Income Tax Appellate Tribunal - Jaipur
Jaipur Bottling Co. vs Assistant Commissioner Of Income Tax on 25 January, 2006
Equivalent citations: (2006)101TTJ(JP)192
ORDER
B.P. Jain, A.M.
1. These two appeals of the assessee arise from the consolidated order of learned CIT(A), Rajasthan-II, Jaipur, for the asst. yrs. 1986-87 and 1987-88, dt. 1st Aug., 2000.
ITA No. 473/Jp/2000 (1986-87)2. In ground 1, the assessee's grievance is with respect to learned CIT(A) holding that AO was not bound by law to give a copy of reasons recorded for issuance of notice under Section 148 of the Act.
3. Since the reasons recorded by the AO have already been supplied by the Department to the assessee and are part of paper book of the assessee (paper book 20-21), therefore, there is no substance in the ground 1 of the assessee. Therefore, ground No. 1 of the assessee stands dismissed.
4. In ground 2, the learned CIT(A) has confirmed the action of the AO in initiation of proceedings under Section 148, which is disputed by the assessee.
5. The facts of the case are that original return was filed on 29th Aug., 1986 which was processed under Section 143(1) of the Act on 30th March, 1988. Notice under Section 148 was served on assessee on 4th March, 1994 and time given for filing of the return was "within 30 days of service of notice". Another notice dt. 28th Feb., 1996 was served on the assessee and the time given for filing the return was "within 35 days of service of notice". A reply dt. 12th March, 1996 was filed before the AO, by the counsel of the assessee, contending that order of assessment has not been passed in pursuance of the original notice under Section 148, the second notice issued on the same facts is invalid. The AO was of the view as per para 2, p. 2 of his order as under :
As the first notice was technically defective (gave less than 30 days' time for filing of return), the second notice was issued, whereby the time given was as prescribed by law. It has been held by the Hon'ble Supreme Court that if a notice is technically defective, then another can be issued (on same facts), more so if the time limit for completion of assessment, in pursuance of the first notice is not over. The counsel has cited the decision of the Supreme Court in CIT v. Rao Thakur Narayan Singh (1965) 56 TTR 234 (SC) wherein it was held that once reassessment has been cancelled no fresh notice can be issued on same facts. The facts of the case under consideration however differ from those of the case cited by-the counsel. In the assessee'S' case reassessment has not been cancelled, only another notice has been issued so as to remove the technical defect of the first notice. Therefore the assessee's plea of the proceedings initiated being invalid, is rejected.
6. The learned CIT(A) confirmed the action of AO that notice issued to assessee on 3rd March, 1994 was defective to the extent that time given for filing of return was noted as to be within 30 days of service of notice, whereas, as per law, the time to be provided was 35 days from the date of service of notice. Therefore (sic-Although), the original notice suffering from this technical defect, AO was not required to close those proceedings and therefore, the second notice issued was for the purposes of removing the technical defects in the first notice. Therefore, the assessment framed consequent to issue of notice under Section 148 dt. 28th Feb., 1996 is within time limit provided. Therefore, finding of AO that income had escaped assessment and initiating of proceedings under Section 147 was found to be valid.
7. We have heard the parties. The law applicable on reassessment in this case shall be as applicable on or after 1st April, 1989, i.e. the amended law. The amended provisions of Section 147 r/w Section 148 have to be considered procedural in nature. Under the amended provisions, before making the assessment, reassessment or recomputation under Section 147, the AO shall serve on the assessee a notice requiring him to furnish within such period, not being less than 30 days as may be specified in the notice, a return of income. Thus as per the amended provisions of Section 148(1) (operative from 1st April, 1989, it mandated that a Section 148 notice not giving a minimum period of 30 days for furnishing the return could not be sustained in view of the expression, 'not being less than 30 days' in the said Section 148(1). But by Finance (No. 2) Act, 1996, the condition that a Section 148(1) notice must give 'not being less than 30 days' have been dispensed with retrospective effect from 1st April, 1989. The amendment probably has been made in the statute to avoid quashing of reassessment notices for the fellow on the part of the AO to comply with such statutory mandate. Therefore, a notice under Section 148 served on the assesses can require him to furnish within such period, as may be specified in the notice, a return of income, etc.
