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1990 DIGILAW 399 (PAT)

Commissioner Of Income Tax v. S. Surjan Singh

1990-11-19

G.C.BHARUKA, G.G.SOHANI

body1990
Judgment G.C.Bharuka, J. 1. In this case, a statement of case has been sent by the Tribunal referring the following questions of law pursuant to an order of this court passed under Sec. 256(2) of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"). "(1) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in setting aside the order passed by the Income-tax Officer and the Appellate Assistant Commissioner, when the assessee has maintained no proper account and the reserve as required under Section 34(3)(a) has not been maintained ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the provisions of Sec. 154 of the Income-tax Act are not applicable ?" 2. The assessee is an individual. For the assessment year 1973-74, the assessee was assessed to income-tax by an order dated September 19, 1975, under Section 143(3) of the Act. During the assessment proceeding, no books of account were produced on the ground that the same were not maintained. The Income-tax Officer, on a consideration of all material facts, allowed deduction of Rs. 15,870 on account of development rebate in respect of machinery acquired during this period. Subsequently, the Income-tax Officer felt that the said deduction by way of development rebate was wrongly allowed to the assessee. He, therefore, initiated proceedings under Sec. 154 of the Act. According to the Income-tax Officer, since the assessee had not maintained any books of account, there was no occasion on his part to create a development rebate reserve account as required under Sec. 34(3)(a) of the Act. As such, the Income-tax Officer took the view that the deduction by way of development rebate was wrongly granted and this, according to him, being a mistake apparent on the face of the record, he recomputed the income by withdrawing the said deduction by passing an order of rectification under Sec. 154 of the Act. In the order of rectification, it has been specifically recorded that the assessee had deposited Rs. 12,000 in fixed deposit account and that that amount remains unutilised for the purpose of business. 3. Being aggrieved by the said order, the assessee preferred an appeal to the Appellate Assistant Commissioner but the same was dismissed. In the order of rectification, it has been specifically recorded that the assessee had deposited Rs. 12,000 in fixed deposit account and that that amount remains unutilised for the purpose of business. 3. Being aggrieved by the said order, the assessee preferred an appeal to the Appellate Assistant Commissioner but the same was dismissed. On second appeal to the Tribunal he succeeded on two counts, namely, (i) the deposit of Rs. 12,000 as fixed deposit with the bank satisfied the requirement of creating the development rebate reserve under Sec. 34(3)(a) of the Act, and (ii) the question involved being a debatable question and two views being possible, it was not a case of mistake apparent on the face of the record and, therefore, the provisions of Sec. 154 of the Act could not have been invoked. 4. Turning first to the second question referred to above, I am of the view that the Tribunal was justified in law in holding that the provisions of Sec. 154 of the Act were not applicable in the facts and circumstances of this case. In this case, admittedly the assessee, had deposited Rs. 12,000 in fixed deposit with the bank, which according to him, amounts to creation of development rebate reserve as required under Sec. 34(3)(a) of the Act. This fact was very much before the Income-tax Officer when the original assessment order was passed and it is to be presumed that he allowed the deduction on account of development rebate by taking into account all the material facts. Whether the deposit of a certain amount by way of fixed deposit in the bank could satisfy the requirement of creating a development rebate reserve or not is a debatable issue and, as such, the question could not have been decided in a proceeding under Sec. 154 of the Act. 5. In the case of T. S. Balaram, ITO v/s. Volkart Brothers [1971] 82 ITR 50, it has been held by the Supreme Court that (at p. 53). "It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under Sec. 154 of the Income-tax Act, 1961. 5. In the case of T. S. Balaram, ITO v/s. Volkart Brothers [1971] 82 ITR 50, it has been held by the Supreme Court that (at p. 53). "It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under Sec. 154 of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may conceivably be two opinions". 6. I, therefore, hold that, in the present case, the Income-tax Officer has wrongly exercised his jurisdiction under Sec. 154 of the Act. In this view of the matter, it is not necessary to examine the question of admissi-bility of development rebate. Accordingly, my answer to the second question referred to above is in the affirmative, i.e., in favour of the assessee. As stated above, the first question need not be answered. There shall be no order as to costs. Let a copy of this judgment be transmitted to the Assistant Registrar of the Income-tax Appellate Tribunal, Patna Bench, Patna, in terms of Sec. 260 of the Act. G. G. Sohani, C.J. 7. I agree.