1984 (3) TMI 200 - AT - Income Tax

Summary

Issues Involved:

1. Whether the rectification applications under section 154 of the Income-tax Act, 1961, were barred by limitation.
2. Whether the period of limitation should be counted from the date of the original assessment or the date of the order giving effect to the appellate order.
3. Whether the assessee's claim for recomputation of deduction under section 80J by revising the capital employed without taking into account the liabilities was valid.

Issue-wise Detailed Analysis:

1. Limitation of Rectification Applications under Section 154:

The primary issue was whether the rectification applications filed by the assessee under section 154 were within the prescribed time limit. The Income-tax Officer (ITO) had rejected these applications, stating that they were barred by limitation as they were filed more than four years after the original assessments. The Commissioner (Appeals) upheld this decision, holding that the period of limitation should be counted from the date of the original assessment orders and not from the date of the orders giving effect to the appellate orders.

2. Period of Limitation:

The assessee contended that the period of limitation should be counted from the date of the ITO's orders giving effect to the appellate orders (31-3-1977 and 30-9-1977) and not from the date of the original assessments. The Commissioner (Appeals) and the ITO, however, relied on the decisions of the Gujarat High Court in Ahmedabad Sarangpur Mills Co. Ltd. v. A.S. Manohar, ITO and the Calcutta High Court in Bengal Assam Steamship Co. Ltd. v. CIT, which held that the period of limitation should be counted from the date of the original assessment orders.

The Tribunal, in its decision, noted that the Gujarat and Calcutta High Court decisions were distinguishable as they did not involve cases where the original assessment orders were superseded by subsequent orders. The Tribunal held that when an assessment is modified pursuant to an appellate order, the subsequent order replaces the earlier assessment order. Therefore, the period of limitation should be counted from the date of the subsequent order.

3. Validity of the Assessee's Claim under Section 80J:

On the merits, the Tribunal held that the assessee's claim for recomputation of the deduction under section 80J by excluding liabilities from the capital employed was not valid. The Tribunal noted that the assessee had not raised this claim during the original assessments or in the appeals before the AAC. Furthermore, section 80J had been amended with retrospective effect by the Finance (No. 2) Act, 1980, which required the computation of capital employed to include liabilities. Therefore, there was no mistake apparent from the record that warranted rectification.

Separate Judgments:

The Judicial Member and the Accountant Member of the Tribunal delivered separate judgments. The Judicial Member held that the rectification applications were barred by limitation and that the assessee's claim under section 80J was not valid. The Accountant Member, however, held that the period of limitation should be counted from the date of the orders giving effect to the appellate orders and directed the Commissioner (Appeals) to dispose of the issue on merits.

Third Member's Decision:

The matter was referred to a Third Member due to the difference of opinion between the Judicial Member and the Accountant Member. The Third Member agreed with the Accountant Member, holding that the period of limitation should be counted from the date of the orders giving effect to the appellate orders. The Third Member noted that the original assessment orders had ceased to exist and that the mistake sought to be rectified existed in the subsequent orders. Therefore, the rectification applications were within time.

Conclusion:

The Tribunal, by majority opinion, held that the period of limitation for rectification under section 154 should be counted from the date of the orders giving effect to the appellate orders. The assessee's rectification applications were thus within time. However, on the merits, the Tribunal upheld the ITO's decision, holding that the assessee's claim under section 80J was not valid. The appeals were dismissed on merits.