9911796707
TMI Blog1985 (6) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... es, Commission and amount paid to N. L. Vaidya. 7. The ld. CIT erred in setting aside the assessment. 2. The facts and decision leading to the present appeal as found in the order of the CIT are as follows: 2.1 On examining the records of proceedings in this case for the asst. yr. 1979-80, it appeared that while passing assessment order for the asst. yr. 1979-80, the ITO had committed certain errors which were prejudicial to the interest of revenue as stated in detail as under: (1) Out of unabsorbed deficiency of s. 80J of Rs. 5,61,246, the ITO had set off Rs. 3,11,524 against the profit and the balance was directed to be carried forward. The action of the ITO was not correct as carry forward of s. 80J deficiency of earlier years had already been exhausted in the asst. yr. 1977-78 and there was no balance which was to be set off in the year under consideration. (2) The assessee had received cash subsidy of Rs. 4,92,584. While working out depreciation, the ITO had not deducted the amount of cash subsidy from the cost of machinery and building for determining the depreciation. (3) The ITO had allowed Bank Guarantee Commission amounting to Rs. 1, 76,591 with out veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses, office expenses, commission and amount paid to Shri N. L. Vaidya, the assessee has furnished the details on 13the April, 1983. Since details have been brought on record after the completion of assessment, in the interest of justice, it would be necessary for the ITO to verify the nature of expenses form the details furnished and to decide whether any of the expenses are of disallowable nature on merits. 2.7 For the reasons stated above, it must be held that the assessment order is erroneous and prejudicial to the interest of revenue, I, therefore, set aside the assessment made by the ITO for the asst. yr. 1979-80 with a direction to reframe the assessment on the lines indicated above after giving an opportunity of being heard to the assessee." 3. At the time of hearing, the ld. counsel appearing on behalf of the assessee very strongly raised grievance against the assumption of jurisdiction under s. 263 by stating that regarding rectification in respect of relief under s. 80J the assessee had already acted even before the ITO and this was mistake apparent and could be rectified under s. 154. Regarding subsidy, reading the relevant extracts from the order passed by the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Inspite of the details filed the CIT could not find anything disallowable, viewed from this angel it could not be said that order passed by the ITO was erroneous. Reliance was placed on the decision of the Delhi High Court in the case of Addl. CIT vs. J. K. D' Costa (1981) 25 CTR (Del) 224 : (1982) 133 ITR 7 (Del). Clarifying the position it was submitted that it appeared that audit Department raised certain queries for which details were called for by the ITO subsequent to the assessment and copies of statements were given and on this basis proceedings were initiated under s. 263 of the Act. 4. The ld. Departmental Representative vehemently opposed the submissions in respect of assumption of jurisdiction by lagging stress on the aspect that assessee did admit mistake in granting relief under s. 80J forming major part of mistake. It was wrong to state that the CIT could not invoke the provisions of s. 263. No doubt s. 154 could be invoked but that did not necessarily debar the CIT invoking the provisions of s. 263 being the revisional powers. It may be that both the sections to some extent overlap land once the assumption of jurisdiction is legal the CIT could touch upon vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegal. 6.2 Apart from the above, we find that the order passed by the ITO could not be said to be erroneous on any of the points considered by the CIT in respect fo the relief under s. 80J. It is admittedly a mistake apparent from the record for which the assessee had also agreed for the necessary rectification. Therefore, the ITO was within his powers to rectify the mistake and in this respect even the CIT could bring to the notice of the ITO the mistake apparent so as to necessitate rectification. The decision relied upon by the assessee in the case of J. K. D' Costa would support the stand taken by the assessee. It was held by Their Lordships, while dealing with revisional powers of the CIT as under:- "The mere fact that there is minor omission or mistake in the assessment order cannot justify the action of the CIT in setting aside the whole of the assessment order. Such a wholesale cancellation of the assessment with a direction to make a fresh assessment is called for only in cases where there is something totally or basically wrong with the assessment which is not capable of being remedied by amendments to the assessment order itself." Therefore, the issue that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P L A/c. In fact, that is the important part of the assessment proceedings which no ITO missed. Therefore, while going through each any every debit expenditure claimed in P L A/c necessary details are either taken on record or seen from the books of accounts or discussed. This is not the assessment made under s. 143 (1). With the coming in force of instructions for acceptance of return for certain income under s. 143 (1) the provisions contained in s. 143 (3) too get more weightage in the sense that first the provisions of s. 143 (1) are considered as to whether the income is required to be accepted or necessary inquiries on certain points are requited to be made consequent to notice under s. 143 (2) It is not as if in the case of each and every return the notice under s. 143 (2) is issued without having look at the return of income. Therefore, the assessment completed under s. 143 (3) is on the basis of all relevant material which the ITO has gathered (Gundo Subbayya vs. CIT (1939) 7 ITR 21 (Mad)). Again, the ITO has very wide powers and is not fettered by technical rules of evidence and pleadings, the only overriding feature being he must act honestly (Seth Gurumukh Singh vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessment under s. 143 (3). Moreover, this assessment was also subject to the provisions contained in s. 144-B necessitating directions form the IAC who too would be under bounder duty to bring to the notice of the ITO if certain details were not considered by him. Therefore, in our opinion, the order passed by the ITO could not be said to be erroneous for the purpose of invoking provisions contained in s. 263. 7. Coming to the merits of the case, regarding relief under s. 80J the same is required to be rectified as conceded. 7.1 In respect of the subsidy amount not deductible from the cost of building and machinery the issue is decided in favour of the assessee on the basis of the decision in the case of Pioneer Match Works by the Special Bench of the ITAT referred to above. 7.2 In respect of the details regarding bank guarantee commission, we hold that the same is allowable as revenue expenditure. The contention by the ld. Departmental Representative that part of the expenditure is in respect of raising the capital for the purpose of business and, therefore, the capital expenditure, holds no substance. If at all, it is only a borrowing by the assessee or an expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
