SINGH POULTRY P. LTD. v. INCOME TAX OFFICER
[Citation -1986-LL-0929-2]

Citation 1986-LL-0929-2
Appellant Name SINGH POULTRY P. LTD.
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 29/09/1986
Assessment Year 1980-81
Judgment View Judgment
Keyword Tags agricultural development allowance • application for rectification • income escaping assessment • mistake apparent on record • additional investment • appropriate authority • investment allowance • plant and machinery • mechanical process • additional ground • issue of notice • fresh claim
Bot Summary: The negation of the claim for investment allowance of Rs. 3,42,481 and the disallowance of the claim for agricultural development allowance claimed before the ld. 20th Feb., 1984, stated that claim of investment allowance on parent stock as well as the deduction under s. 35C represent claims which were never put forward at the time of assessment and they were fresh claims. Departmental representative argued that despite the objection filed by the ITO, these new claims were taken up for discussion and so even assuming that the action of the CIT in entertaining the appeal and considering the claims amounts to rejection of the objection put forward on behalf of the Revenue that the appeal regarding the new claims is not entertainable in the stand of the respondent as he now is, he is entitled to support the order of the CIT regarding his ultimate decision on the ground that the fresh claims are not entertainable in reopened proceedings. Counsel for the assessee, contended that the claim for investment allowance is not a fresh claim but it was only an extension of the claim already made. In view of the circular of the Central Board of Revenue of 1955 which we have set out hereinabove, although the assessee-firm itself did not claim relief under s. 80J and though the responsibility for claiming refund and reliefs rested with the assessee, the ITO should have drawn the attention of the assessee to this relief under s. 80J to which the assessee appeared to be clearly entitled but which the assessee had omitted to claim for some reason or the other. 1980-81 b y the assessee- company on which it claims investment allowance and the claim under s. 35C for agricultural development allowance represent new claims made by the assessee- company in the reopened proceedings. 16th Dec., 1983, the assessee is within time to make such claims, whether non-consideration of both the claims can be validly taken to be error apparent on record which can be rectified under the proceedings taken under s. 154, what is the appropriate authority before w h i c h those claims should have been made and instead of before the appropriate authority, whether the rectification could be sought for in higher forum while the appeal proceedings are pending, whether there is any substance in the contention of the Revenue that the new claims cannot be entertained for the first time by the learned CIT and he has no jurisdiction to decide over those claims should all have been decided by the ld.


T.V. RAJAGOPALA RAO, J.M. This is appeal filed by assessee against order of ld. CIT(A)- II, Hyderabad, dt. 3rd Sept., 1984, and it relates to asst. yr. 1980-81. 2. negation of claim for investment allowance of Rs. 3,42,481 and disallowance of claim for agricultural development allowance claimed before ld. CIT(A) constitute subject matter of this appeal. 3 . ld. Departmental Representative raised preliminary objection to maintainability of appeal In order to understand merits in this objection in correct perspective, various vicissitudes through which this matter passed till now should be borne in mind. 4 . assessee is company in which public are not substantially interested. We are concerned with asst. yr. 1980-81. assessee company runs hatchery and produces or manufactures one day old chicks by following two methods. first method it adopts is to purchase one day old chicks in batches from M/s Rani Shaver of Delhi, tender them and obtain eggs though out their fertility stage, hatch them by putting them in incubators and produce or manufacture one day old chicks artificially or mechanically and sell them to poultries. second method is to purchase eggs also in order to hatch them and produce one day old chicks artificially. Therefore, primary business of assessee company is to manufacture and sell one day old chicks. We are also told that assessee company manufactures poultry feed and sells it to poultry, farmers. Original assessment of assessee company was completed on 12th April, 1982. During course of assessment proceedings, it appears