ORDER
T.N.C. Rangarajan, Judicial Member
1. These appeals relate to the claim of the assessee for deduction Under Section 35B of the Income-tax Act, 1961 made in the reassessment proceedings.
2. The assessee is a registered firm. The assessee was wholly-engaged in the business of exporting ready-made garments. For the assessment year 1974-75, corresponding to the previous year ended 31-3-1974, the original assessment was made on 27-9-1976 on a total income of Rs. 3,05,488. Later a reassessment was made Under Section 147(b) on 20-3-1980 adding a sum ofRs. 250 claimed as donation and a sum of Rs. 1,300 being expenses incurred for a guest house to determine the total income at Rs. 3,07,040. The assessee appealed on 24-4-1980 to contend that these two additions were untenable. The assessee also filed additional grounds of appeal on 24-9-1980 claiming that the assessee was entitled to deduction under Section 35B in respect of an expenditure of Rs. 7,69,599. The CIT (Appeals) found that the disallowance of Rs. 250 was conceded and the disallowance of Rs. 1,300 was unjustified. He also found that the assessee was entitled to weighted deduction in respect of an expenditure of Rs. 1,85,702 and accordingly granted relief.
3. The assessee has filed the appeal to plead for the full deduction claimed Under Section 35B. The revenue has filed an appeal to contend that the assessee is not entitled to claim any deduction in the reassessment proceedings when such a claim was not made in the original assessment proceedings.
4. We find it convenient to first consider the claim of the assessee for deduction on merits. The total amount of expenditure which the assessee claimed was eligible for deduction was Rs. 7,69,570 of which the CIT (Appeals) had regarded Rs. 1,85,702 as eligible. Therefore, the assessee claims the balance of Rs. 5,73,897 as also eligible for the deduction. Further, the assessee has given detailed break-up of this expenditure only to the extent of Rs. 5,29,831 as follows:
Rs. Ps.
Commission paid to two parties for getting the
working capital 6,100.00
Freight charges for the purpose of export items
stored in harbour dues, rent and commission 1,70,960.02
Service charges for Cotton Textile Export
Promotion Council 1,75,100.00
Export forms samples on foreign bills 240.00
Photostat copies for export documents 261.02
Miscellaneous export expenses 4,016.29
Stationery expenses 6,435.60
L.C. Commission for Bank 358.00
Export Certificate charges 67.47
Inspection charges by Textile Council 225.58
Interest on packing credit towards the purchase
of export items only 81,433.50
Export Credit Guarantee commission premium 3,836.39
Bank commission towards export items only 38,451.06
T.A. to staff to procure the export items to port 12,546.23
Electricity charges 1,598.20
Godown Insurance-stored for export items only 4,578.75
Advertisement charges towards publicity for
export 1,746.18
Stitching charges for garments 2,815.65
Madras Yarn Merchants Association 450.00
Federation of Indian Export Organization 300.00
Money order sent to Indian Export Director 60.00
Miscellaneous Export ECGC Premium 5,719.27
Subscriptions Texprocil 1,335.00
Indian Yarn Trade Federation 150.95
Bombay Silk & Rayon Textiles Export Promotion
Council 750.00
Hindustan Chamber of Commerce 300.00
Tamilnadu Handloom Industry Trade Association 100.00
Czechoslovakia Government Export Inspection
Charges 514.52
Repairs maintenance sundry expenses 9,381.98
5,29,831.66
The contention of the assessee was that every item of this expenditure was incurred for the purpose of development of exports and should, therefore, be accepted as eligible for deduction. The contention of the revenue relying on the decision in the case of K. Vensimal & Sons v. CIT [1986] 157 ITR 807 (Mad.) was that only the expenditure incurred outside India was eligible for deduction and this expenditure incurred in India was not, But we find that that decision related only to expenditure falling within item (iii) of Section 35B(1)(b) and, therefore, expenditure which falls in other items of that section would be eligible for deduction even if they were incurred in India. In these items given in the list above, the first item of Rs. 6,100 and the second item of Rs. 1,70,960 are clearly precluded by item (iii). However, all the other items except stitching charges of garments of Rs. 2,815 and the last item of Rs. 9,381 fall within the scope of Section 35B and are eligible for the deduction because they are all related to export market development. We, therefore, find that the assessee is entitled to deduction Under Section 35B in respect of further expenditure of Rs. 3,40,575.
