Commissioner of Income Tax vs Amritsar Swadeshi Woolen Mills

Gokal Chand Mital, J.—On 29-3-1980, the ITO served a draft assessment order u/s 144B of the income tax Act, 1961 (''the Act''), on the assessee. On 3-4-1980, the assessee filed objections and the matter was sent to the IAC and on receipt of the directions from him, the matter was taken up by the ITO. On 22-5-1980, the assessee filed a letter before the ITO to claim weighted deduction u/s 35B of the Act. The ITO by order dated 23-9-1980, framed assessment and declined to give the benefit of weighted deduction as this matter was not raised in the objections filed against the draft assessment order. On the assessee''s appeal, he failed to get the benefit of weighted deduction from the Commissioner (Appeals), but on further appeal the Tribunal allowed the point to be raised and sent back the case to the Commissioner (Appeals) for decision of the appeal afresh. At the instance of the revenue, the following questions have been referred for opinion of this Court:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in restoring the appeal on the issue of the additional claim for weighted deduction u/s 35B made by the assessee vide his letter dated 22-5-1980, for fresh disposal in accordance with law?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in maintaining that the assessee was entitled to revise the return of income before the assessment was made although the draft assessment had been made and sent to the IAC for issuing directions u/s 144B?

The only point raised before us at the instance of the revenue is that the assessment proceedings were being taken u/s 144B and the ITO had the jurisdiction to deal with only those matters which were covered by the objections raised against the draft assessment order and as per directions of the IAC and since there was no direction from the IAC with regard to the grant of weighted deduction u/s 35B, the matter could not be considered by the ITO or any other Appellate Authority, and, therefore, the Tribunal has erred in law in allowing the point to be raised at the appellate stage and in sending back the case to the Commissioner (Appeals) for fresh decision.

We are unable to appreciate the argument raised by the counsel for the revenue because the matter of grant of weighted deduction, u/s 35B was not the matter which was to be included in the draft assessment order. The provisions of section 144B are applicable only when the ITO comes to the conclusion that additions to the tune of Rs. one lakh or more deserve to be made. Wherever a draft assessment order is served on the assessee proposing addition of Rs. one lakh or more against such draft assessment order the assessee has to raise objections justifying non-addition. Claim of deductions under one head or the other, under one section or the other is not a matter covered by section 144B. Such a claim could be made even in proceedings u/s 144B. The counsel for the revenue could not dispute that if it was a case of assessment u/s 143 of the Act, the assessee could raise the point of weighted deduction during the proceedings, even if such a deduction was not claimed in the return filed by it. Moreover, it has been held in CIT v. Oswal Woollen Mills Ltd. (1987) 163 ITR 484 (Punj. & Har.) that after completion of assessment proceedings, at appellate stage benefit u/s 35B of weighted deduction can be claimed and such a point can be allowed to be raised. For claiming such deduction, we find no difference whether the assessment proceedings are being made u/s 143 or 144B. In this view of the matter, the Tribunal was right in allowing the point to be raised at the appellate stage and in remanding the matter to the Commissioner (Appeals) for fresh decision. Accordingly, we answer the first question in the affirmative, in favour of the assessee.

In view of the aforesaid, the second question is academic and is returned unanswered. The reference stands disposed of accordingly with no order as to costs.