Income Tax Appellate Tribunal - Ahmedabad
Ahmedabad Kaiser-I-Hind Mills Co. Ltd. vs Income-Tax Officer on 13 November, 1987
Equivalent citations: [1988]25ITD392(AHD)
ORDER
P.J. Goradia, Accountant Member
1. This appeal directed against the order dated 17th August, 1983 involves various grounds.
2. The assessee is a. company. It closes its books of account passed on mercantile system as per the calendar year.
3. The first ground is in respect of challenging the assessment not having been completed within the time allowed under Section 153 of the IT Act.
4.1 The date of the assessment order passed under Section 143(3) is 10th December, 1982. The notice of demand in Form No. 7 is dated 27th April, 1983, which was received by the assessee subsequently. As per the notice of demand there is a refund due to the assessee of an amount of Rs. 4,50,000 approximately. In the assessment order at the fag end it is stated by the Income-tax Officer "the tax computation being part of the assessment is given as under". But no such tax computation is actually given in the assessment order.
4.2 On appeal, reliance was placed by the assessee on the decision of the Supreme Court in the case of CIT v. Balkrishna Malhotra [1971] 81 ITR 759, decision of the Jammu and Kashmir High Court in the case of S. Mubarik Shah Naqshbandi v. CIT [1977] 110 ITR 217 and in the case of R. Gopal Ramnaryan v. Third ITO [1980] 126 ITR 369 (Kar.). The CIT(A) rejected this ground of the assessee holding that on verifying the records not only the assessment order was completed on 10-12-1982 but even ITNS 150A was prepared on 10-12-1982. On 19-1-1983, the Income-tax Officer made a reference to IAC regarding checking of the refund because the assessment resulted in refund of more than Rs. 5,000 and the IAC vide letter dated 26-4-1983 permitted the Income-tax Officer to issue refund order, if there was no arrear of demand pending. He, therefore, held that assessment was legally completed. The reliance placed by the assessee on various decisions of the Courts were distinguished and therefore not applicable.
4.3 Before us, the learned counsel appearing on behalf of the assessee reiterated the submissions made before the lower authorities. On query from the Bench as to whether tax calculation form was received together with the assessment order or not, the reply was in negative stating that till today nothing was received.
In fact, it is not known whether tax calculation form is prepared or not. In any case, even if the same is prepared, the same was not communicated to the assessee.
4.4 The learned Departmental Representative submitted that the decision in the case of S. Mubarik Shah Naqshbandi (supra) was favouring the Department.
4.5 We have considered the submissions and materials to which our attention was drawn. Though the assessee had been complaining of tax calculation having not been done in the assessment order, no copy of the tax calculation form was submitted to the assessee. Even the statement is not challenged. If at all ITNS 150A was prepared on 10-12-1982, the learned. Departmental Representative has not placed before us the copy of the same because this document is a very vital document going to the root of the issue involved. We are, therefore, not inclined to accept that tax calculation form was either prepared or the same was signed on 10-12-1982. The reference to the IAC as stated by the CIT(A) is only in respect of issue of the refund order because probably it appears that there is some system regarding prior permission of IAC for issue of refund order if the same is of an amount exceeding Rs. 5,000 and, therefore, the IAC gave permission to issue refund order on 26-4-1983. This is what we understand by what is mentioned in the order of the CIT(A). But then what stopped the Income-tax Officer from despatching the assessment order, tax calculation form, if any and demand notice to the assessee ? The refund, if at all it was necessary to issue the same after the sanction of the IAC, could have been issued subsequently. Besides, though the CIT(A) mentioned that reference was made by the Income-tax Officer on 19-1-1983 to IAC, the IAC gave a permission to issue the refund order only on 26-4-1983. There is also one more aspect to be looked into. If really the ITO completed ITNS 150A and signed the same on 10-12-1982, how is it that in spite of request having been made to IAC on 19-1-1983 the IAC replied only on 27-4-1983 ? It is not the case of Department that usually it does not issue refunds during the period December to March of the financial year. Besides, what checking IAC was to do in respect of