Commissioner of Income Tax vs Amritsar Swadeshi Woollen Mills

Gokal Chand Mital, J.—On March 29, 1980, the Income Tax Officer served a draft assessment order u/s 144B of the Income Tax Act, 1961 (hereinafter called "the Act"), on the assessee. On April 3, 1980, the assessee filed objections and the matter was sent to the Inspecting Assistant Commissioner and on receipt of the directions from him, the matter was taken up by the Income Tax Officer. On May 22, 1980, the assessee filed a letter before the Income Tax Officer to claim weighted deduction u/s 35B of the Act. The Income Tax Officer, by order dated September 23, 1980, framed an 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 of Income Tax (Appeals), but, on further appeal, the Income Tax Appellate Tribunal (hereinafter referred to as "the Tribunal") allowed the point to be raised and sent back the case to the Commissioner of Income Tax (Appeals) for decision of the appeal afresh.

At the instance of the Revenue, the following questions have been referred for opinion of this court:

"(1) 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 May 22, 1980, for fresh disposal in accordance with law ?

(2) 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 Inspecting Assistant Commissioner 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 of the Act and the Income Tax Officer 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 Inspecting Assistant Commissioner and since there was no direction from the Inspecting Assistant Commissioner with regard to the grant of weighted deduction u/s 35B of the Act, the matter could not be considered by the Income Tax Officer 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 of Income Tax (Appeals) for fresh decision.

We are unable to appreciate the argument raised by counsel for the Revenue because the matter of grant of weighted deduction u/s 35B of the Act was not a matter which was to be included in the draft assessment order. The provisions of Section 144B of the Act are applicable only when the Income Tax Officer 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 of the Act. Such a claim could be made even in proceedings u/s 144B of the Act. Counsel for the Revenue could not dispute that if it was a case of assessment u/s 143, 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 Commissioner of Income Tax Vs. Oswal Woollen Mills Ltd., that after completion of the assessment proceedings, at the appellate stage, benefit of weighted deduction u/s 35B of the Act can be claimed and such a point can be allowed to be raised. For claiming such deduction, we find it makes no difference as to whether the assessment proceedings are being made u/s 143 or Section 144B of the Act 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 of Income Tax (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.