8. Under Section 149(1)(b) of the Act, as per amended provisions as applicable on date of issue of the notice, the notice under Section 148 shall not be issued for the relevant assessment year if seven years, but not more than 10 years, have elapsed from the end of the relevant assessment year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 50,000 or more for that year. The limitation in the present case, for issue of notice under Section 148 r/w Section 149(1)(b) of the Act expires on 31st March, 1997. Under the unamended law, applicable before 1st April, 1989, the notice could have been issued within 8 years from the end of the relevant assessment year, but as a result of amendment under Section 149, such notice can be issued within 10 years from the end of relevant assessment year, as enlarged period of limitation became effective before the expiry of the then existing period of limitation.
9. In the present case, the assessee had been given a time for filing of return within 30 days of service of notice i.e., 4th March, 1994, is within the time, as allowed by the statute, as discussed above. Therefore, we find no illegality in the issue of notice under Section 148 dt. 3rd March, 1994 which was served on the assessee on 4th March, 1994 prior to period of limitation on 31st March, 1997.
10. The assessee's grievance that another notice dt. 28th Feb., 1996 was served on the assessee giving the time to file the return within 35 days of service of notice is bad in law, since the proceedings under the first notice issued under Section 148 dt. 3rd March, 1994 served on 4th March, 1994 have been dropped by the AO. In this regard the lower authorities issued the second notice to remove the technical defect of time 'not being less than 30 days', by giving 35 days' time for filing the return of income in place of 'within 30 days' given earlier in the notice dt. 3rd March, 1994. The AO had not closed the proceedings of the assessment which were initiated in response to notice under Section 148 dt. 3rd March, 1994 served on 4th March, 1994 and presumption of the assessee that the AO has dropped the proceedings in lieu of notice dt. 3rd March, 1994 does not hold good and is without any basis. Moreover, as discussed above, the notice dt. 3rd March, 1994 which was served on 4th March, 1994 has already been held to be legal and within the statutory powers of the AO. The AO during pendency of assessment or reassessment proceedings can issue another notice under Section 148, because earlier notice has been issued, that by itself in law cannot bar him from issuing second notice under Section 148, provided the conditions stipulated in Section 147 are satisfied and the same is within the period specified under Section 149 r/w Section 151 of the Act. These views find support from various decisions in the cases of:
1. CIT v. Maharaja Pratap Singh Bahadur of Gidhaur ;
2. KEM Mohammad Ibrahim Maracair v. CIT (1964) 52 ITR 890 (Mad);
3. Gurdayal Berlia v. CIT (1966) 62 ITR 494 (Cal);
4. Ashok Kumar Dixit v. ITO .
But as decided in the case of Smt Nilofar Hamid v. ITO , if an assessment is pending either by way of original assessment or by way of reassessment proceedings, the AO cannot issue a notice under Section 148. The Hon'ble High Court of Kerala in this case has Mowed the decision of CIT v. Adinarayna Murthy . In the present case, the proceedings of reassessment are pending. Therefore, second notice issued on 28th Feb., 1996 is invalid. Therefore, the invalidity of second notice does not invalidate the first notice dt. 3rd March, 1994, which has been held to be legal, as discussed above. Therefore, the assessment made by the AO in the present case cannot be held to be without jurisdiction. Thus, ground 2 of the assessee is dismissed.
11. In ground No. 3, the assessee is aggrieved as under:
That the learned CIT(A) has erred in holding that the assessee was not entitled to claim deduction of investment allowance and has erred in confirming the action of the AO in withdrawing the investment allowance. The said action is illegal. The assessee was clearly entitled to deduction under Section 32A.
12. The facts in this ground are as per pp. 2 to 5 of AO's order as under:
The assessee-firm derives income from manufacture and sale of aerated and mineral water made from different types of concentrates. The concentrates are purchased from 'Parle' group at Ahmedabad.
For the year under consideration the assessee has claimed 'investment allowance' amounting to Rs. 4,08,284 under Section 32A of the IT Act. Presumably, the allowance has been claimed on the grounds that the firm is a small scale industrial undertaking eligible for the deduction under Section 32A(2)(iii) (it has been stated during the proceedings under Section 147).
The Act provides that the investment allowance would be admissible to a small scale industrial undertaking, or to a non-small scale industrial undertaking if it does not manufacture any of the items specified in the Eleventh Schedule of the IT Act, [s. 32A(2)(iii)].