investment allowance was prayed for. However, ITO negatived claim of assessee for investment allowance for reasons discussed by him in detail while passing assessment order for asst. yr. 1978-79 and 1979-80 dt. 22nd March, 1982. appeal was filedinter alia against assessment passed for asst. yr. 1980-81 against assessee company before ld. CIT(A). ld. CIT(A) clubbed appeal for asst. yr. 1980-81 with those for asst. yrs. 1978- 79 and 1979-80 and disposed of them by his common order dt. 31st May, 1982. copy of order is furnished to us in paper book filed for assessee. ld. CIT(A), following order of Madras Bench "B" of Tribunal, camping at Hyderabad, dt. 9th March, 1982 passed in ITA Nos. 290 and 291/Hyd. 1981 in case of M/s Sri Venkataswara Hatcheries Pvt. Ltd., Hyderabad, for asst. yr. 1977-78 & 1979-80, wherein it was held extending ratio of decision in Torai Development Corporation's case rendered by Allahabad High Court in (1979) 120 ITR 342 (All), that eggs can be equated with seeds, both being generators of life, and product coming from them, through association or help of human agency, can reasonably be described as 'things'. ld. CIT(A) noted Tribunal holding that if seeds could be considered as 'article or thing.' there is no reason why eggs hatched artificially by company by mechanical process cannot be said to have produced 'article or thing'. He also noted Tribunal interpreting term 'produce' to mean that which has produced thing that results from any action, process or effort. term is not necessarily confined to what is grown from ground, where human agency is associated with natural process, it is also credited with production of article or thing. Hatching is done mechanically and healthy production of chicks is assured. Ultimately, Tribunal held that assessee before them can claim that they are producing chicks. Disposing of claim for investment allowance put forward by assessee before him, he held that said claim should also be allowed. He found investment allowance having been allowed in Sri Venkateswara Hatcheries Pvt. Ltd's case (supra). Therefore, he considers that in light of Tribunal's order in said case, appellant-company before him also should be given relief under s. 32A. He, therefore, directed ITO to verify figures relating to this claim and give suitable deduction in accordance with law. ITO while purporting to give effect to order of ld. CIT(A) dt. 31st May, 1982, passed consequential order dt. 22nd day of June, 1982 in which he had computed investment allowance which assessee is entitled to at Rs.4,08,142 on basis of value of plant and machinery. copy of modificatory order is furnished in second paper book filed on behalf of assessee. value of plant and machinery taken by ITO for purposes of granting investment allowance is as follows: . Rs. Electrical fittings 1,87,533 Setters & Hatchery 8,77,049 Generator 4,53,855 Poultry Equipment 98,730 Furnace 8,720 Crane 10,480 Total 16,35,369 Allowance under s. 32A @ 25per cent 4,08,142 5. As matters stand thus, on 29th August 1983, assessee-company filed Income tax return for asst. yr. 1980-81 only, further adding back Rs. 51,573.95 as purchases not supported by proper vouchers. reason given for filing return even after assessment was complete is stated in letter dt. 29th day of August 1983 accompanying return. last para of letters, which is relevant for our purpose, is as under: "As you are aware we had given assurance to authorities that full details for expenditure of that nature would be furnished by us in respect of Income tax asst. yrs. 1978-79, 1979-80 & 1980-81 and in spirit of co- operation and goodwill, and we had also done so in that spirit. In view of later scrutiny we felt that it was necessary to file this further revised return notwithstanding completion of assessments if only to show our anxiety to fully co-operate with Department in all respects and we now request you in light of above circumstances to take on record return now filed and treated is as filed in response to any future notices you may deem necessary to serve on us and revise assessment on that basis." We do not have any definite information whether in pursuance of this letter assessment was again reopened by issue of notice under s. 147 and was completed by ITO under which she determined total income of assessee- company at Rs. 3,51,746. She completed assessment purporting to be under s. 143(3) read with s. 147(A). However, though she ought to have taken into consideration her own consequential order passed on 22nd June, 1982 under which she implemented ld. CIT (A)'s order dt. 31st