INCOME TAX OFFICER Vs. KAILASH CHAND MAHESHWARI
INCOME TAX APPELLATE TRIBUNAL
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K.C. Srivastava, Accountant Member -
(1.) THIS appeal by the department and the cross-objection by the assessee are directed against the order of the A AC for the assessment year 1975-76.
(2.) The assessee derived income from dividends, apart from the other sources, and in this year he had received dividends from Partap Steel Rolling Mills (P.) Ltd., Chheharfa, to the extent of Rs. 8,600. The original assessment in this case was made on an income of Rs. 76,050, by an order dated 29-11-1975. The claim of the assessee under Section 80K of the Income-tax Act, 1961 ('the Act'), in respect of the above dividends had been allowed in full. The ITO later on, received a letter from the IAC on 7-3-1980. In this letter, the IAC informed the ITO that as per the assessment order passed in the case of Partap Steel Rolling Mills (P.) Ltd., it had been determined that the dividends declared for the assessment year 1975-76 did not qualify for deduction under Section 80K. It may be mentioned that the assessment order in the case of the limited company had been passed on 12-9-1978. On the basis of the above letter of the IAC, the ITO proceeded to re-open the assessment of the assessee and other shareholders similarly situated. The ITO recorded reasons for such reopening on 19-3-1980 and issued notice for reassessment for the assessment year 1975-76, under Section 147(b) of the Act.
The ITO then proceeded to make the assessment, in which he made reference to the assessment order in the case of the company. He found that though an amount of Rs. 4,07,828 had been determined as the amount which could have been deducted under Section 80J of the Act, no profit in fact was deducted as the net result of the new industrial undertaking, after deducting depreciation and development rebate, was a minus figure. He also mentioned that the deduction admissible under Section 80J had been carried forward to be adjusted in later years. On the basis of this, he concluded that the assessee could not get any benefits of deduction under Section 80K. The [TO repelled the contention of the assessee regarding the re-opening of the assessment. He pointed out that at the time of original assessment, the assessment of the company had not been made and there was no information available to indicate the extent of the amount of exemption under Section 80K, in respect of the dividends received by the assessee. The exemption earlier granted under Section 80K was, therefore, withdrawn.
(3.) BEFORE the AAC the assessee challenged the correctness of the reassessment proceedings and also challenged the action of the ITO in withdrawing the deduction allowed earlier under Section 80K. The AAC upheld the reopening of the assessment as she found that the proceedings had been taken under Section 147(6) and the ITO had received information after the completion of the original assessment. According to her, on the basis of this information the ITO could have reason to believe that excessive relief had been allowed to the assessee in the original assessment. The AAC, however, held that the actual deduction under Section 80J was immaterial, and what was important was that whether the assessee-company was entitled to deduction under Section 80J. She accepted the plea of the assessee and held that the decision of the Supreme Court in the case of Union of India v. Coromandel Fertilizers Ltd.  102 ITR 533 supported the case of the assessee. In view of the above decision, the AAC directed the ITO to allow deduction under Section 80K in the hands of the appellant.;
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