M/S.jai Bharath Tanners, Vellore v. The Commissioner Of Income-Tax, Tamil Nadu V, Madras

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 31/12/2002 CORAM THE HONOURABLE MR.JUSTICE N.V.BALASUBRAMANIANandTHE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN T.C.No.212 of 1999 M/s.Jai Bharath Tanners,Vellore. ... Applicant -Vs- The Commissioner of Income-tax,Tamil Nadu V, Madras. .. Respondent Reference arising out of the order of the Income-tax AppellateTribunal, B-Bench, Madras in I.T.A.No. 4101 Mds/89, dated 24.7.1996, at theinstance of the assessee. !For applicant :: Mr.V.S.Jayakumar ^For respondent :: Mrs.Pushya Sitharaman, Sr.SC for IT. :JUDGMENT N.V.BALASUBRAMANIAN,J. This is a reference at the instance of the assessee. Theassessee requested the Income-tax Appellate Tribunal to state a case and referthe following questions of law: 1. Whether on the facts and in the circumstances of the case,the Tribunal was right in holding that the order passed by the CIT U/s.263 ofthe I.T.Act is valid? 2. Whether on the facts and in the circumstances of the casethe Tribunal was right in holding that the CIT could validly invoke theprovision of section263 of the Act, even though the same does not accord tothe instructions given by the Central Board of Direct Taxes in similarsituations? 2. The Appellate Tribunal, by order dated 24.12.1998, hasstated a case and referred only the first question stated above. TheAppellate Tribunal rejected the second question on the ground that it was onlyargumentative in nature and not fit for reference and that the assessee didnot produce the Board's instructions before the Tribunal. The assessee, aggrieved by the order of refusal to refer the second question, approachedthis Court by a writ petition in W.P.No.12910 of 1 997 and E.Padmanabhan,J.,who heard the writ petition, taking note of the submission of the learnedcounsel for the assessee and the Revenue, held that it is open to the assesseeto challenge the order passed by the Appellate Tribunal and also to rely uponthe Board's circular at the time of final hearing of the reference. Learnedcounsel for the assessee submitted that though this Court has permitted thecounsel for the assessee to urge his submissions on the second question, he isnot urging any point on the second question. Hence, it is not necessary toconsider the same. 3. The relevant facts as seen from the statement of case are that the assessee firm was engaged in the business of purchase and sale oftanned and finished hides and the assessee earned some portion of turnoverfrom and out of the export activities carried on by the assessee. Theassessee for the assessment year 1986-87 filed a return of income disclosing atotal income of Rs.10,32,500/- and admitted in Part/III of the return firstly,the premium on sale of import entitlements of Rs.68,900/- and secondly, cashcompensatory support of Rs.8,59 ,373/-. The assessee also claimed deductionunder section 80HHC of the Income-tax Act, 1961 (hereinafter referred to as'the Act') of Rs.4,58,356/- and a sum of Rs.6,04,780/- under section 80 HH ofthe Act. The assessee claimed in its return that the amounts representing thepremium on sale of import entitlements and the amount received towards cashcompensatory support were liable to be exempt. 4. The assessing officer accepted the return filed by the 4. The assessing officer accepted the return filed by the assessee and completed the assessment under section 143(1) of the Act by orderdated 29.3.1989. The Commissioner of Income-tax (hereinafter referred to as'the Commissioner') invoked his revisional jurisdiction under section 263 ofthe Act and revised the assessment made by the assessing officer under section143(1) of the Act. The Commissioner held that as far as subsidy and theimport entitlements are concerned, they are the normal trade receipts of theassessee and there are number of decisions of this Court to support the viewthat the premium on sale of import entitlements received by an exporter arisesin the course of business and is taxable as business income. He also heldthat the cash compensatory support amount is also business income. As far asthe deductions under sections 80HH and 80 HHC are concerned, the Commissionerheld that it is for the assessee to prove that the conditions laid down inboth the sections have been fulfilled and without being satisfied that theconditions have been complied with, the deduction under section 80HH and 80HHC cannot be granted automatically. He therefore held that the assessingofficer completed the assessment under section 143(1) of the Act even withoutlooking into the question of eligibility of the deduction or the liability ofreceipt to tax and the assessment made is erroneous and prejudicial to theinterests of Revenue. After hearing the counsel for the assessee, theCommissioner held that there were obvious mistakes in the order of assessmentand set aside the order of assessment and restored the same to the assessingofficer to enable him to look into the claims of the assessee and decide themin accordance with law. 5. Aggrieved by the order passed by the Commissioner, the assessee preferred an appeal before the Appellate Tribunal. The AppellateTribunal held that it is the duty of the assessing officer to verify whetherthe conditions for allowing deduction under sections 80 HH and 80 HHC of the Act have been satisfied, and if it is allowable, how much is allowable. TheAppellate Tribunal relied upon the decision of this Court in INDIAN TEXTILESv. C.I.T. (157 ITR 112) and held that the relief was given by the assessingofficer without proper verification and the order of the assessing officer wasan order prejudicial to the interests of the Revenue which could properly formthe subject matter of revision. The Appellate Tribunal therefore held thatthe Commissioner was justified in setting aside the assessment order andrestored the same to the assessing officer enabling him to look into theclaims of the assessee and decide them in accordance with law. 6. As earlier observed, the assessee sought for reference and the first question sought for by the assessee has been referred to forconsideration. 