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TMI Blog1992 (11) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... chases one-day old chicks called parent birds and rear them till they attain the egg laying stage. The eggs laid by parent birds would not be sold but would be hatched into one day old chicks which will be sold as stock-in-trade. One day old chicks would also be purchased to convert them into parent birds and one day old chicks would also be sold as stock-in-trade. However, the assessee maintains separate accounts for these two categories - (i) one day old chicks called parent birds, and (ii) one day old chicks meant to be stock-in-trade. The company has been consistently contending that the parent birds used for the purpose of laying eggs to be hatched in the hatcheries of the assessee are to be considered as plants and it has been claiming depreciation, terminal allowance and investment allowance in respect of the cost of the birds. In the statement of fixed assets prepared for assessment year 1987-88 W.D.V. of the livestock (parent birds) as on 1-4-1986 was shown at Rs. 12,84,727. The additions made in the accounting year in question to the said live stock was noted as Rs. 38,32,555 and the total of the W.D.V. of the live stock was noted as Rs. 51,17,282. On that depreciation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock-in-trade but cannot be considered as plants. At para 9 in the learned Commissioner (Appeals)'s order, the ground of attack relating to rejection of the claim of investment allowance made by the assessee can be found and they are the following: "The learned Deputy Commissioner is not correct in his observation that the one-day old chicks purchased by the Company for laying eggs used for hatching, constitute stock-in-trade. This observation of the Deputy Commissioner is without any basis and in fact is in confrontation to the earlier record. The learned Deputy Commissioner is not justified in ignoring the order of the Income-tax Appellate Tribunal relating to the earlier years wherein it was clearly held that the parent stock purchased by the Company constitute plant and therefore, the additions to parent stock is eligible for investment allowance." At para 10, the learned Commissioner (Appeals) pointed out that the assessee claimed investment allowance on parent stock-in-trade at Rs. 38,32,555 and the Dy. Commissioner (Assessment) disallowed the claim holding that the parent stock is not plant. He found that this point is covered by the decision of the Tribunal for assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---- W.D.V. for depreciation Rs. 16,46,879 -------------- He calculated the depreciation at 15 per cent thereon at Rs. 2,47,032 whereas the terminal allowance on live stock was accepted at Rs. 23,26,443. The Deputy Commissioner later found that mistakes had crept into his modificatory order dated 10-9-1990 and, therefore, he modified it further by another order passed under section 154 of the Income-tax Act on 19-3-1991 forming the basis of the present appeal. By this modificatory order dated 19-3-1991, he withdrew the depreciation as well as terminal allowance claim totalling to Rs. 27,91,696 on live stock. The main ground on which he withdrew depreciation and terminal allowance granted by him earlier was noted in his order under section 154 dated 19-3-1991 which is hereinafter called the second modificatory order. In the second modificatory order, the Deputy Commissioner held the following: "In the assessment completed on 27-3-1990 in the above case for the assessment year 1987-88, the assessee's claim for depreciation of Rs. 27,91,696 on live stock was disallowed, treatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax (Appeals) and another should be deemed to be an independent order containing findings of the Dy. Commissioner with regard to matters not dealt with by the Commissioner (Appeals) in his appellate orders. It is important to know, the learned counsel for the assessee argued that the learned Commissioner (Appeals) while disposing of the quantum appeal did say and specifically found that parent birds are plants. The assessee had already furnished all particulars necessary for granting depreciation. In those circumstances whether the assessee categorically claims depreciation or not it should have been allowed as a consequence of the finding that the parent birds are plants. The learned counsel for the assessee further argued that the depreciation claimed should be deemed to have been allowed to the assessee by the first modificatory order invoking suo motu powers of the Income-tax Officer given under sub-section (2) of section 154. He relied upon the following decisions: (i) Chokshi Metal Refinery v. CIT [1977] 107 ITR 63 (Guj.). (ii) Beco Engg. Co. Ltd. v. CIT [1984] 148 ITR 478 (Punj. Har.). 