refund ? The only situation that can be envisaged, from administrative point of view, could be to verify the pending arrears, if any, in spite of which whether to grant refund or not. But then IAO has replied on 27-4-1983 that ITO should verify this position before issuing refund. We are not all enlightened on this aspect in any manner. Hence, the only inference that can be drawn is Department wanted to utilise money of the assessee without any cost in the guise of assessment order having been passed on 10-12-1982. It cannot be expected of an office of IAC sitting inactive over request of ITO to issue refund order for period of almost four months. In fact, the function of the office of IAC is to remove such delays rather than cause them. Apart from this, we are not shown even the copy of the acknowledgement in respect of receipt of the assessment order, tax calculation form, etc. Again in the same order the CIT(A) has allowed interest under Section 214 up to 27-4-1983, i.e., the date of issue of refund order, in spite of his stand that assessment was completed on 10-12-1982. As per provisions of Section 214(1) the interest is payable by Govt. only for the period commencing from 1st day of assessment year to the date of regular assessment. Therefore, if the interest is granted by the CIT(A) up to 27-4-1983, then he is contradicting himself when he states that regular assessment was completed on 10-12-1982. Hence, the CIT(A) was in error because he accepted the stand of the assessee, while granting interest under Section 214. Hence, he could not act on different footing while considering the issue of limitation. The decision of the Supreme Court in the case of Balkrishna Malhotra (supra) supports the case of the assessee. It is not the case of the Department that Section 292B of the Act introduced by the Taxation Laws Amendment Act, 1975 had any bearing on the issue involved. We, therefore, decide this issue in favour of the assessee, holding that the assessment was not completed as per the law and, therefore, annul the assessment.
5. For the sake of completion, we would also decide the other grounds affecting the quantum of income in the assessment.
6. The first such ground taken is in respect of decision of the Income-tax Officer holding that Rs. 12,950 paid by way of professional charges fell within the purview of Section 80W of the Act on the ground that once there is specific provision for allowance of any expenditure, Section 37 could not be resorted to. On appeal, the CIT(A) directed the Income-tax Officer to verify the claim afresh in the light of directions given by him.
6.1 The learned counsel appearing on behalf of the assessee submitted that the payments so included were in respect of comprehensive services with regard to preparation of advance tax estimates, statements to be attached to the return of income, regular advice on routine matters from time to time and, therefore, whole amount should not have been taken as falling under Section 80VV.
6.2 The learned Departmental Representative relying upon the decision in the case of Mohan Meakin Breweries Ltd. v. CIT (No. 1) [1979] 118 ITR 101 (HP) stated that there was a special provision in the Act contained in Section 80VV of the Act and, therefore, no allowance could be considered under Section 37, 6.3 We have considered the submissions. There is no question of. the expenditure falling under Section 80VV and also in Section 37, nor is there any question of dovetailing. What the assessee has asked is to properly estimate the expenditure in respect of the services rendered to the clients before the proceedings before the Income-tax Officer commenced. It would be necessary to allow fair proportion of the expenditure under Section 37 and remaining portion of the expenditure which can be directly related to services in respect of the proceedings before the Income-tax Officer shall have to be considered as per the provisions of Section 80VV. Looking to the details of the expenditure in respect of Rs. 12,950, we are of the view that Rs. 5,000 consisting of two items clearly fell to the extent of 100 per cent within the meaning of Section 80VV and, therefore, the same is considered under that section and allowable to the maximum extent of Rs. 5,000. Out of the balance amount of Rs. 7,950, in our opinion, proportion of 50.50 falling under Section 37 and 80VV would be a correct estimate considering the types of comprehensive services usually rendered by the Chartered Accountants in general. Therefore, Rs. 3,975 shall be allowed under Section 37 and balance of Rs. 3,975 falling under Section 80VV shall attract disallowance.
