1984 (6) TMI 109 - AT - Income Tax

Issues Involved:
1. Legality and validity of the assessment framed.
2. Jurisdiction of the IAC (Assessment), Indore under Section 144B.
3. Classification of the return filed by the assessee under Sections 139(1) and 139(4).
4. Validity of the assessment framed on 23rd August 1980.
5. Application of proviso to Section 145(1).
6. Valuation of closing stock.
7. Depreciation rate for purely temporary erections.
8. Allowability of payment to a former partner as revenue expenditure.
9. Charging of interest under Sections 139(8), 215, and 216.

Detailed Analysis:

1. Legality and Validity of the Assessment Framed:
The assessment framed under Section 143(3) read with Section 144B was challenged on grounds of being illegal and void ab initio. The Tribunal found that the assessment order was based on directions from the IAC (Assessment), Indore, who lacked jurisdiction. Consequently, the assessment was deemed a nullity and void ab initio.

2. Jurisdiction of the IAC (Assessment), Indore under Section 144B:
The assessee contended that the IAC (Assessment), Indore, did not have valid jurisdiction to dispose of the reference under Section 144B as there was no specific order under Section 123 transferring the reference from IAC, Bhopal. The Tribunal agreed, citing that jurisdiction cannot be conferred by parties or consent and must be explicitly vested. The assessment based on directions from the IAC, Indore, was therefore invalid.

3. Classification of the Return Filed by the Assessee under Sections 139(1) and 139(4):
The assessee argued that the return filed on 31st August 1976 should be considered under Section 139(4) rather than Section 139(1), claiming no formal extension was granted. However, the Tribunal upheld the lower authorities' decision, noting that the assessee had represented that an extension was granted, and the ITO acted on this representation. Thus, the return was valid under Section 139(1), and the revised return filed on 2nd March 1979 was also valid.

4. Validity of the Assessment Framed on 23rd August 1980:
The assessee claimed the assessment was beyond the period of limitation. The Tribunal rejected this, affirming that the revised return filed on 2nd March 1979 was valid, thus the assessment framed on 23rd August 1980 was within the limitation period.

5. Application of Proviso to Section 145(1):
Grounds related to the application of the proviso to Section 145(1) were not pressed by the assessee and were therefore rejected.

6. Valuation of Closing Stock:
Grounds related to the valuation of closing stock were also not pressed by the assessee and were rejected.

7. Depreciation Rate for Purely Temporary Erections:
The Tribunal agreed with the assessee that the expenditure on purely temporary erections should be allowable as revenue expenditure or, alternatively, 100% depreciation should be allowed. This ground was allowed in favor of the assessee.

8. Allowability of Payment to a Former Partner as Revenue Expenditure:
The payment of Rs. 21,451 to a former partner was deemed allowable as revenue expenditure. The Tribunal found that the payment was made for business expediency and was necessary for carrying on the business, thus allowing this ground in favor of the assessee.

9. Charging of Interest under Sections 139(8), 215, and 216:
The Tribunal directed that the provisions of statutory Rules 40, 117A, and 116A should be complied with and the issue should be decided afresh, keeping in mind the substantial relief granted in quantum. However, since the assessment was held to be a nullity, this issue became academic.

Conclusion:
The appeal by the assessee was allowed, with the assessment order and the orders of the lower authorities being cancelled. The Tribunal held that the assessment was void ab initio due to the lack of jurisdiction of the IAC (Assessment), Indore.

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