7. Mr.V.S.Jayakumar, learned counsel for the assessee 6. As earlier observed, the assessee sought for reference and the first question sought for by the assessee has been referred to forconsideration. 7. Mr.V.S.Jayakumar, learned counsel for the assessee submitted that the order of the Commissioner merely directed the assessingofficer to look into the claims of the assessee and decide the same inaccordance with law. He further submitted that the Commissioner has not evenformed a prima facie opinion that the deductions granted by the assessingofficer were erroneous. He also submitted that under section 143(1) of theAct, it is not necessary for the assessing officer to conduct a detailedenquiry and section 143(1) of the Act does not contemplate that enquiry shouldbe conducted before accepting the return filed by the assessee and to make anassessment under that section. He further submitted that the Commissioner wasnot correct in holding that the assessing officer should conduct an enquiry inthe proceedings initiated and concluded under section 143(1) of the Act andthe decisions on which the Appellate Tribunal placed reliance are all casesdealing with the assessments made under section 143(3) of the Act where theassessing officer has to conduct a thorough enquiry and then pass an order ofassessment under section 143(3) of the Act, and when the assessing officer didnot conduct the enquiry, the Courts have taken the view that the order ofassessment passed without enquiry under section 143(3) of the Act would beerroneous and prejudicial to the interests of the Revenue. He thereforesubmitted that the decisions delineating the powers of the Commissioner withreference to the order passed under 143(3) of the Act are not applicable inthe exercise of power of revision over an order of assessment made undersection 143(1) of the Act. He therefore submitted that the Commissioner hadno material at all to set aside the order of assessment passed by theassessing officer. 8. Mrs.Pushya Sitharaman, learned senior standing counsel for the Revenue, on the other hand, submitted that the nature of the order passedby the assessing officer clearly shows that the assessing officer should nothave passed the order under section 143(1) of the Act and the Commissioner wasright in holding that without verification, the deduction ought not to havebeen granted and the power under section 143(1) of the Act should not havebeen resorted to by the assessing officer in completing the assessment. Shetherefore submitted that the Commissioner had necessary jurisdiction to invokehis powers under section 263 of the Act. 9. We have carefully considered the submissions of the learned counsel for the assessee and the learned senior standing counsel forthe Revenue. The Commissioner, as seen from the facts detailed earlier, hasset aside the order of assessment passed by the assessing officer undersection 143(1) of the Act. The Commissioner has considered two aspects of the 9. We have carefully considered the submissions of the learned counsel for the assessee and the learned senior standing counsel forthe Revenue. The Commissioner, as seen from the facts detailed earlier, hasset aside the order of assessment passed by the assessing officer undersection 143(1) of the Act. The Commissioner has considered two aspects of the matter which were subject matter of summary assessment under section 143(1) ofthe Act. In so far as the subsidy and the import entitlements are concerned,he has stated that there are number of decisions of this Court holding thatthe premium on sale of import entitlements received by the exporter is anincome from business. Sub-sections (iiia), (iiib) and (iiic) of section 28 ofthe Act postulate that the profits on the sale of an import licence, cashassistance and duty of customs or excise repaid or repayable as drawback areall treated as business income and by the Finance Act, 1990, section 28 hasbeen amended with full retrospective effect from 1.4.1961 treating all kindsof income covered under three sub-sections as business income of the assessee.The effect of substitution of the amended section with retrospective effect isthat the order of the assessing officer under section1 143(1) holding that thereceipts in question were capital receipts and not taxable under theprovisions of the Income-tax Act is plainly erroneous. That apart, this Courtin C.I. T. v. WHEEL & RIM CO. OF INDIA LTD. (107 ITR 168), by judgmentdated 7 .9.1976, held that the receipts received by cash subsidy and importentitlements are profits and gains derived by the assessee in the export ofgoods and they are business income. This Court in another decision in GEORGEMAIJO & CO. (VIZAG) v. C.I.T. (157 ITR 475), by judgment dated 14.3.1985,held that the sale of import