6.4 While on the aspect we would like to touch upon the aspect of Department's stand usually taken in such matters, though not specifically taken here is that services rendered in connection with preparation of statements including depreciation statement, etc., be taken as proceedings in respect of income-tax and, therefore, falling under Section 80VV. This view is based on misconception of law. Because what Section 80VV contemplates is fees in respect of any proceedings before any income-tax authority. Therefore, to relate the services of preparation of return should be a proceeding before an IT authority. Usually the proceedings commence only after return is filed because in absence of return how the proceedings of assessment commence ? It is not the case of revenue that here the return was filed under Section 139(2)/148 of the IT Act. Again, the legislative intent is not to restrict expenditure on such services. The main purpose in introducing Section 80VV was to curb allowance in respect of exorbitant fees charged by counsels for appeals.
7. The third ground is in respect of disallowance out of travelling expenses in excess of Rule 6D to the extent of Rs. 1,908 and the fourth ground is in respect of allowing an option of exercising to adopt fair market value of the machinery as on 1-1-1964 as cost of acquisition while computing capital gains.
7.1 As submitted and stated in the Court, both these grounds are decided against the assessee as no interference is called for with the decision taken by CIT(A).
8. In the result, we set aside the order of OIT(A) while annulling the assessment having been made outside the time limit permissible under the Act for completing the assessment and direct that Income-tax Officer to pass the orders appropriate in accordance with law.
9. In the result, the appeal is allowed.
P.S. Dhillon, Judicial Member
1. I have gone through the order of my learned brother Shri P.J. Goradla, Accountant Member, but it is my misfortune that I do not agree with his reasons and conclusions on the issues hereinafter discussed.
2. The first issue is that whether the assessment for the assessment year 1980-81 is nullity in the eyes of law. The learned Accountant Member has taken a view in the affirmative, but the reasons assigned by him are merely inferences which cannot take the place of proof. The documentary proof is on record and the same has been rejected by my learned brother on the basis of inference, viz., ITNS 150A is there on which the approval was granted by the Inspecting Assistant Commissioner of Income-tax vide his order dated 26-4-1983 to award refund, which shows that the assessment order was passed and calculation of income-tax was made and the same is very clear vide reference made by the Income-tax Officer to the Inspecting Assistant Commissioner of Income-tax on 19-1-1983 and the permission was granted by the Inspecting Assistant Commissioner of Income-tax on 26-4-1983. When this is so, then it can be safely held that the assessment was made as it is to be made under the provisions of law. No doubt, the learned Accountant Member has held from these facts that only inference could be drawn is that the department wanted to utilise money of the assessee without any cost in the guise of assessment order having been passed on 10-12-1982, which is negatived by the facts on record and the facts mentioned above as well as CIT(A) in his order in details in paras 1.1 and 1.2 respectively. No adverse inference can be drawn if there is delay in making the refund for the assessment order made by the Income-tax Officer in the assessment year under consideration and on account of such delay the assessment cannot be held as invalid and nullity. Further, since such delay is there under the process of law, no adverse inference can be drawn if the Commissioner (Appeals) has allowed interest under Section 214 of the Act, up to 27-4-1983, for holding that the assessment is nullity in the eyes of law and if thereafter, the interest is granted accordingly by him then it cannot be held that he has contradicted himself in acting on different footing ; while considering the issue of limitation, particularly when his findings are that the assessment is made or 10-12-1982 which has been supported by reasons and substantiated by material on record, which he has relied upon for this conclusion in said paras of his order, the same goes unrebutted.
2.1 The decision of the Hon'ble Supreme Court in the case of Balkrishna Malhotra (supra) does not support the case of the asses-see. The facts and circumstances of the case decided by the Hon'ble Supreme Court are distinguishable from the facts and circumstances of the instant case. Moreover, I fully agree with the CIT(A) for the purpose and also adopting his reasons to hold so.
