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TMI Blog1988 (3) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... y Boards had power to waive the damages. In the present case, the original assessments were made on the following dates : Asst. year Date 1978-79 6-3-1980 1979-80 17-9-1980 1980-81 27-2-1981 1981-82 2-1-1982 1982-83 19-3-1983 In making the original assessments, the ITO did not disallow any portion of the provision which was made by the assessee towards the damages payable to the Electricity Boards. It is not in dispute that the figures of provision for the assessment years 1978-79, 1979-80 and 1980-81 were respectively Rs. 3,72,788, Rs. 11,72,211 and Rs. 16,76,608. For the assessment year 1981-82, according to the assessee, the figure of provision was only Rs. 4,68,018. According to the revenue, it was Rs. 15,18,619. In due course, the ITO took the view that the provisions of section 147(a) were attracted. He, therefore, initiated action for the respective assessment years by issue of notices under section 148 on 23-2-1984. This action was taken to bring to tax the amounts for which provision had been made to which we have referred earlier. The assessee filed returns on 28-4-1984. 3. In the meanwhile, the jurisdiction of assessment appears to have been transferred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng fully well that they may not be able to get the full payment as per contract. On the basis of accounting principles, such unrealisable amount should not be taken as sales. It is further seen that as and when the exact amount of penalty is quantified by the various Electricity Boards, the assessee reduces the compensation payable account for the subsequent year for the excess provided for the earlier years. The assessee has also filed the copy of the statement for contracts. I am convinced about the explanation submitted by the assessee-company. The proceedings initiated u/s 148 are therefore closed as N.P. Sd/--- (A. Ali Sayed) I.A.C., Range II, Madras. " It would be seen that the IAC stated finally "The proceedings initiated u/s 148 are therefore closed as N.P. ". 4. For the assessment years 1979-80, 1980-81 and 1981-82 also the IAC closed the proceedings recording in identical terms the reasons as in the year 1978-79 except that for letters "N.P." at the end, which was scored out, the letters "N.A." were substituted. In these three assessment years, where the letters "N.P." had been changed to "N.A.", i.e., for the assessment years 1979-80, 1980-81 and 1981-82, a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashed. 8. Finally on merits, the learned counsel submitted that a similar issue in the assessee's own case had come up before the Tribunal for the assessment year 1983-84 and the Tribunal in ITA No. 1200/Mds/85, dated 9th December, 1987 (to which one of us, i.e., the Judicial Member, was a party) had held that the provision for payment of liquidated damages was an accrued liability and hence was an admissible deduction. The Tribunal had found that the assessee had followed a consistent method of making such a provision and setting off whatever amount was waived in respect of the provision made for the earlier years in subsequent years. On merits, therefore, the submission of the learned counsel was that there was no error prejudicial to the revenue which could be rectified. 9. It was also submitted that for the assessment year 1979-80, full particulars had been furnished and in any view of the matter, proceedings under sec. 147(a) could never have been taken because the ITO could not have assumed the necessary jurisdiction as there was no omission or failure on the part of the assessee to disclose fully and truly all material facts. 10. On behalf of the revenue, the learned D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs and directed him to continue proceedings under section 34(1)(a). The High Court had held that on the facts, the Commissioner was precluded from revising the aforesaid order by reason of section 33B(2)(a), viz., that provisions precluded the Commissioner from revising an order of reassessment made under the provisions of section 34. In the aforesaid decision, their Lordships had stated that in every case it had to be determined, on the facts and circumstances thereof, as to what the expression used by the ITO, i.e., 'proceedings filed' or 'proceedings disposed of or filed' connotes or means. Their Lordships observed that in one set of circumstances it may not amount to an order of assessment or reassessment whereas in another set of circumstances it may so amount. In the case of Esthuri Aswathiah v. ITO [1961] 41 ITR 539 where a nil return was filed and the ITO wrote 'no proceedings', the Supreme Court held that it had to be construed that the assessed income was nil. In the case of CIT v. Bidhu Bhusan Sarkar [1967] 63 ITR 278, where the expression used was 'filed', the Supreme Court observed that it meant that the case was disposed of and nothing remained and their Lordships fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263. " For the assessment year 1978-79, the present case squarely falls within the ratio of the judgment of the Supreme Court in the case of Esthuri Aswathiah v. ITO [1961] 41 ITR 539. The IAC had used the letters "N.P." after giving his reasons and it has to be construed that the assessed income in the reassessment was nil. This was, therefore, not a case of dropping of the proceedings initiated under section 147 but of making an assessment under section 147 without bringing to tax any income over and above that originally assessed. 12. As far as the assessment years 1979-80 to 1981-82 are concerned, the letters "N.P." were scored out and substituted by the letters "N.A.". Not only that, demand notices were also issued for each of the years. Nothing could be more positive proof that assessment was made than the issue of demand notices showing a 'nil assessment'. For the years 1979-80 to 1981-82, therefore, proceedings initiated under section 147 were not dropped but the proceedings were terminated by making of valid assessments under section 147(a) for each of the years but without raising any additional demand. 13. In the above background, the conclusion arrived at by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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