1984 (6) TMI 49 - HC - Income Tax

High Court allows Revenue's rectification under Income Tax Act, finds extra-shift allowance error, awards costs.

The High Court ruled against the assessee, upholding the Revenue's right to rectify the mistake under section 154 of the Income Tax Act. The court found ... Mistake Apparent From Record Issues Involved:1. Validity of the order u/s 154 of the I.T. Act withdrawing the extra-shift allowance.2. Legality of reassessment proceedings u/s 147 of the I.T. Act.3. Propriety of excluding indirect charges from the actual cost of fixed assets.4. Allowance of extra-shift depreciation on electrical machinery.Summary:1. Validity of the order u/s 154 of the I.T. Act withdrawing the extra-shift allowance:The Tribunal held that the ITO's order granting extra-shift allowance, which was independent of the AAC's order, could not be revoked u/s 154 as it was not a mistake apparent from the record. The High Court disagreed, stating that the mistake was apparent when considering the entire assessment files, thus making the rectification u/s 154 valid.2. Legality of reassessment proceedings u/s 147 of the I.T. Act:The AAC upheld the reassessment proceedings initiated by the ITO for the assessment years 1963-64 to 1965-66, rejecting the assessee's contention regarding their validity.3. Propriety of excluding indirect charges from the actual cost of fixed assets:The AAC directed the ITO to recompute depreciation and development rebate by capitalizing the bulk of the pre-production expenses, excluding specific sums, and distributing the remaining amount among the fixed assets.4. Allowance of extra-shift depreciation on electrical machinery:The High Court noted that the statutory rules explicitly prohibit extra-shift allowance on electrical machinery. The ITO's grant of such allowance was contrary to these rules, making it a mistake apparent from the record and rectifiable u/s 154. The court emphasized that the statutory prohibition is clear and not debatable, thus supporting the rectification.Conclusion:The High Court answered the common question in the negative, against the assessee, and upheld the Revenue's right to rectify the mistake u/s 154. The court awarded costs to the Revenue, with counsel's fee set at Rs. 500.