Orissa H.C : The assessee is the Project Engineer (Mech.) of Orissa Construction Corporation Ltd. He purchased some National Savings Certificates for the asst. yr. 1985-86 and claimed deduction of the same under section 80C(2)(d) of the Act.

High Court Of Orissa

CIT vs. N. Benugopal Choudhary

Sections 80C, 256, 256(2)

S.C. Mohapatra & J.M. Mahapatra, JJ.

SJC No. 137 of 1988

27th July, 1990

Counsel Appeared

Roy,, for the Revenue : None appeared, for the Assessee

C. MOHAPATRA ,J.:

This is an application by the Revenue under s.256(2) of the IT Act, 1961 (hereinafter referred to as “the Act”). Despite valid service of notice, the assessee has not entered appearance.

The assessee is the Project Engineer (Mech.) of Orissa Construction Corporation Ltd. He purchased some National Savings Certificates for the asst. yr. 1985-86 and claimed deduction of the same under section 80C(2)(d) of the Act. During the assessment proceeding, he explained that, out of funds available by encashing fixed deposits and gifts to his son, he purchased the certificates. The ITO disallowed the claim for deduction. The AAC, however, held that the assessee is entitled to the deduction in respect of the certificates purchased from his funds only and not from gifts to his children and allowed it. The appeal by the Revenue before the Tribunal being unsuccessful, an application under s. 256(1) of the Act was filed before the Tribunal. The same having been refused, the present application has been filed.

It is true that the Tribunal has held that the statement of the assessee in his letter filed on September 9, 1985, stated that, in respect of Rs. 10,000, certificates were purchased from out of the fixed deposits for the previous years and, in respect of the National Savings Certificates of Rs. 3,000, they came from the gifts to the children of the assessee. Considering the fixed deposits in earlier years, the Tribunal held that it cannot be said that the fixed deposits were not out of the income chargeable to tax of this year specially when there is no evidence of suggestion to the contrary. On that basis, the amount of Rs. 10,000 for purchase of the National Savings Certificates was permitted to be deducted.

Mr. S. C. Roy, the learned Advocate-General, who is standing counsel for the IT Department, submitted that any amount invested from out of income of the year attracts s. 80C(2)(d) and investment in the year from out of income of earlier years is not to be deducted in the year of assessment. Reading s. 80C(2)(d) of the Act, we are of the view that the submission of Mr. S. C. Roy has great force. Normally, we would have called for a statement of the case. The same, however, would not be of any assistance in the present case since it is normal human behaviour in an individual’s private life that all sources are amalgamated and spent. We can safely draw the conclusion that the assessee who is a salaried person was putting amounts received by him to the common fund. It cannotbe ruled out that the money received, from fixed deposits was being spent by him and money received from salaries was invested in National Savings Certificates. A wrong explanation by an assessee who is an engineer, ignorant of the niceties of tax law, ought not to be ground to deprive him of the benefit available under the Act since it is not in dispute that the amount is so negligible that it can be invested from out of his salary received during the year. Where the amount received and the nature of expenses are such that it could not have been normally invested, the question would be different. Even if we had called for a statement of the case, would have ultimately directed a further enquiry by the AO. The same would, in the circumstances, be an idle exercise taking into consideration the negligible amount involved in this case. The time consumed can be better utilised by the assessing authorities.

6. Since we have clarified the law, on the facts and in the circumstances, we decline to call for a statement of a case. The application is rejected.

J. M. MAHAPATRA J.

I agree.

[Citation : 187 ITR 614]

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