G.T.N. Textiles Ltd. vs Commissioner of Income Tax

K.S. Paripoornan, J.—At the instance of the applicant (assessee), the Income Tax Appellate Tribunal has referred the following two questions of law for the decision of this court:

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the Income Tax Officer was right in law in reopening the assessment u/s 147(b) and in withdrawing the relief u/s 80J computed and carried forward in the original assessment for the assessment year 1973-74 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the validity of reassessment made u/s 147(b) ?"

We heard counsel for the assessee, Mr. Jose Joseph, and also counsel for the Revenue, Mr. P.K.R. Menon. The assessee claimed relief u/s 80J of the Income Tax Act for the assessment years 1971-72, 1972-73 and 1973-74. Without giving priority of deduction u/s 80J, the assessing authority allowed set off of unabsorbed depreciation and development rebate. He carried forward the relief claimed u/s 80J as there was no income to allow set-off for the relief claimed. The unadjusted relief so carried forward amounted to Rs. 5,70,419. The assessment for the year 1973-74 was reopened as the audit note alerted the Income Tax Officer that, in the original assessment made on January 20, 1975, the assessing authority had wrongly carried forward a sum of Rs. 5,70,419 which was done in violation of the provisions contained in the first proviso to Sub-section (3) of Section 80J. The Income Tax Officer reopened the assessment for the year and withdrew the relief u/s 80J that had been computed and carried forward in the original assessment. In appeal by the assessee, the Appellate Assistant Commissioner held that the decision in Indian Transformers Ltd. Vs. Commissioner of Income Tax, is applicable to the instant case and that the Income Tax Officer had no basis for reopening the assessment. The Appellate Assistant Commissioner directed the Income Tax Officer to set off the correct amount due u/s 80J before setting off the other carried forward amounts. The Revenue appealed to the Income Tax Appellate Tribunal. The Appellate Tribunal held that the unabsorbed depreciation and development rebate are to be given priority over deduction u/s 80J of the Act. It was further held that a look at the proviso to Section 80J(3) will show that in no case shall the deficiency of the relief u/s 80J or any part thereof be carried forward beyond the 7th assessment year. In this view, the Income Tax Officer was held to be right in giving priority and in setting off the development rebate and depreciation allowance and also in withdrawing the carry forward relief u/s 80J originally granted for the assessment year. Thus, the reassessment made on the basis of the audit report was held to be proper. Since it was found that the audit objection merely drew the attention of the Income Tax Officer and did not in any manner amount to an expression of opinion, the appeal filed by the Revenue was allowed. It is thereafter at the instance of the assessee that the questions of law, formulated hereinabove, have been referred for the decision of this court.

We heard counsel. In paragraph 7 of the appellate order dated February 16, 1981, the Appellate Tribunal has given clear and cogent reasons to hold that the assessing authority was right in giving priority and in setting off the development rebate and depreciation allowance and also withdrawing the carried forward relief u/s 80J originally granted for the assessment year 1973-74. The Appellate Tribunal also held that, on the facts, it is evident that the audit objection only drew the attention of the Income Tax Officer and it did not amount to an expression of opinion by the audit and, in this view, the reassessment is to be sustained. The above finding of fact by the Appellate Tribunal is not challenged. We are of the view that the Appellate Tribunal was justified in holding that the reopening of the assessment u/s 147(b) is valid. The consequential order withdrawing the carried forward relief u/s 80J originally granted for the assessment year 1973-74 is also valid. There is no merit in the plea of the assessee that the reopening of the assessment on the basis of a valid objection is untenable in view of the decision of the Supreme Court in Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New Delhi, , as we are of the view that the finding of the Appellate Tribunal that the audit objection merely drew the attention of the Income Tax Officer and that did not in any manner amount to an expression of opinion in the matter.

In the light of the above, we answer question No. 1 in the affirmative, against the assessee and in favour of the Revenue. We answer question No. 2 also in the affirmative, against the assessee and in favour of the Revenue. The reference is disposed of as above.

A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.