R.K.AGRAWAL, J. - (1.) THE Tribunal, Allahabad Bench, Allahabad has referred the following two questions of law under s. 256(1) of the IT Act, 1961, hereinafter referred to as 'the Act' for opinion to this Court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the proportionate basis of estimating the profit on the assembly of 300 tractors for allowing deduction under s. 80J of IT Act, 1961 was not backed by any legal or accountancy principles ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in upholding the order of the CIT (A) cancelling the order of the ITO passed under s. 154 of IT Act, 1961 -
(2.) THE present reference relates to the asst. yr. 1973 -74. Briefly stated the facts giving rise to the present reference are as follows : The assessee is a limited company whose entire shareholding is held by the Government of UP as well as by the Central Government. It filed a return of income showing an income of Rs. 45,60,500. Among various reliefs, the assessee claimed relief under s. 80 -I of the Act in respect of its assembly workshop. In the statement filed along with the return, relief of Rs. 3,76,958 was claimed under s. 80J of the Act. This was duly allowed by the ITO. Subsequently by a letter dt. allowed a further relief of Rs. 6,97,463. The records of the Department were subsequently checked by the internal audit party. The audit party pointed out to the ITO that in the year under appeal, there was no import of tractors in semi -knocked condition, resulting in the virtual closure of its assembly workshop. In other words, it was communicated to the ITO by the audit party that the industrial undertaking had not undertaken any job, which required withdrawal of relief already granted under s. 80J. On the basis of this report, the ITO gave show -cause notice to the assessee pointing out that only 300 tractors had been assembled by it during the year and, therefore, it was entitled to relief under s. 80J only on the profit attributable to the manufacturing activities relating to the above tractors. The ITO found that in the year under appeal, the assessee had sold 2624 tractors. The assessee had also earned profit of Rs. 41,90,996. On the simple arithmetical basis, the ITO came to the conclusion that only Rs. 4,79,155 could be attributed as proportionate profit to the assembly of 300 tractors. He required the assessee to show cause why relief under s. 80J should not be restricted to this income of Rs. 4,79,155 only. Rejecting the various objections raised on behalf of the assessee, the ITO passed an order under s. 154 of the Act on is some mistake in the figures. In fact it should have been Rs. 5,95,266). Feeling aggrieved the assessee preferred an appeal before the CIT(A), who cancelled the order of the ITO. Against the above order, the Revenue preferred an appeal before the Tribunal. The Tribunal dealt with the matter in para 6 of its order in the following words : "After giving our careful thought to the whole matter, we are in agreement with the counsel for the assessee. The ITO merely, on proportionate basis, has thought that Rs. 4,79,155 could be the profit on the assembly of 300 tractors. The proportionate basis is not backed by any legal or accountancy principles. It is only a convenient method, which, in our opinion, has no scope in the present case. If the ITO wanted to withdraw the relief already allowed to the assessee under s. 80J, then burden was on him to show clearly that a lesser profit than that declared by the assessee could alone be attributed to the industrial activity on the basis of some acceptable legal evidence. We do not find any such thing in the present case. The learned Departmental Representative of course, submitted that a fresh look could be given to the industrial undertaking. We do not agree with this submission. Admittedly, there is nothing on record to show what amount of profit could be attributed to the industrial undertaking and whether the industrial undertaking was confined to the assembly of 300 tractors and not to any other activity of the assessee. Well, these are all complicated matters requiring long -drawn process of reasoning and, therefore, outside the scope of s. 154 of the Act in view of the principle laid down by the Supreme Court in T.S. Balaram, ITO vs. Volkart Brothers (1971) 82 ITR 50 (SC). It was held in this case that a mistake apparent on the record must be an obvious and patent mistake and not something, which could be established by a long -drawn process of reasoning on points on which there may be conceivably two opinions. A decision on debatable point of law is not a mistake apparent from the record. In view of this principle, we agree with the finding of the CIT(A) cancelling the order of the ITO passed under s. 154 of the Act."
(3.) WE have heard Sri R.K. Upadhyay, learned standing counsel for the Revenue and perused the impugned order of the Tribunal giving rise to the present reference. It is not in dispute that in the assessment order passed originally the assessing authority had allowed relief under s. 80J of the Act on the basis of the profits disclosed by the respondent -assessee. It is also not in dispute that the respondent -assessee had not maintained the books of account item -wise so as to depict actual profit earned on the assembly of tractors and sold as such. The Tribunal in its order has rightly pointed out that the estimate of profit on proportionate basis at Rs. 4,79,155 is based on convenience and is not supported by any legal accountancy principles. If the real profit cannot be worked out from the books of account maintained by the respondent -assessee then, in our considered opinion the proceedings of rectification under s. 154 could not have been taken as profit share taken by the assessing authority is based on conjecture, presumption and assumption, which could only be arrived after long -drawn process. The mistake cannot be sought to be an error apparent on record, therefore, the order passed under s. 154 of the Act cannot be sustained.;