2005 (5) TMI 266 - AT - Income Tax

Summary

Issues Involved:
1. Allowability of deduction under Section 80J.
2. Allowability of investment allowance under Section 32A.
3. Allowability of deduction under Sections 80HH and 80-I.
4. Limitation of order under Section 154.
5. Dismissal of Department's SLP by the Apex Court.
6. Application of the doctrine of merger.
7. Disallowance of investment pertaining to the vaccine unit.

Detailed Analysis:

1. Allowability of Deduction under Section 80J:
The assessee's claim for deduction under Section 80J was initially allowed but later reversed by the Hon'ble Supreme Court in the case of CIT vs. Venkateswara Hatcheries (P) Ltd., which held that the assessee is not entitled to such deductions. The AO issued notices under Section 154 to withdraw the previously granted deductions. The assessee contended that the allowability of deduction under Section 80J was a debatable issue and thus could not be rectified under Section 154, which is meant for rectifying mistakes apparent from the record.

2. Allowability of Investment Allowance under Section 32A:
Similar to the deduction under Section 80J, the investment allowance under Section 32A was also initially allowed and later reversed by the Supreme Court. The assessee argued that the issue was debatable and could not be rectified under Section 154. The Tribunal noted that the AO's action to withdraw the allowance under Section 154 was beyond the limitation period prescribed under Section 154(7).

3. Allowability of Deduction under Sections 80HH and 80-I:
The deductions under Sections 80HH and 80-I were also initially allowed and subsequently reversed by the Supreme Court. The assessee argued that these were debatable issues, and thus, the AO's rectification under Section 154 was not justified. The Tribunal agreed with the assessee, noting that the rectification was beyond the four-year limitation period specified in Section 154(7).

4. Limitation of Order under Section 154:
The primary contention of the assessee was that the impugned orders passed by the AO under Section 154 were beyond the four-year limitation period specified in Section 154(7). The Tribunal upheld this argument, stating that the rectification orders were indeed passed beyond the permissible period and thus were not legally sustainable.

5. Dismissal of Department's SLP by the Apex Court:
The assessee argued that the Supreme Court's dismissal of the Department's Special Leave Petition (SLP) for certain assessment years indicated that the issue had attained finality. The Tribunal noted that the AO had no jurisdiction to pass rectification orders under Section 154 when the matter had already been decided by higher appellate authorities.

6. Application of the Doctrine of Merger:
The doctrine of merger was invoked by the assessee, arguing that once an appellate authority has decided on an issue, the AO cannot rectify the same issue under Section 154. The Tribunal agreed, stating that the AO had no jurisdiction to rectify issues that had already been decided by appellate authorities.

7. Disallowance of Investment Pertaining to the Vaccine Unit:
For the assessment year regarding the disallowance of investment pertaining to the vaccine unit, the Tribunal found that the rectification order was also beyond the limitation period and thus not sustainable.

Conclusion:
The Tribunal quashed the orders passed by the AO under Section 154 for being beyond the limitation period specified in Section 154(7). The Tribunal also noted that the issues had already been decided by higher appellate authorities, and the AO had no jurisdiction to rectify them under Section 154. Consequently, all the appeals of the assessee were allowed.