COMMISSIONER OF INCOME TAX Vs. ENFIELD INDIA LIMITED

JUDGEMENT

(1.) IN pursuance of the direction given by this Court in TCP No. 518 of 1982, dt. 5th April, 1983, the Tribunal referred the following question for the opinion of this Court, under s. 256(2) of the IT Act, 1961, hereinafter referred to as the "Act" :

(2.) THE assessee is a company, carrying on business at Madras. THE assessment for the asst. yr. 1974-75, for which the previous year ended on 31st Dec., 1973, was completed under s. 143(3) of the Act. Subsequently, the ITO noticed that expenditure was allowed by way of remuneration to directors under s. 40(c) of the Act in excess of the ceiling prescribed and that the weighted deduction under s. 35B was improperly allowed on an amount of Rs. 1,34,411, which represented commission paid to U. K., and Nepal parties. He, therefore, reopened the assessment under s. 147(b) of the IT Act, and in the reassessment, added Rs. 44,827 under s. 40(c) and Rs. 1,34,411 under s. 35B of the Act. Aggrieved, the assessee filed on appeal before the CIT(A), questioning the jurisdiction with regard to the reopening of the assessment as well as the addition made on merits. THE CIT(A) upheld the ITO's order in so far as the question of jurisdiction is concerned. In so far as the appeal filed on merits is concerned, the CIT(A) upheld the addition made by the ITO under s. 40(c) of Rs. 44,827 but deleted the other addition of Rs. 1,34,411 made under s. 35B of the Act. Aggrieved, the assessee filed an appeal before the Tribunal questioning the jurisdiction of the ITO to reopen the assessment under s. 147(b) of the Act. On merits, objection was taken to the disallowance sustained under s. 40(c) of the Act. THE Tribunal, taking note of the fact that the reopening of the assessment under s. 147(b) was based upon the earlier years records, which in turn, is based upon the audit note, came to the conclusion that reopening under s. 147(b) is bad. On merits, with regard to addition made under s. 40(c) is concerned, the Tribunal has not expressed any opinion.