COMMISSIONER OF INCOME TAX Vs. CHITHRASALA

JUDGEMENT

(1.) ON hearing the learned Senior Standing Counsel for Taxes and the counsel for the assessee, in fact, the question need not be answered. Additionally we also find that before the presentation of this reference to this Court, the order of the Tribunal is already complied with and has done real justice to the situation. This is apart from the position that the question is a pure and simple question of fact. It is as follows:

(2.) IN the assessment year in question in this proceedings 1976-77, the return shows a net loss of Rs. 63,960 and in regard to this figure the assessee had claimed 50 per cent of the cost of production in spite of full deduction in regard thereto for the previous year 1975-76. This was not allowed by the ITO for the year in question. In this regard it was contended by the assessee that the claim for full deduction for the previous year 1975-76 was erroneous as r. 9A(2)(a) of the IT Rules could not be said to be applicable. It was plainly contended that the exercise of option claiming full deduction for the previous year 1975-76 was a mistake. The ITO did not agree since, according to him, the entire cost of production was already allowed as a deduction for the previous year.

(3.) BEFORE the Tribunal the assessee contended similarly. The Tribunal took the view that the mistake committed was really by the ITO and could not be considered as a bar on the assessee to assert his rights. The Tribunal took the view that the ITO had material in the form of the agreement dt. 29th Aug., 1974 to verify and satisfy himself whether the assessee's case fell under r. 9A(2)(a) or not. The Tribunal found fault with the ITO that he had simply gone by the contents of the assessee's letter dt. 8th Oct., 1977. The Tribunal by its order dt. 9th Oct., 1986 directed the ITO to grant the necessary relief not under r. 9A(2)(a), but under r. 9A(3) with liberty to the Department to take remedial measures to rectify or modify the assessment for the asst. yr. 1975- 76 as per law.