COMMISSIONER OF INCOME TAX Vs. KANODIA & SONS.

JUDGEMENT

(1.) THIS is a reference under s. 256(1) of the IT Act. The Tribunal has referred the following question for the opinion of this Court :

(2.) THE facts as briefly stated are that the assessee, a registered firm carrying on business of sale of sugar and oil in the name of Kanodia Flour Mills, did not claim any relief under s. 80J of the IT Act in its return pertaining to the asst. yr. 1972 -73, but later on, it made an application under s. 154 of the Act, on which deduction of Rs. 53,554 was allowed under s. 80J. Similar deduction of Rs. 60,524 was also allowed to the assessee in the regular assessment completed under s. 143(3) for the asst. yr. 1973 -74. The CIT took the view that the relief under s. 80J allowed by the ITO under s. 154 for the asst. yr. 1972 -73 and in the assessment made under s. 143(3) of the asst. yr. 1973 -74, was wrongly computed, inasmuch as the debts due to and from the assessee were not properly accounted for in computation of capital employed for the business for which the relief was claimed. 'The order of the ITO was thus found to be erroneous and prejudicial to the interests of the Revenue and a notice under s. 263 of the Act was then issued by the CIT to the assessee.

(3.) THEN the assessee appealed to the Tribunal. A brief finding was recorded by the Tribunal in Para 3 of its order dt. 25th June, 1979, which is as follows : 'In our view, after perusal of the order passed by the CIT the only point that survives for consideration is that the CIT has not challenged the order of the ITO passed under s. 154 or the computation made in the asst. yr. 1973 -74. He has simply challenged the calculation and directed the ITO to recalculate the same as per the provisions of r. 19A of the IT Rules, and since in the case reported in Kota Box Manufacturing Co. vs . ITO : [1980]123ITR638(All) their lordships of the Allahabad High Court in have declared sub -r. (3) or r. 19A of the IT Rules, 1962 as ultra vires of rule making power conferred by the IT Act. The question of sustaining the order of the CIT does not arise and as such we reverse the order passed by the CIT ......'