On application of the above two criterias on the assessee, it is found that the assessee is not eligible/entitled to the investment allowance. This is on account of the following facts:
1. Assessee is not a small scale industrial undertaking. With a view to qualify for treatment as a small scale industrial undertaking, the aggregate value of plant and machinery, other than tools, jigs, dies and moulds installed as on the last day of the previous year for the purposes of the business of the undertaking does not exceed;
In a case where the previous year ends after the 12th day of March, 1985, thirty five lakhs rupees;
In the assessee's case, as per Annexure to the balance sheet as on 31st Dec., 1985, enclosed as Annex. 'A', the value of plant and machinery was as under:
1. Plant & machinery 26,17,726
2. Generators 4,41,250
3. Empty bottles 66,26,503
4. Wooden crates 19,25,879 In the return filed, depreciation has been claimed on plant and machinery at serial No. 1.
Generators and wooden crates : Annex. 'B' to be seen from the depreciation chart that if 'both are excluded from the purview of definition of plant and machinery' (as the order of Rajasthan High Court in the case of Jai Dwarka (P) Ltd. had not been passed) yet the WDV of the assets comprising of plant and machinery as on the last day of the previous year is Rs. 49,54,855 (and this is when some items have been from inclusion) this figure being more than Rs. 35 lakhs demolishes the assessee's claim of being a small scale industrial undertaking. Therefore, on this account the firm is held to. be ineligible for the investment allowance claim. The Act provides the benefit of investment allowance even to those assessees who are not a small scale industrial undertaking. However, the eligibility is confirmed only to those concerns which do not manufacture any items specified in Schedule Eleventh of the IT Act. The 5th item of the Schedule mentions 'manufacture of aerated water' to be on the activities against which the investment allowance deduction is not admissible.
The counsel has vide his letter dt. 17th Jan., 1996 submitted that the 'assessee is manufacturing aerated water containing added sugar and the same are being manufactured from non-alcoholic beverage base supplied by Parle Export Ltd. and Bislery Beverage (P) Ltd. The assessee is also manufacturing soda....' It is observed that the non-alcoholic beverage base are the blended flavouring concentrates which when mixed with the aerated water result in production of Gold Spot, Thumsup, Limca, etc. Therefore, there is little doubt of the fact that as the business activity of the assessee is manufacture of items specified in the Eleventh Schedule, the assessee is not eligible for the deduction.' The counsel has in his abovereferred letter, further stated that the explanation to item No. 5 has been added w.e.f. 1st April, 1988 and hence does not apply to the assessee's case for the asst. yr. 1986-87. Against this assertion, it is observed that insertion of the explanation is merely by way of the clarification, as to what constitutes blended flavouring concentrates. But in the absence of the explanation (asst. yr. 1986-87) it does not mean that the 'blended flavouring concentrates have no meaning/no existence/no interpretation. Blended flavouring concentrates are the basic ingredient/essential component of any soft drink such as Thumsup, Limca, Maza, etc. being manufactured by the assessee (that the blended flavouring concentrates, alias synthetic licences in the use of the assessee are non-alcoholic beverage base as stated by the counsel cannot be denied by the assessee. Therefore, irrespective of the insertion of explanation to item No. 5, the fact remains that the assessee used blended flavouring concentrates for manufacturing Thumsup, Limca, Maza, etc. Hence the assessee loses its eligibility for the investment allowance claim.
From the facts discussed above, it is held that as the assessee is neither a small scale industrial undertaking nor its items manufactured being beyond the purview of the Schedule Eleven of the IT Act, the assessee is not entitled to the investment allowance. The claim is therefore being disallowed.
13. The learned CIT(A) confirmed the action of the AO as per reasons mentioned in his order.
14. We have heard the parties. The investment allowance under Section 32A is allowed as deduction on the machinery or plant specified in Sub-section (2)(b), which is owned by the assessee and is wholly used for the purposes of the business carried on by him. As per Clause (ii) Sub-section (2)(b) of Section 32A, the machinery or plant are which are installed in- a small industrial undertaking for the purpose of business of manufacture or production of any article or thing or as per Clause (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule. First of all, we have to examine whether the assessee is a small scale industry (SSI) or not i.e., whether the assessee is covered under Section 32A(2)(b)(ii) of the Act. The total value of plant and machinery as per balance sheet on the last day of previous year is RS. 49,54,855 which is more than Rs. 35 lakhs. The arguments of learned Authorised Representative that the assessee is duly registered as SSI unit with Director of Industries for the relevant assessment year and certificate to that fact is already there with the authorities below, therefore, in the books of account even if the value of plant and machinery on the last date of previous year is more than Rs. 35 lakhs, cannot exclude the unit being an SSI, since the appropriate authority in this regard is Director of Industries and not the income-tax law.
