1982 (3) TMI 133 - AT - Income Tax

Issues Involved:
1. Jurisdiction of the Commissioner under section 263.
2. Adjustment of development rebate relating to the assessment year 1967-68.
3. Adjustment of relief under section 80J relating to the assessment year 1971-72.
4. Deduction of the provision for gratuity amounting to Rs. 2,54,452.

Detailed Analysis:

1. Jurisdiction of the Commissioner under section 263:

The assessee contended that the Commissioner lacked jurisdiction to revise the ITO's assessment order under section 263 because the assessment was processed under section 144B, making the IAC's directions integral to the assessment. The Commissioner rejected this preliminary objection, and the Tribunal upheld this decision. The Tribunal reasoned that the assessment order, although influenced by the IAC's directions, was still passed by the ITO. The statutory language and legislative intent behind section 144B and section 263 were analyzed, leading to the conclusion that the Commissioner retained jurisdiction to revise the ITO's order.

2. Adjustment of development rebate relating to the assessment year 1967-68:

The ITO allowed a development rebate of Rs. 33,16,297 for the assessment year 1967-68, which the Commissioner found erroneous. Under section 33(2), the development rebate can only be carried forward for eight assessment years immediately succeeding the relevant assessment year. The Commissioner determined that the last permissible year for carrying forward the rebate was the assessment year 1975-76, not 1976-77. The Tribunal agreed, emphasizing the continuity of assessment years and rejecting the argument that the absence of an assessment for 1975-76 altered the sequence. The Tribunal concluded that the ITO's allowance of the rebate in 1976-77 was incorrect.

3. Adjustment of relief under section 80J relating to the assessment year 1971-72:

The ITO granted relief under section 80J for the assessment year 1971-72, which the Commissioner also found erroneous. Section 80J(2) allows the relief to be carried forward for only four assessment years immediately succeeding the initial assessment year. The Commissioner noted that the last permissible year for carrying forward the relief was the assessment year 1975-76. The Tribunal upheld this view, reiterating the importance of the term "immediately succeeding" and maintaining that the assessment year 1975-76 existed irrespective of whether an assessment was made. The ITO's allowance of the relief in 1976-77 was thus deemed incorrect.

4. Deduction of the provision for gratuity amounting to Rs. 2,54,452:

The ITO allowed a deduction for a provision for gratuity despite the absence of an approved gratuity fund during the previous year. The Commissioner found this allowance erroneous. The Tribunal agreed, noting that section 40A(7)(b)(ii) applied only to the assessment years 1973-74 to 1975-76. For the assessment year 1976-77, the provision could only be allowed if the gratuity fund existed during the previous year, which it did not. Consequently, the Tribunal upheld the Commissioner's decision to withdraw the gratuity provision allowance.

Conclusion:

The Tribunal dismissed the appeal, affirming the Commissioner's order under section 263. The ITO's errors in allowing the development rebate, section 80J relief, and gratuity provision were corrected, ensuring compliance with the statutory provisions and preserving the revenue's interests.

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