2.2 On these reasons I hold that the assessment order is not a nullity in the eyes of law. I further hold that the assessment order for the assessment year 1980-81 is valid.
3. The second issue in this appeal is whether a sum of Rs. 7,950 out of Rs. 12,950 is subject-matter of Section 80VV of the Act. The provisions of Section 80VV are specific provisions and these provisions override the general provisions of Section 37 of the Act. Reliance is placed on the decision in the case of Mohan Meakin Breweries Ltd. (supra). Furthermore, the amended Section 80VV makes it clear that in computing the total income of an assessee there shall be an allowance by way of deduction for any expenditure incurred by him in the previous year in respect of any proceedings before any income-tax authority or the Appellate Tribunal or any court relating to the determination of any liability under this Act, by way of tax, penalty or interest to the extent of Rs. 5,000. Therefore, if any assessee before filing the return is taking any advice from the Tax Consultant, then it is there to reduce the liability to pay tax. Therefore, such sought for advice by the assessee is to reduce tax and as such it cannot be held that the same is not part of tax proceedings before the tax authorities. In such cases the Tribunal has taken this view. Reliance can be placed on the decision of the Ahmedabad Bench '0' in the case of C.M.C. (India) v. ITO [IT Appeal No. 924 (Ahd.) of 1981, dated 14-5-1982].
Hence I hold that the assessee is entitled to claim a deduction to the extent of Rs. 5,000 only which has been granted by the authori ties below. I further hold that no further deduction under Section 37 of the Act is allowable to the assessee. Accordingly, I decide this issue in favour of the revenue and against the assessee.
3.1 No doubt, my learned brother in his order at para 6.4 has discussed the provisions of Section 139(2)/148 by holding that the assessment proceedings are there when these provisions are applied and executed and, therefore, he came to the conclusion that if prior to the proceedings under these sections any services are rendered by the Tax Consultants to the assessee and the assessee has paid remuneration or amount for such services, then the same amount is subject-matter of Section 37 of the Act, which view is contrary to the judicial view taken by the Hon'ble Supreme Court holding therein that the general provisions cannot override the special provisions of the Act and as such it cannot be held that the payment for such services is subject-matter of Section 37 of the Act and hence, the provisions of Section 80VV of the Act are not applicable. Moreover, the Tribunal is to follow its own orders and as such the authorities below are justified in their respective conclusions, as they did so on following the decision of the Tribunal (supra).
4. The third ground is determined by my learned brother in his order in para 7, holding therein that no interference is called for on this issue in the impugned order, regarding disallowance of tranvelling expenses in excess of Rule 6D. I fully agree with him. Despite it, my learned brother has held in the case of the assessee that the assessment is nullity for the reasons stated by him in his order in paras 4.5 & 8, whereas I have taken a different view and as such the result is different than that of my learned brother for the reasons stated above.
5. In view of my above discussion and reasons thereto, I hold that the appeal of the assessee fails and as such is liable to be dismissed.
6. In the result, the appeal is dismissed.
REFERENCE UNDER Section 255(4) OP THE INCOME-TAX ACT, 1961 P.S. Dhillon, Judicial Member
1. Difference of opinion has arisen amongst the Members, who constituted the Bench. The following points of difference are referred to the Hon'ble President of the Appellate Tribunal under Section 255(4) of the Act:
(1) Whether, on the facts and circumstances of the case, the assessment for the assessment year 1980-81 is nullity in the eyes of law or not ?
(2) Whether, on the facts and circumstances of the case, the provisions of Section 80VV of the Income-tax Act, 1961 are applicable and, therefore, the Commissioner of Income-tax (Appeals) was right in sustaining disallowance of Rs. 7,950 out of Rs. 12,950 paid by way of professional charges ?
(3) Whether, in law the appeal is required to be refixed so as to gather correct facts, because of contrary facts found by the learned Judicial Member, who passed the dissenting order subsequently without reference to the Accountant Member ?