15. In this regard, the Hyderabad Bench of Tribunal in the case of Electrolytic Foil Ltd. v. ITO (1984) 7 ITD 635 (Hyd) have held that assessee's claim for investment allowance was disallowed because it was declared as SSI under Industrial Development (Regulation) Act and it did not satisfy conditions prescribed in IT Act because the value exceeded Rs. 7.5 lakhs and IT Act has its own definition of SSI, the lower authorities were justified in rejecting assessee's claim. Also in UBS Publishers Distributors Ltd. v. IAC (1991) 41 TTJ (Del) 499 : (1991) 36 ITD 457 (Del), the Tribunal held that letter from Ministry of Industry is not relevant and the assessee has not satisfied conditions laid down in the IT Act.
16. But in the case of Indian Communication Network Ltd. v. IAC (1994) 50 ITD 411 (Del), relevant pp. 422-423, following decisions have been held :
The policy of the Government, to promote the small scale units, by providing various concessions, through the Ministry of Industry, considering their contribution to the overall growth and economic development of this country, is echoed in the above Memorandum Explaining the Provisions of the Finance Bill.
The benefits as were extended to the small scale units by the Industries Ministry was considered under the IT Act, for the first time in 1976, which was the grant of investment allowance to such units and this continued over the years. In 1986, through the Finance Bill, 1986, it was observed that, the upward revision of the value of machinery and plant is being made in the light of the upward revision made by the Department of Industrial Development through the Notification dt. 17th March, 1985, to be effective from 1st April, 1985.
The Finance Bill, 1986 does not make any further reference to other contents of the notification so issued by the Department of Industrial Development, such as the determination of the aggregate value of investment in machinery and plant. In our view, this was felt unnecessary because, through the IT Acts, only some more benefits were extended to such small-scale units. From the time, small scale units were given concessions under the IT Act, there was never any explanation or provision added to the Act, as to manner of determination of the aggregate value of the machinery and plant, that was contrary to the one laid by the Ministry of Industry. We may assure that unlike the provisions of Section 80-I, 80HH, etc., where the prerequisites for a new industrial undertaking had been defined, there are no conditions specified in Section 32A of the Act for grant of recognition as a small scale unit, other than, industries. This, in our view suggests that, the only authority, which has the power to grant recognition to a unit as a small scale unit being Industries Ministry or the concerned Department under that Ministry, so the long as, a unit is recognized by that authority, for purposes of harmonious construction of the term small scale unit, the same should be adopted for the purposes of this Act as well.
As observed above, the intention being the promote to small-scale units, the concessions are granted by Ministry of Industries, were complimented with concessions under the IT Act. The definition of the term 'small-scale industrial unit' not only was borrowed as recognized by the Ministry of Industry, but, it was retained as it is, under the IT Act, with the only addition of the words 'as at the end of the previous year' which was necessary to keep in line with the provisions of the Act, which determined the income for the assessment year with reference to the income of the previous year.
In the absence of any specific explanation or provision for the determination of the aggregate value of machinery and plant, under the IT Act, it would be only proper that, the manner of computation of the aggregate value of the machinery and plant as recognized by that Ministry is also adopted, so that, uniformity for the same class or category, under different Acts could be maintained. In our view, such uniformity of the view, is what is intended by the legislature and would only be proper, for achieving the objective of the growth of these units and their contributions to the overall economic development of this country and last but not the least, to reduce avoidable litigation.
We have to observe that, we have arrived at the above conclusion, by considering the additional material, namely, the reasons given in the memorandum Explaining the Provisions of the Finance Bill, 1986, with the emphasis that, in the light of the upward revision to the term by the Ministry of Industries, the definition is being revised under the IT Act. We, therefore, accept the plea of the assessee, that the aggregate value of machinery and plant should be determined in the like manner as done by the Directorate of Industries. Since the Directorate of Industries, had accorded recognition to the assessee, as a small scale industrial unit, the claim of investment allowance on such items as are installed in the factory premises, is accordingly upheld. Since, the AO had never examined the quantum of the claim, he is only directed to verify the same and the other conditions of creation reserve, etc. are satisfied and allow the claim, in accordance with law.