5. We now come to the objection of the revenue that this relief cannot be given because it was not claimed in the original assessment proceedings. The revenue relies on the decision in the case of Dr. Ravishanker Tapa v. CIT [1987] 165 ITR 81 (MP) to the effect that the reassessment is concerned only with the escapement and the decision in the case of Chettinad Corpn. (P.) Ltd. v. CIT [1984] 147 ITR 57 (Mad.) to the effect that the claims rejected in the original assessment cannot be re-agitated in the reassessment proceedings. Reliance was also placed on the decisions in the cases of S. Index Singh Gill v. CIT [1963] 47 ITR 284 (Bom.) and Sir Shadi Lal & Sons v. CIT [1973] 92 ITR 453 (All.) to contend that the reassessment was made only for the benefit of the revenue and the income originally determined cannot be varied to the benefit of the assessee. On the other hand, it was contended on behalf of the assessee that once the assessment was re-opened the initial order of assessment stands automatically cancelled and the ITO had to make a fresh assessment of the total income taxable under the Income-tax Act. Reliance was placed on the decisions in the cases of CIT v. Standard Motor Products of India Ltd. [1983] 142 ITR 877 (Mad.), CWT v. Subakaran Gangabhishan [1980] 121 ITR 69 (AP) (FB), CIT v. H.M. Esufali H.M. Abdul all [1973] 90 ITR 271 (SC), V. Jaganmohan Rao v. CIT [1970] 75 ITR 373 (SC) and CIT v. Assam Oil Co. Ltd. [1982] 133 ITR 204 (Cal.). Particular stress was laid on the decision of the Madras High Court in Dy. Commissioner v. Indian Refrigeration Industries (P.) Ltd. [1980] 46 STC 264, where it was held that in a reassessment under the Sales Tax Act the entire tax liability had to be re-determined. Relying on the decision of the Rajasthan High Court in the case of CIT v. Rangnath Bangur [1984] 149 ITR 487 it was submitted that only matters which have been agitated in the original assessment and repelled, could be left out of consideration and a claim which was not made earlier had necessarily to be considered, It was pointed out that when the assessee was entitled to the deduction the determination of the tax at higher amount amounted to collection of tax without the authority of law and it should be directed to be refunded as held by the Supreme Court in the case of Salonah Tea Co. Ltd. v. Supdt. of Taxes [1988] 173 ITR 42.
6. On a consideration of the rival submissions, we are of the opinion that we have to uphold the objection of the Revenue. No doubt, the assessee is entitled to the decision Under Section 3533 as we have found above and if that deduction is granted then the income of the assessee should be determined at a figure much less than that originally assessed. “However, the assessee had not made that claim in the original assessment proceedings. Again it is unfortunate that even though the information that the assessee was engaged wholly in export business and its expenditure was eligible for deduction Under Section 35B was available on record, the assessee was not advised to make such a claim. In this connection, it may be re-called that there is a circular of the CBDT issued in June 1955 instructing the officers of the Department not to take advantage of the ignorance of the assessee of his rights and stating that it is one of their duties to assess a tax-payer in every reasonable way particularly in the matter of claiming and securing reliefs. [See Chokshi Metal Refinery v. GIT [1977] 107 ITR 63 at 71 (Guj.)]. Yet the fact is that the claim was not made and the original assessment was completed without granting the deduction due to the assessee. Even when the reassessment proceeding was initiated the assessee did not make this claim and even in the appeal at the initial stage the claim was not made. It is only by way of an additional ground that the assessee had made the claim in the appellate proceedings. Therefore, the question arises whether the assessee is precluded from making the claim by reason of abandonment of the claim or laches on his part. The Supreme Court had held in the case of Tilokchand Motichand v. Munshi, CST [1969] 2 SCR 824 that by his own conduct the person has abandoned his claim it would not be possible to revive it at a later stage. On the other hand, we have a recent decision of the Supreme Court in Salonah Tea Co. Ltd.’s case (supra) where it was held that the question of consideration of laches is a matter of discretion. In this context it is pertinent to refer to the decision of the Rajasthan High Court in the case of Rangnath Bangur (supra) where it was held that if a question is raised in the original assessment and is decided against the assessee, such a question cannot ordinarily be allowed to be raised again in the course of the reassessment proceedings. But if no such question was raised in the original assessment proceeding, then there could be no prohibition against the assessee raising such a question relating to computation of the amount of tax payable by him at the time of reassessment. But the facts of that case show that the question which was raised in the reassessment proceedings related to the claim for deduction of the expenditure in respect of the escaped income. In the present case, however, we are concerned with the deduction which has nothing to do with the escaped income which was sought to be taxed in the reassessment proceedings. Moreover, the claim which has been abandoned cannot be a better claim than a claim which has been made and rejected in the original proceedings.
7. There is another aspect of this matter which arises from the scheme of reassessment provided in the Income-tax Act. Section 152(2) provides that in a case such as this when an assessment has been re-opened the assessee may claim that the proceedings shall be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be rightly liable for even if the income alleged to have escaped assessment had been taken into account. In the present case since the ITO wanted to add back only Its. 1,550 and the assessee is entitled to the deduction of more than a lakh of rupees he could have made a claim under Section 152(2) in which event the ITO would have normally dropped the proceedings. Consequently, there would have been no assessment made Under Section 147 in which the assessee could insist on a consideration of the claim for deduction. The assessee not having followed that procedure, the ITO had completed the assessment adding only the income alleged to have escaped. Now, is it possible for the assessee to claim in the appeal that a further deduction should be given which if it had been made earlier could not have been considered at all by reason of the proceedings themselves being dropped ? We do not think that the assessee could be allowed to make a claim in the appeal which could never have been considered in the proceedings before the ITO. This reason alone, in our opinion, is sufficient to uphold the objection of the Revenue. The CIT (Appeals) has proceeded on the basis that the Income-tax Act is in pari materia with the Sales-tax Act and has, therefore, followed the decision of the Madras High Court in Indian Refrigeration Industries (P.) Ltd.’s case (supra). But that Act does not contain any provision similar to Section 152(2) which makes quite a difference to the situation. In the circumstances, we have to reverse the order of the CIT (Appeals) and reject the claim of the assessee for deduction Under Section 35B. Therefore, the order of the CIT (Appeals) in all other respects is confirmed.
8. In the result, the appeal of the assessee is dismissed and the appeal of the Revenue is allowed.