COMMISSIONER OF INCOME TAX vs. FAG PRECISION BEARING LTD.

ITR/5/1994HC GujaratGJHC24020083199422 September 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE BANKIM.N.MEHTA4 pages
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What were the facts?

The assessee, Fag Precision Bearing Ltd., is in appeal against the Revenue. The assessment years are 1990-91 and 1991-92. The Assessing Officer (AO) issued orders under Section 154 of the Income Tax Act, 1961, on August 31, 1992. The AO disallowed unabsorbed investment allowance carried forward from Assessment Years 1982-83 to 1989-90, citing Section 115J(2) and CBDT Circular No. 495. This was done after initially accepting the returns under Section 143(1)(a) without prima facie adjustments. The assessee's appeal before the Commissioner (Appeals) failed, but the Income Tax Appellate Tribunal (ITAT) ruled in favour of the assessee, holding that Section 154 adjustments are only for patent mistakes and referring to CBDT Instruction No. 1814.

What did the High Court hold?

The High Court held that the Tribunal was right in law in modifying the orders passed under Section 154 for Assessment Years 1990-91 and 1991-92. The reasoning is based on the principle that Section 154 adjustments are only for obvious and patent mistakes, as held by the Tribunal. The Court also referred to and relied upon CBDT Instruction No. 1814 dated 04.04.1989. The Court answered the referred question in the affirmative, in favour of the assessee and against the Revenue. The reference was disposed of accordingly. The operative direction was to uphold the Tribunal's decision, implying the disallowance made by the AO under Section 154 was set aside.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in modifying the orders passed under Section 154 for Assessment Years 1990-91 and 1991-92? Assessee's contentions: The assessee argued that the Tribunal was correct in its decision. The Tribunal held that adjustments under Section 154 are permissible only for obvious and patent mistakes. The Tribunal also referred to and relied upon CBDT Instruction No. 1814 dated 04.04.1989. Revenue's contentions: The Revenue contended that the Tribunal was not right in modifying the Section 154 orders. The Revenue relied on Section 115J(2) of the Act and CBDT Circular No. 495 to disallow the unabsorbed investment allowance. The judgment notes that the controversy is identical to that in Gujarat Petrosynthese Limited & Another vs. P.L.R ungta & Others, implying the Revenue's arguments were addressed in that case.

Which sections of the Income-tax Act were involved?

Section 154,Section 115J,Section 115J(2),Section 143(1)(a)

AI-generated summary — verify with the full judgment below

ITR/519/1994 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.5 of 1994 For Approval and Signature: HONOURABLE MR. JUSTICE D. A. MEHTA AND HONOURABLE MR. JUSTICE BANKIM N. MEHTA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment? 2 To be referred to the Reporter or not? 3 Whether Their Lordships wish to see the fair copy of the judgment? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder? 5 Whether it is to be circulated to the Civil Judge? ========================================================= = COMMISSIONER OF INCOME TAX - Applicant Versus FAG PRECISION BEARING LTD. - Respondent ========================================================= = Appearance : MR MANISH R BHATT WITH MRS MAUNA M BHATT for Applicant. MR SN SOPARKAR WITH MRS SWATI S SOPARKAR for Respondent. ========================================================= = CORAM : HONOURABLE MR. JUSTICE D. A. MEHTA and HONOURABLE MR. JUSTICE BANKIM N. MEHTA Date : 22/09/2008 ORAL JUDGMENT (Per : HONOURABLE MR. JUSTIC

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