Before we part on this issue, we may observe that, by the Finance Bill, 1992, the definition of the term 'small scale industrial undertaking' in Section 80-IA has been amended to the effect that, the said expression cover only those small-scale industrial undertakings which are regarded as such undertakings under Section 11B of the Industries (Development and Regulation) Act, 1951. This further fortifies our view that, the intention of the Government is only to give uniform treatment to small-scale industrial undertakings under different statutes.
The claim of deduction under Section 80-I, which is an identical lines as those of investment allowance, for the reasons given therein, we direct the AO, to examine the satisfaction of other requirements of that section and the quantum of deduction allowable, and allow deduction, in accordance with law.
By relying upon the decision in the case of Indian Communication Network Ltd. v. IAC (supra), we are of the view, in the present case, that the industry of the assessee has to be SSI for claiming investment allowance and reference has to be made under Section 11B of Industrial Development (Regulation) Act, 1951 and Sch. XI does not have any applicability in such a case and the assessee shall be entitled to investment allowance if the assessee had been recognized as SSI by the Director of Industries, The said decision has also distinguished the above decision of Electrolytic Foil Ltd. v. ITO (supra) and UBS Publishers Distributors Ltd. v. IAC (supra). The assessee has been recognized as SSI by-the Director of Industries and has been allowed investment allowance by treating the assessee as SSI unit, for the purpose of allowing investment allowance. Therefore, the assessee shall be treated as an SSI unit irrespective of value of plant and machinery and items being manufactured by the assessee. Therefore, following the decision in the case of Indian Communication Network Ltd. v. IAC (supra) the assessee is entitled to the deduction of investment allowance, under Section 32A of the Act. The AO has not examined the allowability of the investment allowance and creation of investment allowance reserve. Therefore, the AO has to examine and satisfy himself which of the plant and machinery has to be taken into account for allowability of the investment allowance. Hence, the matter is reserved to the file of the AO who will examine the matter as directed and allow the investment allowance as per directions given above. Thus, the ground No. 3 of the assessee is allowed for statistical purposes.
17. In ground No. 4, the assessee is aggrieved as under :
That the learned CIT(A) has erred in holding that the appellant was not entitled to make claim for 100 per cent depreciation on bottles and crates during reassessment proceedings and the AO has rightly disallowed the claim. The said action is illegal and the assessee was entitled to 100 per cent depreciation on bottles and crates.
18. The facts in this ground are that the assessee has not claimed any depreciation on empty bottles purchased during the year and the assessee, now, in reassessment proceedings has claimed depreciation @ 100 per cent of Rs. 20,44,183 on new bottles purchased during the year. The AO was of the view that the assessee failed to seek benefit of depreciation because it neither filed the revised return, nor moved an application under Section 264. of the Act. The proceedings under Section 147 are for the benefit of the Revenue only and not for the assessee. Therefore, the claim of the assessee in reassessment proceedings was not admitted by the AO as regards depreciation amounting to Rs. 20,44,183 on empty bottles purchased during the year.
19. The learned CIT(A) confirmed the action of the AO, as per reasons mentioned in his order.
20. We have heard the parties. In the present case, the issue is whether in reassessment proceedings, a claim can be raised for the first time by the assessee or not. We-refer to the decision of the apex Court in the case of CIT v. Sun Engineering Works (P) Ltd. , where it has been held that ITO may bring to charge income escaped to assessment other than or in addition to items which led to issuance of notice under s, 148, A matter not agitated in concluded original assessment, cannot be permitted to be agitated in reassessment unless relatable to items sought to be taxed as escaped income. Section 147 is for the benefit of Revenue and not the assessee. Assessee cannot be permitted to convert reassessment proceedings into appeal or revision, in disguise, and seek relief in respect of items earlier rejected or claim/relief in respect of items not claimed in original assessment unless related to escaped income,
21. By reading the decision of Hon'ble apex Court in CIT v. Sun Engineering Works (P) Ltd. (supra), we are of the view that the assessee can make a claim only in respect of items which have escaped income. The assessee has never claimed the depreciation in its original return of income and also have not made the claim in the revised return and no claim in this regard have been made even under Section 264 of the Act. Therefore the original assessment will be taken as concluded assessment and Section 147 proceedings are for the benefit of the Revenue and not for the assessee and therefore, the assessee cannot make a fresh claim which have not been earlier made in the original assessment since the assessee cannot be permitted to convert the reassessment proceedings into appeal or revision. Therefore, the assessee cannot be allowed the depreciation amounting to Rs. 20,44,183 as claimed. Thus, ground No. 4 of the assessee is also dismissed.
