JUDGMENT
1. This is a reference under Section 256 of the Income-tax Act, 1961, at the instance of the Revenue and the following question of law has been referred by the Tribunal for answer of this court, which reads as under :
” Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the Commissioner of
Income-tax wrongly invoked jurisdiction under Section 263 of the Income-tax Act in respect of the claim of the assessee under Sections 80HH and 80J ?”
2. The assessee/non-applicant is a firm which derived income from purchase and sale of forest products and also from rice milling. The Commissioner of Income-tax, on verification of the income-tax record, came to the conclusion that the assessment was erroneous and prejudicial to the interest of the Revenue for the following reasons ;
(i) Allowance under Section 32A was wrongly allowed as the machinery of the value of Rs. 53,979 was second-hand machinery on which investment allowance was not allowable.
(ii) Claim under Section 8QHH was wrongly allowed as :
(a) the conditions stipulated in that section were not fulfilled, as the business was already in existence in 1979-80 and the business was formed by transfer of machinery or plant previously used. As per Explanation below Sub-section (2) of Section 80HH the total value of the machinery or plant or part transferred should not exceed 20 per cent. of the value of the machinery or plant used in the business ;
(b) allowance under Section 80HH granted was in violation of the provisions of that section as the allowance should be restricted to the capital employed in the unit, whereas the allowance was granted on the capital employed in the entire business.
(iii) Claim under Section 80J was also wrongly allowed as :
(a) the condition stipulated in Clauses (i) to (iv) of Sub-section (4) of Section 80J were not fulfilled. The assessee also did not render separate accounts of the industrial unit. Accounts rendered are for the entire business and the allowance granted is for the entire ‘business, whereas the allowance should have been restricted to the capital investment in the unit.
3. Notice under Section 263 of the Income-tax Act was issued to the assessee and after hearing both the parties, the Commissioner observed :
“I, therefore, set aside the order of assessment dated June 29, 1981, for the assessment year 1980-81 with a direction to frame a fresh assessment on due consideration of the points mentioned above, and in the light, the Income-tax Officer may examine the entire issue in the light of various judicial pronouncements of law. Before making the assessment, the assessee should be given a reasonable opportunity of being heard.”
4. The Commissioner, therefore, set aside the order of assessment, vide annexure “B”.
5. Aggrieved against the aforesaid order of the Commissioner of Income-tax, dated June 25, 1983 (annexure “B”), the assessee approached the Tribunal and the Tribunal examined the matter in detail and found that so far as the first question regarding investment allowance under Section 32A was concerned, even the assessee himself did not press the relief and withdrew that relief. Therefore, in any case, so far as the orders of the Commissioner of Income-tax and the Income-tax Officer are concerned to that extent they have become final. Now, the only question remains regarding the enquiry into the investment allowance under Sections 80HH and 80J. For that, the Commissioner of Income-tax only observed that further enquiry was required to be made in this matter. But because on the prima facie evidence, it was found that the assessment was prejudicial to the interests of the Revenue, no adverse observation whatsoever was made by the Commissioner of Income-tax and he only made an observation with certain enquiries pertaining to transfer of assets of the unit whether this was a new unit or old unit, i.e., it was old wine put into new bottle or he is entitled to the benefit of Section 80HH, Likewise, under Section 80J whether he is entitled to 20 per cent. relief of capital employed in the unit as admissible to the assessee or not in view of the conditions laid down in Section 80J. But the Tribunal, instead of approaching the matter in the proper perspective, have on their own started making enquiries and found that the order passed by the Income-tax Officer is correct. This approach of the Tribunal was not warranted at all. After going through the order of the Income-tax Officer, it appears that the Income-tax Officer has not examined the matter in the light of the conditions laid down for grant of relief under Sections 80HH and 80J. Certain conditions have been laid down in both the sections and the Income-tax Officer should have examined the assessee on the basis of the conditions and thereafter recorded the finding whether they are entitled to the benefit of Section 80HH or 80J. But, instead of this, the Income-tax Officer only proceeded to assess the liability of the assessee and that was not the correct approach. The Income-tax Officer should have examined the matter in the light of the conditions mentioned in both the sections before granting relief. We are of the opinion that the Commissioner of Income-tax has not given any finding, but only remanded the case back to the Income-tax Officer for reassessment after complying with the conditions laid down for grant of benefit under Sections 80HH and 80J. Therefore, the finding recorded by the Tribunal appears to be not correct because all the materials which
ought to have been utilised by the Income-tax Officer were not there and it is not understandable that how the Tribunal have on their own, assessed the situation. Therefore, we are of the opinion that the view taken by the Tribunal is not correct and we answer the aforesaid question in favour of the Revenue and against the assessee. The Income-tax Officer may examine the matter afresh in the light of the decision of the Commissioner of Income-tax without taking notice of any adverse observations, if any, made by the Commissioner of Income-tax.