May, 1982, she appeared to have overlooked same and completed assessment dt. 24th Oct., 1983. This led assessment- company to file another appeal before ld. CIT(A) as against assessment order dt. 24th Oct., 1983 and this resulted in ld. CIT(A)-II. Hyderabad, passing order dt. 3rd Sept., 1984. copy of his order is furnished in first paper book filed on behalf of assessee- company. statement of facts as well as grounds filed before ld. CIT(A) are furnished at pages 17 to 19 of second paper book filed on behalf of assessee. From index of paper book, it can be know that grounds were filed before CIT(A) on 16th Dec., 1983. In statement of facts it is stated that assessee company in entitled to investment allowance under s. 32A on additions made to livestock during year. Ground No. 6 is as follow: "The ld. ITO should have allowed investment allowance under s. 32A which t h e appellant is entitled to on additions made to live stock during assessment year." So also, additional ground dt. 16th Dec., 1983 claiming agricultural development allowance under s. 35C was also filed by assessee-company before ld. CIT (A)-II, Hyderabad. As new claims were put forward before him, ld. CIT(A) called upon ITO to file her objections, if any, for those new claims. ITO by her letter dt. 20th Feb., 1984, stated that claim of investment allowance on parent stock as well as deduction under s. 35C represent claims which were never put forward at time of assessment and they were fresh claims. Having specifically put objection in first instance in opening para itself in her letter dt. 20th Feb., 1984, to CIT (A) ITO offered to say how fresh claims were untenable on merits in her view. ld. Departmental representative furnished copy of letter dt. 20th February 1984 to Tribunal. ld. CIT (Appeals), however, while passing impugned order dt. 3rd Sept., 1984, did not consider as to how fresh claims can be put forward in reopened reassessment. He simply took up for consideration merits of new claims put forward before him. In course of his order, he held: "In fact, ITO as per order of CIT(A) dt. 22nd June, 1982 giving effect to order of CIT (A) dt. 31st May, 1982, had computed investment allowance under s. 32A in respect of electrical fittings, satters and hatchery, generator, poultry equipment, furnance and crane at Rs. 4,08,842. However, while passing impugned re- assessment order dt. 24th Oct., 1983 for very same asst. yr. 1980-81, ITO appeared to have overlooked this position that s. 32A deduction was already allowed and is in fact allowable regarding above items of plant and machinery. ITO is directed to allow deduction under s. 32A in respect of above items of plant and machinery, to extent found to be admissible." On merits, ld. CIT(A) dismissed claims of assessee both regarding investment allowance and agricultural development allowance. 6 . ld. departmental representative contended in this appeal that assessment dt. 24th Oct., 1983, where from second appeal arose, is reopened assessment under s. 147(A). In fact, reopening was requested by t h e assessee itself with view to surrender or add further sum of Rs. 51,373.95 to its already returned income. reopening is not intended to give further benefits to assessee. This is assessment almost requested to be made against assessee-company to regularise addition of Rs. 51,374 after giving notice under s. 148. ld. Departmental representative contended that reassessment are not meant to confer benefits on assessee for first time, More, so, with reference to highly debatable and controversial issues. He argued that these deductions were not put forward when original assessment was completed. He invited our attention to r. 27 of Tribunal Rules which is as follows : "The respondent, though he may not have appealed, may support order appealed against on any of grounds decided against him." ld. departmental representative argued that despite objection filed by ITO, these new claims were taken up for discussion and so even assuming that action of CIT (A) in entertaining appeal and considering claims amounts to rejection of objection put forward on behalf of Revenue that appeal regarding new claims is not entertainable, yet, in stand of respondent as he now is, he is entitled to support order of CIT (A) regarding his ultimate decision on ground that fresh claims are not entertainable in reopened proceedings. He relied upon two decisionsCWT vs. C. Ravindra and Ors. 1977 CTR (Ker) 176 : (1977) 107 ITR 547 (Ker) andCWT vs. Ballarpur Industries Ltd. 1978 CTR (Bom) 654 : (1979 118 ITR 711 (Bom). In said case, Kerala High Court, following