AJIT K.SENGUPTA, J. - (1.) IN this reference under S. 256(1) of the IT Act, 1961, for the asst. yr. 1979-80, the following question of law has been referred to this Court : "Whether, on the facts and in circumstances of the case, the rectification order dt. 10th Sept., 1985, was barred by limitation ?"
(2.) THE assessment for the asst. yr. 1979-80 was originally completed by the ITO on 30th May, 1981. The assessee claimed weighted deduction under S. 35B of the IT Act, 1961, in respect of various items of expenditure including bank interest and packing expenses of Rs. 11,57,255 and Rs. 17,41,812, respectively. In the original assessment, the ITO allowed weighted deduction under s. 35B on all items including bank interest and packing expenses. A sum of Rs. 6,08,842 was spent on payment of allowance and commission to two governing directors of the assessee-company. In the original assessment, the ITO did not make any disallowance under S. 40(c) of the IT Act, 1961. The ITO passed a rectification order under S. 154 on 10th Sept., 1985. According to him, the assessee got the excess deduction of Rs. 4,64,842 under S. 40(c) and weighted deduction under s. 35B on the expenditure relating to bank interest and packing expenses was not covered under s. 35B(1). He accordingly, withdrew the weighted deduction allowed in the original assessment on the aforesaid two items of expenditure and made an addition of Rs. 4,64,842 under S. 40(c).
(3.) AGAINST the aforesaid rectification order, the assessee appealed to the CIT (A) before whom it was contended that the rectification order passed by the ITO on 10th Sept., 1985, was barred by limitation. The order of the ITO on the aforesaid points was also assailed on merits. The CIT (A) rejected the assessee's contention that the impugned order of the ITO was barred by limitation. He was further of the view that the point whether weighted deduction was allowable on bank interest and packing expenses was a debatable one and that the issue relating to this point could not be the subject-matter of rectification under S. 154. He, accordingly, cancelled the rectification order of ITO withdrawing the weighted deduction under S. 35B in respect of aforesaid two items of expenditure. Regarding the third point, namely, the addition made under S. 40(c), the CIT (A) was of the view that, on this point, there cannot by any argument. The order of the ITO on this point was, accordingly, confirmed. As both the parties felt aggrieved by the order of the CIT (A), they came up in appeal before the Tribunal.;