22. In ground No. 5 the assessee is aggrieved as under :
That the learned CIT(A) has erred in holding that the AO was justified in withdrawing excess depreciation on generator. The said finding is illegal. The depreciation was correctly allowed to the assessee in the original assessment proceedings.
23. The brief facts of this ground are that the assessee has claimed depreciation (c) 30 per cent on generators and extra-shift depreciation was also claimed at higher rate. The normal rate of depreciation is 15 per cent and the higher rate of depreciation i.e., 30 per cent is admissible only if the generators are on non-conventional sources of energy i.e., wind and solar energy. The assessee's generators were ran on electricity and power. Therefore, the excess depreciation claimed by the assessee amounting to Rs. 1,29,252 has been withdrawn by the AO.
24. The learned CIT(A) has confirmed the action of the AO.
25. We have heard the parties. The learned counsel for the assessee has relied upon the decision of the Hon'ble Rajasthan High Court in the case of CIT v. Agarwal Transformers (P) Ltd. where facts of the case are as under :
The reference application pertains to the asst. yrs. 1984-85, 1985-86 and 1987-88. The respondent-assessee is a company carrying on the business of re-rolling of stainless steel pattas through hot and cold process. The assessee claimed depreciation on generator set at the rate of 30 per cent, on the basis of item (10A) in the depreciation schedule in Appendix I. In the opinion of the AO, the generator set is not run on wind energy as such it is not covered by item at (10A) and as such the higher depreciation was not permissible on that count. The AO, however, allowed the depreciation at the normal rate of 15 per cent, on the generator set. The CIT(A) confirmed the finding of the AO. However, the Tribunal was of the view that the generator being a renewable energy device, the depreciation of 30 per cent was allowable. In order to appreciate the controversy involved, it will be convenient to extract the relevant entry at Clause (xiii) of item (10A) of Appendix I appended to the IT Rules, which reads as follows :
Any special devices including electric generator and pumps running on wind energy.
According to the rules of construction, where two or more words which are susceptible of analogous meaning are coupled together noscitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general. Thus, in our view, the words electric generator must be construed ejusdem generis. The electric generator by itself generates electricity and therefore, does not, fall within the renewable energy devices. It is different from pumps run on the wind energy, which falls within the renewable energy devices. Thus, it is erroneous to say that the condition 'run on wind energy' is also attached to electric generators. Even grammatically neither, nor the word 'both' is used after the word 'pumps' in the relevant entry and this also clarifies that the condition running on wind energy is only attached to the word 'pumps' and not to the electric generators. A further reading of the entry shows that it is inclusive, it refers to two different items, namely, electric generators and secondly, the pumps running on wind energy. Thus, in our view, electric generator clearly falls under renewable energy devices and the Tribunal has rightly allowed the depreciation at the rate of 30 per cent on the basis of item (10A), Clause (xiii) of Appendix I to the IT Rules, 1962.
The reference is accordingly answered in favour of the assessee and against the Revenue.
26. By reading the relevant entry at Clause (xiii) of item (10A) of Appendix I to IT Rules and following the judgment of the jurisdictional High Court in the case of Agarwal Transformers (P) Ltd. (supra), we are of the view that the electric generators fall under renewal of energy devices and a depreciation @ 30 per cent is allowable to the assessee. Therefore, the AO has wrongly withdrawn the depreciation allowed by him in the original assessment. The order of the learned CIT(A) is hereby reversed in view of above discussion. Thus, this ground No. 5 of the assessee is allowed in his favour.
27. During the course of hearing, the learned Authorised Representative of the assessee has not pressed the ground No. 6 of the assessee. Hence the same is dismissed as not pressed.
28. In ground No. 7, the assessee is aggrieved with the decision of the learned CIT(A) who has erred in holding that the AO is to charge interest under Sections 216 and 217 for asst. yr. 1986-87 upto the date of regular assessment and the said findings are illegal and no interest was chargeable.
