COMMISSIONER OF INCOME TAX Vs. VINCAST ENGINEERING

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, Allahabad, has referred the following questions of law under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as "the Act" for opinion to this Court : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in setting aside the order of the Commissioner of Income-tax passed under Section 263 of the Income-tax Act ?

(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that since the event of retrospective amendment made in Section 80J had occurred after the framing of the assessment on February 13, 1980, the Commissioner of Income-tax could not validly assume jurisdiction under Section 263 of the Act ? 2. Briefly stated the facts giving rise to the present reference are as follows : The assessee is a firm and the assessment year is 1977-78, the relevant previous year ending on March 31, 1977. The original assessment was completed on February 13, 1980, on a net loss of Rs. 1,16,473. The Commissioner of Income-tax, Lucknow, was of the opinion that the Income-tax Officer had wrongly taken the borrowed capital for working out the capital employed in the business of the assessee. As such, he issued a notice under Section 263(1) of the Act and after hearing the assessee-firm set aside the assessment and directed the Income-tax Officer to recompute the allowance under Section 80J of the Act. The assessee preferred an appeal against the said order of the Commissioner of Income-tax, Lucknow. In disposing of this appeal, the Tribunal observed as follows : ... the amendments in the relevant provision of the section were made by the Finance (No. 2) Act, 1980, which came into force from August 21, 1980. It is no doubt true that by the said Finance Act the retrospective amendment was made in the relevant provisions of the Act. However, since this event had occurred after the framing of the assessment on February 13, 1980, we fail to appreciate how this could be considered by the Commissioner of Income-tax with a view to assume jurisdiction under Section 263 of the Act. The decision of the hon'ble Calcutta High Court in the case of Ganga Properties v. ITO [1979 ]118 ITR447 (Cal ) clearly supports the stand taken by the assessee in this regard.

(3.) As a result the Tribunal allowed the appeal and set aside the order of the Commissioner of Income-tax made under Section 263 of the Act.