decision of Bombay High Court inKewaldas Ranchhoddas vs. CIT (1968) 68 ITR 842 (Bom), where it was held that under s. 34(1)(a) of Indian IT Act, 1922, which is predecessor of s. 147 of IT Act, 1961, recomputation can take place only with view to gathering any income escaping assessment and that it was clear from section itself that it was not intended for benefit of assessee but only for benefit of Revenue. They have also followed Allahabad High Court decision inSir Shadilal and Sons vs. CIT (1973) 92 ITR 453 (All) and they have quoted following passage with approval: "It is settled law that on reassessment, entire assessment is not opened. Thus, claims which had been disallowed during original assessment cannot be reagitated on assessment being reopened for bringing to tax certain income which has escaped assessment. controversy on reassessment is confined to matters which are relevant in respect of income which had not been brought to tax during course of original assessment. It has not been contended that disallowance of expenditure made during course of original assessment, which assessee wanted to be reconsidered during re assessment, were relevant for enquiry on which ITO had re-embarked on reassessment. disallowance of these expenses in original assessment had become final and this being so, it was not open for assessee to make claim for these items of expenditure." decision of Bombay High Court relied upon by ld. Departmental representative also supported ratio of Kerala High Court decision already cited (supra). 7 . As against this, Sri B Satyanarayana Murty, ld. Counsel for assessee, contended that claim for investment allowance is not fresh claim but it was only extension of claim already made. balance-sheet, profit and loss account, all particulars required to decided issue of investment allowance on cost of parent birds purchased during accounting year in question, in fact whole material on which our decision can be based, is already there present in record. It is no doubt true that claim was made for first time before CIT (A) in appeal against assessment order dt. 24th Oct., 1983. ld. counsel argued that by 16th Dec., 1983, 4 years had not elapsed from date of modificatory order dt. 22nd June, 1982. He contended that not granting investment allowance on purchase of parent birds in accounting year in question is mistake apparent on record which can be rectified under s. 154. During accounting year in question, additions to plant and machinery without including livestock was Rs. 16,37,336. value of livestock purchased during accounting year was Rs. 13,69,9 27 . According toSri Venkateswara Hatchories Pvt. Ltd.Case, which was followed by learned CIT (A), while disposing of appeal in first instance, parent bird is to be taken as plant and following said view adopting by Revenue itself, in not allowing investment allowance on additions made to livestock during accounting year in question is mistake apparent on record which can be rectified under s. 154, but assessee thought that it could as well agitate same matter even before ld. CIT (A) who was considering appeal. Therefore, it is contention of Sri B. Satyanarayana Murty that additional investment allowance claimed as well as agricultural development allowance claimed before CIT (A) should be considered to be claims made invoking right given to assessee under s. 154. Sri Satyanarayana Murty invited our attention to theCommentary in Chaturvedi and Pithi saria,3 r d edition, volume 3, page 3123, where it is observed as follows: "Similarly, where statute itself gives exemption and if that exemption has been inadvertently not claimed by assessee, it is certainly case where taxing authorities also should equitably view situation and render justice. In such case, taxing authorities should entertain application for rectification and deal with it in accordance with law." He also cited before us decision of Andhra Pradesh High Court He also cited before us decision of Andhra Pradesh High Court inG . Sreerama Murthy vs. ITO, A-Word, Rajahmundry (1974) 97 ITR 290 (AP). At page 297, Andhra Pradesh High Court held as follows : "It is now well settled that in cases where reassessment under s. 147, or rectification under s. 154, are both equally competent, Department may take action under either section, since two sections are not mutually exclusive." It is contention of Sri B. Satyanarayana Murty that on 16th Dec., 1983 on which he made additional claim of investment allowance and fresh claim for agricultural development allowance before CIT (A), he is entitled to file rectification