29. The brief facts of this ground are that the AO has charged Interest under Sections 216 and 217 of the Act. This action of the AO was confirmed by the learned CIT(A) that interest should be charged on the assessee upto the date of regular assessment.
30. No arguments have been made by the parties except that the reliance have been placed by both the parties on the orders of the lower authorities. We have considered the orders of the authorities below and there were no other facts available before us. Whatever, we could gather from the orders of the authorities below, we find that the interest payable by the assessee under Sections 216 and 217 is, where on making the regular assessment the ITO finds that the assessee has made the underestimate or no estimate has been made by the assessee for advance tax payable by him. What is regular assessment in the said section becomes important for charging the interest under these provisions i.e., whether regular assessment includes reassessments under Section 147 or not is the issue which has to be decided in the present case. In this regard, learned counsel for the assessee has relied upon the decision of jurisdictional High Court in the case of CIT v. Smt. Padam Kumari Surana where it has been held as under :
2. (40) 'regular assessment' means the assessment made under Sections 143 or 144.
We find substance in the submission of the assessee's counsel and are unable to widen the meaning of the aforesaid expression by importing into it something not provided for. Under this definition, only a proceeding which is taken under Sections 143 and 144 is covered. The legislature, if it had desired to empower the IT authorities to impose penalty, even in reassessment proceedings, it could have provided for the same. The Allahabad High Court in CIT v. Smt. Jagjit Kaur held that the assessments made under Section 147(a) r/w Section 143(3) were not 'regular assessments' within the meaning of Section 273(b) r/w s 212(3) and, therefore, the levy of penalty was not valid. We are in agreement with the aforesaid view and hold that we cannot read the words 'regular assessment' as occurring in Section 273 as justifying the levy of penalty in the proceedings under Section 147(b). The same view was taken by the Punjab & Haryana High Court in Smt. Kamala Vati v. CIT (1978) 111 ITR 248 (P&H) and by the Patna High Court in the case of CIT v. Ram Chandra Singh .
In CIT v. Mannalal Nirmal Kumar , a question though different but having some resemblance, came up for consideration before this Court. The question was whether Section 217 of the Act applies to reassessment proceedings as well. The view taken was that since interest was payable only in regular assessment, the same could not be applied to reassessment proceedings under Section 147 of the Act.
Consequently, the question referred is answered in favour of the assessee and against the Revenue by holding that no penal action can be taken in the course of reassessment. The assessee would be entitled to get costs of Rs. 400.
Also the reliance is placed in the case of Modi Industries Ltd. and Ors. v. CIT and Anr. where it has been held that 'regular assessment' under Section 2(40) means the assessment made under s, 143 or Section 144. Having regard to the scheme of the Act and use of the phrase 'regular assessment' in various sections of the Act, in Section 214, 'regular assessment' has been used in no other sense than the first order of the assessment passed under Section 143 or Section 144. In view of above discussions, we are of the view that the AO cannot charge the interest upto the date of reassessment. The learned counsel for the assessee has also relied upon the decision of jurisdictional High Court in the case of CIT v. Mannalal Nirmal Kumar where the Hon'ble High Court has held the same decision that the regular assessment means the assessment under Section 143(3) or Section 144 and interest under s, 217 is payable by the assessee only upto the date of regular assessment. Therefore, the learned CIT(A) has rightly directed the AO to charge the interest upto the date of regular assessment. Thus, we find no infirmity in the order of the learned CIT(A) which is hereby sustained. Thus, the ground No. 7 of the assessee is dismissed.
ITA No. 472/Jp/2000-(Asst, yr. 1987-88)31. In ground No. 1 the assessee is aggrieved as under:
That the learned CIT(A) has erred in holding that proceedings under Section 148 were validly initiated. The said action is illegal. There was no justification for initiation of proceedings under Section 148 and initiation of proceedings as well as the order passed by the AO is bad in law.
