COMMISSIONER OF INCOME TAX Vs. MAHESH CHAND GUPTA

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, Allahabad, has referred the following two questions of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for opinion to this Court for the assessment years 1990-91 and 1991-92.

(2.) The brief facts of the case are as follows :

(3.) The assessee in this case is an individual deriving income from the manufacture and sale of insulated wire under the name and style of Khandelwal Wires being a proprietary concern. In the course of the assessment proceedings for the assessment year 1990-91 deductions were claimed under Sections 80HH and 80-I of the Act both at 20 per cent. of the profit from the alleged newly established industrial undertaking in a backward area. To consider the aforesaid claims, the Assessing Officer proceeded to ascertain relevant facts from the record and which revealed that up to the assessment year 1980-81, the assessee was a partner in a registered firm, namely, Khandelwal Associates, Mathura and the said firm came to be dissolved on March 31, 1980. Subsequently, with effect from May 10, 1980, the assessee started his proprietary manufacturing concern under the name of "Khandelwal Electricals" for which the accounts were closed for the first time on December 31, 1980. As the aforesaid concern was operating in a backward area, the assessee claimed deductions under Sections 80HH and 80-I of the Act and these were being regularly allowed to him. M/s. Khandelwal Electricals was stated to have been closed on March 31, 1989, but prior to that during the previous year 1988-89 relevant to the assessment year 1989-90, the assessee is stated to have started a new concern, under the name of "M/s. Khandelwal Wires" with effect from June 1, 1988. It was claimed that machinery worth Rs. 1,64,164 had been installed in the said unit. As the said concern was following the financial year as its previous year, the first assessment year was 1989-90 for which the assessee reflected a net loss of Rs. 6,499 and after adjusting the same with the profit of M/s. Khandelwal Electricals as also adjusting various other deductions income was returned at a figure of Rs. 4,62,102. No deductions under Sections 80HH and 80-I of the Act were claimed for the assessment year 1989-90 in respect of the alleged new unit, namely, M/s. Khandelwal Wires, and it is also a, matter of record that the return for the assessment year 1989-90 was processed under Section 143(1)(a) of the Act.