petition under s. 154. Therefore, appeal before ld. CIT (A) can be considered to be appeal against order passed by ITO under s. 147 as well as s. 154. ld. counsel for assessee also invited our attention to Supreme Court decision inIAC vs. E.M. Ravi Namboodiripad,(1974) 96 ITR 73 (SC). At page 78 of reported decision, it is held that rectification in question could be made under s. 35 of Indian IT Act, 1922, even though reassessment could have been made under s. 34 of that Act. ld. counsel also relied upon decision of Gujarat High Court inChokshi Metal Refinery vs. CIT (1977) 107 UTR 63 (Guj). At page 74 of reported decision, Gujarat High Court, after quoting circular No. 14 (SL-35) of 1955 dt. 11th April, 1955, held disagreeing with view of Allahabad High Court as follows: "With great respect to ld. Judges of Allahabad High Court we are unable to agree with their conclusions regarding scope of s. 154. In view of circular of Central Board of Revenue of 1955 which we have set out hereinabove, although assessee-firm itself did not claim relief under s. 80J and though responsibility for claiming refund and reliefs rested with assessee, ITO should have drawn attention of assessee to this relief under s. 80J to which assessee appeared to be clearly entitled but which assessee had omitted to claim for some reason or other. In view of decision in Navneetlal Jain's case (1965) 56 ITR 198 (SC), it is obvious that it was duty of ITO to have followed this particular circular of Central Board of Revenue issued as far back as 1955 and in view of this circular read with Navneetlal Jain's case (1965) 56 ITR 198 (SC), we are with respect unable to agree with these two decisions of Allahabad High Court." Sri B Satyanarayana Murty, ld. counsel, contended that claims are which he now put forward are claims to which assessee- company is duly entitled under law. If assessee-company inadvertently omitted to make claims regarding them as per circular of 1955 as well as Gujarat High court decision, it is duty of ITO to bring right to relief to notice of assessee. In view of all above authorities, he contended that proceedings cannot be taken to be merely conducted under s. 147(a), but they should be deemed to have been conducted under s. 154 also. 8 . After considering arguments on both sides, we hold that extended claim of investment allowance on purchase of parent brids valued at Rs.13,69,9 27 made in accounting year relevant to asst. yr. 1980-81 b y assessee- company on which it claims investment allowance and claim under s. 35C for agricultural development allowance represent new claims made by assessee- company in reopened proceedings. questions whether those claims can be made by way of rectification under s. 154 and whether by date those claims were made viz., 16th Dec., 1983, assessee is within time to make such claims, whether non-consideration of both claims can be validly taken to be error apparent on record which can be rectified under proceedings taken under s. 154, what is appropriate authority before w h i c h those claims should have been made and instead of before appropriate authority, whether rectification could be sought for in higher forum while appeal proceedings are pending, whether there is any substance in contention of Revenue that new claims cannot be entertained for first time by learned CIT (A) and he has no jurisdiction to decide over those claims should all have been decided by ld. CIT (A) while passing impugned order. Had he in fact decided on those issues by giving his own reasons, both sides would have fair opportunity to file appeals against decision of ld. CIT (A) and to raise specific groups in appeals. However, impugned order does not contain even one sentence as to how ld. CIT (A) had authority to clutch at jurisdiction and decide that fresh claims. We, therefore, feel that in order to decide above issues, which in substance amount to finding ground to assume jurisdiction and decide fresh claims. amount to finding ground to assume jurisdiction and decide fresh claims. We, therefore, feel that in order to decide to appeal before CIT(A), matter should go back to CIT(A). We do not wish to pronounce on tenability or otherwise of respective contentions advanced by parties on question of jurisdiction. Further, we also do not want to pronounce on merits of two claims as it would become unnecessary at this stage. We, therefore, set aside impugned order of CIT (A). 9 . In result, appeal filed by assessee will be deemed to have been allowed for statistical purposes. *** SINGH POULTRY P. LTD. v. INCOME TAX OFFICER
Report Error