32. The brief facts of this ground are that notice under Section 148 dt. 3rd March, 1994 was served on the assessee on 4th March, 1994. The time given for filing of return was 'within 30 days' of service of notice and another notice dt. 28th Feb., 1996 was served on the assessee giving the time for filing the return 'within 35 days of service of notice'. The original assessment was completed under Section 143(3). The contention of the assessee is that notice under Section 148 and the assessment under Section 147 is bad in law. This issue is similar to the issue in the assessee's own case for the asst. yr. 1986-87 and has been dealt with in ITA No. 473/Jp/2000 of even date where it has been held that notice under Section 148 is valid and the assessment made under Section 147 is within the jurisdiction of the AO. The only difference in this case is that the original assessment has been made under Section 143(3) of the Act where proviso to Section 147 shall be applicable. Since, as per the reasons recorded by the AO, it is clear that income of the assessee chargeable to tax has escaped assessment, therefore, the decision taken in the assessee's own case for the asst. yr. 1986-87 is applicable to the assessee in the impugned year. Therefore, following the decision for the asst. yr. 1986-87 in the assessee's own case in ITA No. 473/Jp/2000 of even date, the proceedings initiated by the AO under Section 148 are valid and assessment framed under Section 147 r/w Section 143(3) for asst. yr. 1987-88 are within the jurisdiction of the AO. Thus, ground No. 1 of the assessee is dismissed.
33. In ground No. 2, the assessee is aggrieved as under:
That the learned CIT(A) has erred in holding that the assessee was not entitled to investment allowance and upholding the action of the AO in withdrawing the investment allowance. The said action is illegal.
34. The brief facts of this ground are that the assessee was allowed investment allowance amounting to Rs. 2,20,990 under Section 32A in the original assessment but the same has been withdrawn in the reassessment proceedings. This issue has already come up in the assessee's own case for the asst. yr. 1986-87 where the investment allowance has been allowed as a deduction to the assessee under Section 32A of the Act. Since the facts in this case are similar to the facts in the assessee's own case for the asst. yr. 1986-87 which has been dealt in ITA No. 473/Jp/2000 of even date and following the same decision in the impugned year, we allow the deduction to the assessee under Section 32A of the Act. Thus, we reverse the order of the learned CIT(A) and allow ground No. 2 of the assessee in view of above discussions.
35. In ground No. 3 the assessee is aggrieved as under :
That the learned CIT(A) has erred in holding that the appellant was not entitled to make claim for 100 per cent depreciation on bottles and crates during reassessment proceedings and the AO has rightly disallowed the claim. The said action is illegal and the assessee was entitled to 100 per cent depreciation on bottles and crates.
36. The brief facts of this ground are that the assessee has not claimed any depreciation on empty bottles purchased during the year and the assessee, now, in reassessment proceedings has claimed depreciation @ 100 per cent on new bottles purchased during the year. The AO was of the view that the assessee failed to seek benefit of depreciation even in the revised return and, therefore, the assessee cannot be given benefit in reassessment proceedings under Section 147. This action of the AO was confirmed by the learned CIT(A). This issue has already come up in assessee's own case for the asst. yr. 1986-87 in IT A No. 473/Jp/2000 of even date where the issue has been decided against the assessee. Following the decision in the assessee's own case for the asst. yr. 1986-87 (supra), the assessee's claim for 100 per cent depreciation on purchase of new bottles cannot be allowed. Hence, we confirm the action of the learned CIT(A). Thus, the ground No. 3 of the assessee is dismissed.
37. In ground No. 4 the assessee is aggrieved as under :
That the learned CIT(A) has erred in holding that the AO has justified in withdrawing excess depreciation on generator. The said finding is illegal. The depreciation was correctly allowed to the assessee in the original assessment proceedings.
38. The brief facts of this ground are that the assessee has been allowed higher depreciation on generators @ 30 per cent in the original assessment whereas in the reassessment proceedings, the AO was of the view that it is allowable @ 15 per cent and accordingly, withdrawn the depreciation at the higher rate and allowed the same at the normal rate of 15 per cent. This action of the AO was confirmed by the learned CIT(A). This issue has already come up in assessee's own case for the asst. yr. 1986-87 in ITA No. 473/Jp/2000 of even date where the issue has been decided in favour of the assessee. Following the decision in the assessee's own case for the asst. yr. 1986-87 (supra), the assessee's claim for higher depreciation @ 30 per cent should be allowed to the assessee and the AO has wrongly withdrawn the higher rate of depreciation. Hence, we reverse the decision of the learned CIT(A) in view of the above discussions. Thus, ground No. 4 of the assessee is allowed.
39. During the course of hearing, the learned Authorised Representative of the assessee has not pressed the ground No. 5. Hence, the same is dismissed as not pressed.
40. In the result, both the appeals of the assessee are partly allowed.