Madhya Pradesh H.C : Whether, on the facts and in the circumstances of the case, the ITO was right in law in granting relief to the assessee under s. 80J of the IT Act, 1961, in the rectification proceedings taken under s. 154 of the Act ?

Counsel Appeared

Nema , for the Assessee : B.K. Rawat, for the Revenue

M. AGARWAL, J.:

In pursuance of a direction made by this Court on July 13, 1982, in Miscellaneous Civil Cases Nos. 539 to 542 of 1979 at the instance of the assessee, the Tribunal has stated the case under s. 256 (2) of the IT Act, 1961 (in short, ” the Act “), and submitted the following question of law for our opinion :

“Whether, on the facts and in the circumstances of the case, the ITO was right in law in granting relief to the assessee under s. 80J of the IT Act, 1961, in the rectification proceedings taken under s. 154 of the Act ?”

2. It came to the notice of the CIT that during the assessment proceedings pertaining to the asst. yrs. 1969-70, 1970-71, 1971- 72 and 1972- 73, the assessee-firm did not file any claim for deduction under s. 80J of the Act and no such claim was allowed in the orders of assessment. Subsequently, the assessee filed applications under s. 154 of the Act on December 9, 1974, July 25, 1975, and July 26, 1975, before the ITO, for rectification of a mistake alleged to have occurred in the assessment orders by not allowing deduction under s. 80J. Acting on these applications, the ITO rectified the relevant assessment orders on July 26, 1975, by allowing the deductions claimed by the assessee. In the opinion of the CIT, as there was no claim by the assessee in its returns of income or at the time of the assessment proceedings, there was no mistake apparent from the records of the relevant assessment orders justifying rectification under s. 154 of the Act. Accordingly, the rectification orders were set aside after notice and hearing given to the assessee. In appeals, the orders passed by the CIT were upheld by the Tribunal. It was held :

” . . . Relief under s. 80J of the IT Act is admissible to an assessee who makes such a claim and satisfies the ITO that he has fulfilled the conditions laid down in s. 80J(4). In the present case, by the relevant entries indicated on page 2 of the returns of income for the four years, it would appear that the assessee had made the relevant claims but the relevant material necessary for satisfying the ITO that the assessee fulfilled all the conditions laid down in s. 80J(4) is nowhere to be found. When a pointed question was asked of the representative of the assessee during the course of the hearing, he referred to the profit and loss account and the balance-sheet for the respective years. We have seen the relevant profit and loss accounts and the balance-sheets. They do not give any indication as to the nature of the assessee’s claim and how he was entitled to the relief under s. 80J. In these circumstances, we are not inclined to hold that when the assessee filed an application under s. 154, there was any mistake apparent from the record. “

3. Being aggrieved, the assessee filed applications under s. 256(1) of the Act for making a reference, but they were rejected by the Tribunal.The assessee then approached this Court with its applications under s.256(2) of the Act, which were allowed on July 13, 1982, and, accordingly, the Tribunal stated the case and referred the aforesaid question of law to this Court for its opinion.

4. Having heard learned counsel for the parties we are of the view that the aforesaid question of law deserves to be answered in favour of the Revenue and against the assessee. It cannot be disputed that unless the conditions laid down in s. 80J(4) of the Act are fulfilled, an assessee is not entitled to any deduction under s. 80J. s. 80J(4) provides as follows : ” 80J(4). This section applies to any industrial undertaking which fulfils all the following conditions, namely : (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence ; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose ; (iii) it manufactures or produces articles, or operates one or more cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of thirty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking ; (iv) in a case where the industrial undertaking manufactures or produces articles, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power : Provided that the condition in cl.(i) shall not apply in respect of any industrial undertaking which is formed as a result of the re establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in s. 33B, in the circumstances and within the period specified in that section : Provided further that, where any building or any part thereof previously used for any purpose is transferred to the business of the industrial undertaking, the value of the building or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking. “

5. As pointed out by the Tribunal, in its returns of income, the assessee made a claim for deduction under s. 80J of the Act, but did not furnish details about fulfilment of conditions laid down under s. 80J(4). The profit and loss accounts and the balance-sheets relied on by learned counsel for the assessee also did not disclose fulfilment of the requisite conditions under sub-s. (4) of s. 80J of the Act. Under these circumstances, it could not be said that there was any error apparent on the face of the assessment orders justifying rectification under s. 154 of the Act.

6. Learned counsel for the assessee argued that when a claim for deduction under s. 80J was made by the assessee in its returns, it was the duty of the ITO to call upon the assessee to furnish requisite details so as to entitle it to the deduction under s. 80J of the Act. It was apparent on the face of the records of the assessment orders that the assessee was never called upon to furnish such details and, therefore, a case for rectification under s. 154 of the Act was made out. We find no substance in the contention. If the assessee had furnished details as per the requirement of s. 80J(4) of the Act besides making a claim for deduction under s. 80J, it could be argued that a case for rectification under s. 154 of the Act was made out. But, in the present case, the details were not furnished and, therefore, it could not be said that any error was apparent from the assessment orders requiring rectification under s. 154 of the Act. The failure of the ITO to call upon the assessee to furnish the requisite details for satisfying the conditions laid down in s. 80J(4) of the Act cannot be said to be an error justifying rectification under s. 154. Assuming that such failure on the part of the ITO amounted to an error on the face of the records of the assessment orders, the rectification orders do not disclose that the alleged defect was cured by calling upon the assessee to disclose the requisite details for purposes of s. 80J(4) of the Act in rectification proceedings under s. 154 of the Act. On the contrary, the rectification orders showed that the ITO proceeded to make the rectification orders on the assumption that all the conditions laid down under s. 80J(4) were fulfilled by the assessee. For all these reasons, we are of the view that the aforesaid question of law deserves to be answered in favour of the Revenue and against the assessee. Accordingly, we answer the question as follows : The ITO was not right in law in granting relief to the assessee under s. 80J of the IT Act, 1961, in the rectification .proceedings taken under s. 154 of the Act. In the circumstances of the case, we make no order as to the costs of this reference.

[Citation : 188 ITR 127]