THIRD MEMBER ORDER Y. Upadhyaya, Vice President (WZ)
1. The assessee is a company. The dispute was raised by the assessee that the assessment was not completed within the time allowed under Section 153 of the Income-tax Act, 1961. The date of assessment order passed under Section 143(3) is 10th December, 1982. The notice of demand dated 27th April, 1983 was received by the assesses subsequently. There was a refund of Rs. 4,50,000 according to the notice of demand. The assessee in appeal, relying on the cases of Balkrishna Malhotra (supra), S. Mubarik Shah Naqshbandi (supra) and R. Gopal Rarnnaryan (supra) challenged that the assessment was not made in time, which was not accepted by the appellate authority. The assessee came in appeal before the Tribunal and the learned Accountant Member and the Judicial Member could not come to the common conclusion. Consequently the difference of opinion was referred to the President. Two common questions were recorded by both the Members. They are as under :
(1) Whether, on the facts and circumstances of the case, the assessment for the assessment year 1980-81 is nullity in the eye of law or not ?
(2) Whether, on the facts and circumstances of the case, the provisions of Section 80VV of the Income-tax Act, 1961 are applicable and, therefore, the Commissioner of Income-tax (Appeals) was right in sustaining disallowance of Rs. 7,950 out of Rs. 12,950 paid by way of professional charges ?
The Hon'ble Accountant Member has framed a third question, which has not been signed by the Hon'ble Judicial Member, as hereunder :
(3) Whether, in law the appeal is required to be refixed so as to gather correct facts, because of contrary facts found by the learned Judicial Member, who passed the dissenting order subsequently without reference to the Accountant Member ?
These questions have been assigned to the Third Member for determination under Section 255(4) of the IT Act, 1961 by the President. It has been indicated above that the third question was not signed by the Judicial Member and, therefore, it is necessary to formulate whether the third question also should be taken as a question of difference between the two Members. The arguments were heard of the Departmental Representative and the assessee's counsel on this question and it was found that the two Members have come to a different conclusion so far as the facts are concerned.
2. After hearing both the parties it was found that the third question is most important which is arising out of the order of the learned colleagues. Consequently the third question was also taken as a question of difference between the two Members. The learned Accountant Member on this issue has observed as follows :
If at all ITNS 150A was prepared on 10-12-1982 the learned Departmental Representative has not placed before us a copy of the same because this document is a very vital document going to the root of the issue involved. We are, therefore, not inclined to accept that tax calculation form was either prepared or the same was signed on 10-12-1982.
The learned Judicial Member has observed as follows:
The documentary proof is on record and the same has been rejected by my learned brother, on the basis of inference, vis., ITNS 150A is there on which the approval was granted by the Inspecting Assistant Commissioner of Income-tax vide his order dated 26-4-1983 to award refund, which shows that the assessment order was passed and calculation of income-tax was made and the same is very clear vide reference made by the ITO to the Inspecting Assistant Commissioner of Income-tax on 19-1-1983 and the permission granted by the Inspecting Assistant Commissioner of Income-tax on 26-4-1983.
3. It is clear from the two observations that both the learned colleagues did not come to a common conclusion on facts. The Tribunal is a fact-finding authority. The fact must be determined correctly, so far as possible and thereafter the conclusion should be arrived at or law may be applied. The learned colleagues in the present case have not come to the common facts and, therefore, the third question becomes most important. Unless the facts are correctly determined, the legal position of the dispute cannot be considered. Consequently, accepting the third question, the matter should be refixed for hearing before the Bench. Accordingly the third question is answered as follows :
On the facts and circumstances of the case, the case should be refixed for rehearing for determination of correct facts and application of law.
4. As the matter is going back to the Bench in view of the third question, questions 1 & 2 become infructuous and they are not answered. The matter should be placed by the Registry before the Bench for fresh hearing.