S.N. Rotho, Accountant Member - (1.) THESE two appeals filed by the same assessee are heard together and disposed of by this common order for the sake of convenience.
(2.) The assessee is a partnership firm deriving income from business as a distributor of cinematograph films. These two appeals relate to the assessment years 1972-73 and 1973-74. In the assessment years 1970-71 and 1971-72, the ITO had allowed only a portion of the cost of films released during those years and the balance was allowed in the subsequent two years. Thus, in respect of films released in the assessment years 1970-71 and 1971-72, the ITO had allowed as deduction the cost of films to the tune of Rs. 8,77,000 in the assessment year 1972-73. Similarly, in the assessment year 1973-74, the ITO had allowed a sum of Rs. 1,08,200 as deduction in respect of a film released in the assessment year 1971-72. This was the position in the original assessments made by the ITO for the assessment years 1972-73 and 1973-74. The assessee had gone on appeal in the assessment years 1970-71 and 1971-72 to the Tribunal claiming that the entire cost of the films released in those years should have been allowed as deduction. Originally, the Tribunal had rejected the claim of the assessee. However, on a miscellaneous application filed by the assessee pointing out certain circulars in favour of the assessee, the Tribunal in their order in Misc. Application Nos. 120 and 121 (Cal.) of 1980 dated 3-9-1982 for the assessment years 1970-71 and 1971-72 modified their original order and allowed the contention of the assessee. In other words, the Tribunal allowed the entire cost of the films as deduction in the year of release itself by their order dated 3-9-1982. This is what the Tribunal observed in their order dated 3-9-1982 in the aforesaid miscellaneous applications. Accordingly, we direct the ITO to amortise the films on the basis of the guidelines given in Circular No. 80 dated 4-10-1969 [F. No. 9/8069-IT (A-II)] issued by the Central Board of Direct Taxes, New Delhi. It may be stated that according to the earlier circular, the cost of films was being allowed in three consecutive years at the rate of 60 per cent, 25 per cent and 15 per cent. As stated earlier, the ITO had allowed the cost of the films released in the assessment years 1970-71 and 1971-72 on the above footing so that some portion of the cost of such films became allowable in the assessment years 1972-73 and 1973-74. Subsequently, by virtue of the order dated 3-9-1982 of the Tribunal, the entire cost of the films released in 1970-71 and 1971-72 was allowed in those years themselves so that nothing more remained to be allowed in any of the two subsequent years. Since the aforesaid sums stood allowed as per the original assessments for the years 1972-73 and 1973-74, the ITO took action under Section 147 of the Income-tax Act, 1961 ('the Act') in order to withdraw those allowances in the assessment years 1972-73 and 1973-74. In the reassessments made for those years, the ITO withdrew the aforesaid allowances as they had already been allowed in the earlier years of release. The ITO completed the reassessments accordingly. The assessee appealed to the Commissioner (Appeals) and contended that the ITO erred in his decision. It was urged that the ITO did not take permission of the Commissioner before taking action under Section 147 and so the orders of ITO were bad. Secondly, it was urged that the assessments were barred by limitation because of the provisions of Section 149 of the Act. The assessee urged that there was no direction or finding of the Tribunal and so the provisions of Section 150(1) of the Act did not apply to the facts of this case. The Commissioner (Appeals) considered the contentions of the assessee but did not agree with them. He found that notices under Section 148 of the Act for the two years under appeal were served on 11-6-1984 and the reassessments were made on 11-9-1984. Section 150(1) empowers the ITO to issue a notice under Section 148 at any time for the purpose of making a reassessment in consequence of or to give effect to any finding or direction contained in an order of any appellate authority under the Act. According to the Commissioner (Appeals) the time limit stated in Section 149 was removed in cases coming under Section 150(1). Such cases are also outside the purview of Section 151(2) of the Act and no prior permission need be taken in such cases. He also held that reassessment orders under consideration were passed in consequence of or to give effect to the directions of the Tribunal as contained in their order dated 3-9-1982 and so the reassessment orders as passed by the ITO did not suffer from any defect. In this view of the matter, the Commissioner (Appeals) dismissed the assessee's appeals.
(3.) SHRI S. Bhattacharjee, the learned representative for the assessee, urged before us that the revenue authorities erred in their decision. He stated that the notice under Section 148 can be only under Section 147(b) as the assessee did not conceal any particulars necessary for its assessment. The notice was issued more than four years after the end of the previous years under consideration. Section 151(2) empowers the issue of a notice after four years provided prior permission of the Commissioner or the Board is taken in this regard. As no such permission has been taken, the orders of the ITO were bad in law. Next, he referred to the Explanation 2 to Section 153(3) of the Act and urged that it was not open to the department to take the help of the same because it speaks of exclusion of income whereas the Tribunal was dealing with the allowance of expenses. Further, according to him, there was no direction or finding given by the Tribunal in their order dated 3-9-1982. He contended that a valid direction or finding is one which was necessary to dispose of the appeal before the Tribunal. Since it was not necessary for the Tribunal in the assessment years 1970-71 and 1971-72 to direct the withdrawal of the allowances given in the assessment years 1972-73 and 1973-74 and since the Tribunal has not, in fact, given any such direction, he urged that the provisions of Section 150(1) did not apply to the facts of this case. He relied on the decision in the cases of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC), CIT v. Thayaballi Mulla Jeevaji Kapasi [1967] 66 ITR 147 (SC) and Rajinder Nath v. CIT [1979] 120 ITR 14 (SC) in support of his contentions. Under the circumstances, he urged that the orders of reassessment passed by the ITO deserved to be cancelled.;