TaxTMI 
TaxTMI 
2008 (9) TMI 871
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.... of the Act for the two years under consideration, has acted without jurisdiction and contrary to the provisions of the Act. That the returns which were filed on December 20, 1990, and December 30, 1991, respectively for the two assessment years claiming set off of unabsorbed depreciation and unabsorbed investment allowance have been disallowed in purported exercise of powers under section 143(1)(a) of the Act, vide two intimations dated July 8, 1992. The petitioner, therefore, moved respondent No. 2 by applications under section 154 of the Act. Vide two orders dated September 22, 1992, the rectification applications came to be rejected by respondent No. 2 holding that no change was required to be made in the adjustments made to the returns of income. The petitioner carried the matter before respondent No. 1 by way of applications under section 264 of the Act seeking revision of intimations under section 143(1)(a) of the Act as well as setting aside the orders dated September 22, 1992, under section 154 of the Act. Vide the impugned order dated December 31, 1992, respondent No. 1 rejected applications made under section 264 of the Act. The case of the petitioner in brief is t....
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....i) ; (v) CIT v. Hindustan Electro Graphites Ltd. [2000] 243 ITR 48 (SC) ; (vi) CIT v. Malabar Building Products Ltd. [2001] 248 ITR 72 (Ker) ; (vii) Samtel Color Ltd. v. Union of India [2002] 258 ITR 1 (Delhi) ; (viii) Karnataka Small Scale Industries Development Corporation Ltd. v. CIT [2002] 258 ITR 770 (SC) ; (ix) CIT v. Shikharchand Jain [2003] 263 ITR 221 (MP) ; (x) Denish Industries Ltd. v. ITO [2004] 271 ITR 340 (Guj) ; and (xi) Kvaverner John Brown Engg. (India) P. Ltd. v. Asst. CIT rendered by the apex court in Appeal (Civil) 3073 of 2008 on April 29, 2008, reported in [2008] 305 ITR 103. It was, therefore, submitted that the subsequent orders made under section 154 of the Act and under section 264 of the Act were also bad in law and had to be quashed and set aside. As against that on behalf of the respondent authority it was submitted that in the first instance the court was only required to consider whether the order made by respondent No. 1 under section 264 of the Act could be treated to be bad in law in the light of the settled position in law. That the court in exercise of jurisdiction vested under article 226 of the Constitution was not re....
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.... the earlier decision of the apex court in the case of CIT v. Hindustan Electro Graphites Ltd. [2000] 243 ITR 48 had been distinguished and doubted by the subsequent Bench and, therefore, the said judgment could not be considered to be a good law. The impugned order dated December 31, 1992, made under section 264 of the Act for both the assessment years itself records " The matter, in essence, pertains to the interpretation of section 115J(2). For the sake of clarity, this section is reproduced below* : " Therefore, even for testing the validity of order made under section 264 of the Act one will have to consider as to whether interpretation of a provision can be considered to be within the scope of requirement of the proviso to section 143(1)(a) of the "115. (2) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A or sub-section (3) of section 80J."Act. Theref....
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.... : "Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely : (i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified ; (ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed ; (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed." On a plain reading it becomes clear that in so far as clause (i) is concerned, the same is only in relation to arithmetical errors in the return, accounts or documents accompanying the return which can be rectified. Clauses (ii) and (iii) relate to what is prima facie admissible or what is prima facie inadmissible but this has to be decided on the basis of the information available in such return, accounts or documents. Therefor....
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....petitioner, in any view of the matter, the issue is highly debatable and cannot be considered to be prima facie inadmissible in exercise of powers under section 143(1)(a) of the Act. In support of this proposition the decision in the case of Gujarat Poly-Avx Electronics Ltd. [1996] 222 ITR 140 (Guj) was relied upon. In the case of Gujarat Poly-Avx Electronics Ltd. [1996] 222 ITR 140, this High Court explained the word "prima facie" and stated as to in what circumstances the powers can be exercised in the following words (page 147) : " Powers to make assessment in terms of its proviso can be invoked and when the claim is prima facie inadmissible or prima facie admissible, as the case may be, adjustment is to be made. The word ` prima facie' clearly indicates that it must be first evidenced. A decision on the debatable issue is not envisaged." The apex court in the case of CIT v. Manmohan Das [1966] 59 ITR 699 stated in the following words (page 702) : " Whether the loss of profits or gains in any year may be carried forward to the following year and set off against the profits and gains of the same business, profession or vocation under section 24(2) has to be determined....