax

Summary

Issues:
Departmental appeals against consolidated order by CIT(A) for asst. yrs. 1978-79, 1979-80, and 1980-81 - Whether order passed by ITO under s. 154 of IT Act, 1961 justifiable - Whether rectification orders valid - Whether cold storage company entitled to investment allowance under s. 32A and relief under s. 80HH.

Analysis:
The departmental appeals were consolidated as they raised a common issue regarding the validity of the order passed by the ITO under s. 154 of the IT Act, 1961. The ITO had rectified the assessment orders for the asst. yrs. 1978-79, 1979-80, and 1980-81, withdrawing investment allowance under s. 32A and relief under s. 80HH for a cold storage company. The ITO's decision was based on a High Court ruling stating that cold storage activities did not qualify for these reliefs. The CIT(A) overturned the rectification orders, deeming the issue debatable and not a clear mistake under s. 154. The Department challenged this decision before the Tribunal.

The Department contended that the ITO's rectification was justified as the cold storage company did not qualify as an industrial company for the reliefs granted. The Departmental Representative argued that the ITO's actions were based on a legal mistake apparent from the record and criticized the CIT(A) for canceling the rectification orders. In contrast, the authorized representative for the assessee supported the CIT(A) by asserting that the issue was debatable, and no clear mistake was evident in the original assessment by the ITO.

The Tribunal analyzed the High Court's ruling cited by the ITO and concluded that it did not definitively state that a cold storage company did not manufacture or produce any article or thing. The Tribunal emphasized that for rectification under s. 154, the mistake must be apparent from the record and not a debatable legal issue. Referring to the Supreme Court's decision in T.S. Balaram, ITO vs. Volkart Bros., the Tribunal reiterated that rectification is limited to correcting obvious errors of law. Since the issue of the cold storage company's eligibility for reliefs was debatable, the Tribunal upheld the CIT(A)'s decision to cancel the rectification orders.

Ultimately, the Tribunal dismissed the departmental appeals, affirming the CIT(A)'s decision. The Tribunal held that the ITO did not have the jurisdiction to rectify the assessment orders under s. 154 to withdraw the reliefs granted to the cold storage company under s. 32A and s. 80HH, as the issue was debatable and not a clear mistake apparent from the record.