TECHNO ELECTRIC & ENGINEERING CO. LTD. v. INCOME TAX OFFICER
[Citation -1986-LL-0808-6]

Citation 1986-LL-0808-6
Appellant Name TECHNO ELECTRIC & ENGINEERING CO. LTD.
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 08/08/1986
Assessment Year 1975-76
Judgment View Judgment
Keyword Tags reassessment proceedings • contractual liability • statutory liability • mercantile basis • legal provision • fresh claim • sales tax
Bot Summary: Representative for the assessee is that a claim not made in the original assessment proceedings can he made at the reassessment stage. Departmental representative on the other hand, is that no claim of the assessee can be entertained in the reassessment proceeding particularly when it was not made in the original assessment proceedings. We may not be understood as holding that the questions which were expressly raised and decided during the assessment or in the appeals from the original assessment order can be reagitated either in the reassessment proceedings or in the appeals taken from the reassessment order. We find no merit in the stand of the Department that the fresh claim of the assessee cannot be considered in the reassessment proceedings, Allowability of a claim of deduction is not dependent upon entries in the account books, though they have been maintained in the mercantile system. We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the ITO, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Merit of claim of deduction has to be tested in the light of legal provision and not on the basis of the entries made or not made by the assessee in the account books. The case shall go back to the ITO for redoing the reassessment proceedings after examination of the claim of the assessee on merit according to law.


S.K. JAIN, J.M.: ITO after completing original assessment on 30th June, 1977 for asst. yr. 1975-76, reopened proceedings under s. 147 of IT Act, 1961. In that reassessment proceedings assessee made claim of deduction of Rs. 15,543 which could be made in original assessment proceedings for year 1975-76 since it was initially made in asst. yr. 1976-77 According to assessee it was denied claim of deduction in asst. yr. 1976-77 on ground that it was allowable in asst. yr. 1975-76, ITO had since reopened proceedings for asst. yr.1975-76 for reassessment it got opportunity to make claim of deduction in asst. yr. 1975-76 but ITO did not consider same, CIT (A) dismissed appeal of assessee. He observed that reassessment proceedings under s. 147(A) was initiated by ITO on ground that profit arising out of sale of trailers had escaped assessment. He further observed that deduction of expenses claimed at reassessment stage was not claimed earlier before ITO or before CIT (A) in original assessment proceedings and in appeal therefrom. It was also observed by him that assessee-company maintained accounts of mercantile basis but made no provision in respect of those expenses. Contention of ld. Representative for assessee is that claim not made in original assessment proceedings can he made at reassessment stage. I n that regard, he placed reliance upon judgment of Hon'ble Rajasthan High Court in case of CIT vs. Rangnath Bangur (1984) 41 CTR (Raj) 21 (1984) 149 ITR 487 (Raj). It is also contended by him that even if no provision was made in respect of those expenses assessee was entitled to deduction of expenses. In support he placed reliance upon judgement of Hon'ble Supreme Court in case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 263 (SC). Contention of ld. Departmental representative on other hand, is that no claim of assessee can be entertained in reassessment proceeding particularly when it was not made in original assessment proceedings. He in support placed reliance upon judgment of Hon'ble Allahabad High Court in case of Sir Shadi Lal and Sons vs. CIT (1973) 92 ITR 453 (All). After review of several cases including CIT vs. Assam Oil Co. Ltd. (1982) 133 ITR 204 (Cal), case from Hon'ble Calcutta High Court and following judgment of Hon'ble Supreme Court in case of V. Jaganmohan Rao and Ors. vs. CIT (1970) 75 ITR 373 (SC), Hon'ble Rajasthan High Court reached following conclusion in case of Rangnath Bangur (supra). "Thus, reassessment proceeding cannot be confined only to such income which has escaped assessment, but entire assessment proceedings are set at large and are reopened and earlier order of assessment is set aside or wiped out and substituted by order passed upon reassessment. Once reassessment proceedings are initiated, assessing authority has to redetermine afresh total sum payable by him as tax under Act. We may not be understood as holding that questions which were expressly raised and decided during assessment or in appeals from original assessment order can be reagitated either in reassessment proceedings or in appeals taken from reassessment order." We, therefore, find no merit in stand of Department that fresh claim of assessee cannot be considered in reassessment proceedings, Allowability of claim of deduction is not dependent upon entries in account books, though they have been maintained in mercantile system. In this connection, learned representative for assessee correctly relied upon following observations of Hon'ble Supreme Court in case of Kedarnath Jute Mfg. Co. Ltd. (Supra). "The main contention of ld. Solicitor-General is that assessee failed to debit liability in its books of accounts and therefore, it was debarred from claiming same as deduction either under s. 10(1) or under s. 10(2)(xv) of Act. We are wholly unable to appreciate suggestion that if assessee under some misapprehension or mistake fails to make entry in books of account and although, under law, deduction must be allowed by ITO, assessee will lose right of claiming or will be debarred from being allowed that deduction. Whether, assessee is entitled to particular deduction or not will depend on provision of law relating there to and not on view which assessee might take of his rights nor can existence or absence of entries in books of account be decisive or conclusive in matter. These observations have been made by Hon'ble Supreme Court in case in which deduction of liability on account of sales tax was in question. It has been, therefore, contended by ld. Departmental representative that said observations of Hon'ble Supreme Court are applicable only in case of statutory liability and not in case of contractual liability. He further contended that contractual liability is allowable only when it becomes agreed or admitted liability. There cannot be any dispute that there is distinction between statutory liability on one hand and contractual liability on other, but observations of Hon'ble Supreme Court in case of Kedarnath Jute Mfg. Co. Ltd. (Supra) reproduced above, are general in nature and they do not necessarily confine to statutory liability. Merit of claim of deduction has to be tested in light of legal provision and not on basis of entries made or not made by assessee in account books. Similar observations as those made by Kedarnath Jute Mfg. Co. Ltd. (Supra) were made by Hon'ble Supreme Court in case of CIT vs. C. Parakh and Co. (India) Ltd. (1956) 29 ITR 661 (SC). In case of C. Parkah and Co. (India) Ltd. (Supra) liability was contractual and not statutory. observation are as under: "Whether, respondent is entitled to particular deduction or not will depend on provision of law relating thereto, and not on view which it might take of its rights, and consequently, if whole of commission is under law liable to be deducted against Indian profits, respondent cannot be estopped from claiming benefit of such deduction, by reason of fact that it erroneously allocated part of it towards profits earned in Karachi. What has, therefore, to be determined is whether, notwithstanding apportionment made by respondent in profit and loss statements, deductions is admissible under law." It is, therefore, held that ITO should not have disallowed claim of assessee in reassessment proceedings, he should have instead, examined claim on merit, taking it as if preferred in original assessment proceedings. case shall go back to ITO for redoing reassessment proceedings after examination of claim of assessee on merit according to law. In result, appeal is allowed for statistical purposes. *** TECHNO ELECTRIC & ENGINEERING CO. LTD. v. INCOME TAX OFFICER
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