5. On the other hand, the learned Departmental Representative argued that thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the orders of the Commissioner (Appeals) and after the merger whether any part of the original assessment order passed by the Deputy Commissioner retains its identity and authority. In this connection we may immediately refer to the provisions of section 154(1A) which is as follows : "Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided." The above provision clearly shows that matters which were not considered and decided by the appellate authority can as well be rectified under section 154(1) by the Income-tax Officer. In this case grant of depreciation and terminal allowance which were rejected by the Income-tax Officer in the first instance were not at all appealed against before the Commissioner (Appeals) and, therefore, they still remain as orders of the Deputy Commissioner which are amenable for rectification under section 154(1) by the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the relevant assessment year and the same was granted by the Dy. Commissioner in his first modificatory order. The further question that would arise in this case is whether disregarding the ratio of the decision of the Tribunal given in the assessee's own case for earlier years can be said to constitute a mistake or error within the meaning of section 154(1) of the Income-tax Act. In Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, WTO [1975] 100 ITR 651 (Guj.). for assessment years 1957-58, 1958-59 and 1959-60, the petitioner-company claimed certain amount in each year as deduction in respect of provision for taxation but the claim was disallowed on the ground that the amount provided towards tax liability did not constitute debt owed from the petitioner on the relevant valuation date within the meaning of section 2(m) of the W.T. Act, 1957. The petitioner did not prefer appeals against the order of assessment. Subsequently, however, the petitioner came to know from a decision of the Income-tax Appellate Tribunal that the amounts claimed by it in respect of provision for taxation were deductible in computing the net wealth of the petitioner. The petitioner made applications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we may refer to the Karnataka High Court's decision in Addl. CIT v. India Tin Industries (P.) Ltd. [1987] 166 ITR 454. In that case the total development rebate granted to the assessee by the Income-tax Officer was Rs. 16,781 out of which the development rebate claimed on dyes and tools was Rs. 5,740. The Income-tax Officer while framing the assessment for assessment year 1963-64 disallowed the claim for development rebate in respect of dyes and tools but allowed development rebate of Rs. 11,011. The assessee appealed against the disallowance of Rs. 5,740 only which represents the development rebate claimed on dyes and tools and that claim was allowed to the assessee in the appeal by the Appellate Assistant Commissioner. Subsequently the Income-tax Officer by his order under section 154 holding that since the assessee had created development rebate reserve of Rs. 7,172 only, the maximum development rebate that may be allowed was Rs. 9,563. Therefore, the Income-tax Officer restricted the Development Rebate to be allowed to Rs. 9,550 in respect of machinery only. The Appellate Asstt. Commissioner as well as the Tribunal held the order of rectification as not valid. The High Court on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which was not the subject-matter of the appeal and was thereafter left untouched by the Appellate Assistant Commissioner can be rectified by the Income-tax Officer." Here in this case, the disallowance of depreciation and depletion allowance on the parent stock in the original assessment order were not subjected to in appeal before the Commissioner of Income-tax (Appeals) and hence they remain to be fit matters which can be rectified by the Deputy Commissioner (Assessments) who had passed the original order. He has full authority and competence to exercise that jurisdiction under section 154(1) whenever he realises that there are mistakes apparent from record in his original assessment order in granting depreciation and depletion allowance. It can be seen that from the earlier orders of the Tribunal in this very assessee's case. it was held that the assessee is entitled to depletion allowance and, therefore, there was clear mistake apparent on the face of the record. 8. Another decision to which we may refer is the decision of the Delhi High Court in Rohtak Hissar Districts Electric Supply Co. (P.) Ltd. v. CIT [1981] 128 ITR 52. In that case, the depreciation and developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct position as laid down by the Income-tax Appellate Tribunal in earlier years and also by the Commissioner (Appeals) in this very order. Thus the second modificatory order according to us is illegal and can or be upheld. 9. Three decisions were cited by the learned Departmental Representative. Out of them the Bombay High Court's decision in Shri Someshwar Sahakari Sakhar Karkhana Ltd.'s case is one. In that case the claim for depreciation though originally made in the income-tax return was later not only withdrawn but also specifically stated in the covering letter accompanying the revised return that the depreciation claim made in the original return was withdrawn and that no depreciation was claimed for assessment year 1969-70. However, in this case it was not stated by the assessee that depreciation was not intended to be claimed. Further the assessee not only made depreciation claim but also gave all particulars necessary to determine his claim. For instance he filed balance-sheet as well as list of fixed assets held by the company as on the last day of the previous year. The amount of W.D.V. on the 1st day of the year, the addition made during the year, depreciation c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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