Ajay Tewari, J. - (1.) THIS is a reference made by the Tribunal on the following questions of law: 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in cancelling the order of the Commissioner of Income Tax passed under Section 263 ?
(2.) WHETHER , on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing the investment allowance of Rs. 4,06,822 and interest of Rs. 18,575. 2. The assessee claimed investment allowance under Section 32A(2) of the Income Tax Act, 1961 (for short "the Act") for the year 1977 -78. The Assessing Officer came to the conclusion that the assessee was entitled to the said investment allowance. On March 12, 1979, the Inspecting Assistant Commissioner of Income Tax (Assessment) issued a notice under Section 154 of the Act stating that the aforesaid benefit of investment allowance being inadmissible, he was proposing to make a rectification. The response of the assessee was considered satisfactory since no rectification was made. Thereafter, the Commissioner of Income Tax, acting under Section 263 of the Act, issued a notice again questioning the eligibility of the petitioner for grant of investment allowance. In consequent proceedings, the Commissioner of Income Tax held that the said benefit was wrongly allowed to the petitioner by recording the following: ... It is no doubt true that in the Fifth Schedule while referring to industrial machinery, there is reference to the First Schedule to the Industries (Development and Regulation) Act, 1951, but in the Ninth Schedule which is the relevant Schedule for investment allowance for the assessment year 1977 -78, there is no reference to the Industries (Development and Regulation) Act, 1951. Thus, we are to consider whether the manufacture of needles can be considered as manufacture of industrial and agricultural machinery as referred to in the Ninth Schedule. In second appeal, the Tribunal reversed the finding of the Commissioner as well as the assumption of jurisdiction for action under Section 263 of the Act. On a direction made by this Court, the above mentioned questions have been referred.
(3.) LEARNED Counsel for the assessee contended that Section 32A(b)(ii) of the Act speaks of investment allowance with regard to the business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Ninth Schedule to the Act. She submitted that item No. 8 in the Ninth Schedule is "industrial and agricultural machinery". She further contended that "industrial and agricultural machinery" has not been defined in the Act. Therefore, one has to take in aid the provisions in other relevant Acts and if that be done, the First Schedule to the Industries (Development and Regulation) Act, 1951, becomes relevant and of assistance. In item 8 the First Schedule to the Industries (Development and Regulation) Act, 1951, it is provided that textile machinery (such as spinning frames, carding machines, power -looms and the like) including textile accessories are major items of specialised equipment used in specific industries. In view of these provisions, she submitted that the decision arrived at by the Income Tax Officer at the time of original assessment after going into all aspects of the matter as stated in his order was correct on the facts of the case and relevant provisions of law. There was no mistake apparent from record or a mistake which can be said to be leading to an order which is erroneous or prejudicial to the interests of the Revenue so as to invest the Commissioner of Income Tax with the lawful jurisdiction to intermeddle with the assessment.;