entitlements received on export would constitutea revenue receipt and not a capital receipt. As already observed, theassessing officer has made the order of assessment under section 143(1) of theAct on 29.3.1989 and when he made the assessment under section 143 (1) of theAct, two decisions of this Court were holding the field and the order passedby the assessing officer overlooking the binding decisions of this Court isplainly erroneous. Though the Commissioner in his order has not given thecitation of the cases decided by this Court, yet, when he referred in hisorder that 'there are a number of decisions from the Madras High Court', hemust have meant not only these two decisions earlier referred to, but alsoother decisions of this Court taking the same view on this subject. Wetherefore hold that the Commissioner was justified in invoking his power ofrevision under section 263 of the Act as regards the taxability of receipts byimport entitlements and also from cash compensatory support as businessincome. 10. The main submission of Mr.Jayakumar, learned counsel forthe assessee is that so far as sections 80 HH and 80 HHC of the Are areconcerned, there are no materials for the Commissioner to hold that thededuction granted was erroneous. He submitted that it is not open to theCommissioner to direct the assessing officer to look into the question ofeligibility and the power of revision cannot be exercised for directing theassessing officer to look into the matter afresh and decide the matter. Weare unable to accept the submission of the learned counsel for the assessee.Section 143(1)(a) of the Act was inserted by the Taxation Laws (Amendment)Act, 1970 with effect from 1.4 .1971 and the Section which was inserted, readsas under:-" S.143.Assessment - (1)(a) Where a return has been made undersection 139, the Assessing Officer may, without requiring the presence of theassessee or the production by him of any evidence in support of the return,make an assessment of the total income or loss of the assessee after makingsuch adjustments to the income or loss declared in the return as are requiredto be made under clause (b), with reference to the return and the accounts and documents, if any, accompanying it, and for the purposes of the adjustmentsreferred to in subclause (iv) of clause (b), also with reference to the recordof the assessments, if any, of past years, and determine the sum payable bythe assessee or refundable to him on the basis of such assessment. (b) In making an assessment of the total income or loss of theassessee under clause (a), the Assessing Officer shall make the followingadjustments to the income or loss declared in the return, that is to say, heshall -(i) rectify any arithmetical errors in the return,accounts and documents referred to in clause (a);(ii) allow any deduction, allowance or relief which, on thebasis of the information available in such return, accounts and documents, isprima facie, admissible, but is not claimed in the return; (iii) disallow any deduction, allowance or relief claimed inthe return which, on the basis of the information available in such return,accounts and documents, is, prima facie, inadmissible. (iv) give due effect to the allowance referred to in sub-section (2 ) of section 32, the deduction referred to in clause (ii) ofsubsection (3) of section 32A or clause (ii) of sub-section 92) of section 3 3or clause (ii) of sub-section (2) of section 33A or clause (i) of sub-section(2) of section 35 or sub-section (1) of section 35A or sub-section (1) ofsection 35D or sub-section (1) of section 35E or the first proviso to clause(ix) of sub-section (1) of section 36, any loss carried forward undersub-section (1) of section 72 or subsection (2) of section 73 or sub-section(1) or sub-section (3) of section 7 4 or sub-section (3) of section 74A andthe deficiency referred to in sub-section (3) of section 80J, as computed, ineach case, in the regular assessment, if any, for the earlier assessment yearor years." Sub-clauses (ii) and (iii) of section 143(1)(b) were omitted by the Finance(No.2) Act, 1980 and the reason for the deletion is stated in the statement ofobjects and reasons and it reads as under:-" Under section 143(1) of the Income-tax Act, an Income-taxOfficer may make a regular assessment without requiring the presence of theassessee or the production by him of any evidence in support of the return,and without being satisfied that the return was correct and complete in allrespects. In making such a 'summary assessment', the Income-tax Officer hasthe authority to make certain adjustments to the income or loss declared inthe return. These adjustments are by way of -(i) rectifying any arithmetical error in the return, accountsand documents, if any, accompanying it;(ii) allowing any deduction, allowance or relief which, on thebasis of information available in such return, accounts and documents is,prima facie, admissible though not claimed in the return;(iii) disallowing any deduction, allowance or relief claimedin the return which, on the basis of the information available in such return,accounts and documents, is prima facie, inadmissible; and(iv) giving due effect to the deductions and allowancesbrought forward from earlier years, namely, unabsorbed depreciation (section32(2); unabsorbed investment allowance (section 32A(3)(ii); unabsorbeddevelopment rebate (section 33(2)(ii); unabsorbed development allowance(section33A(2)(ii); unabsorbed amount of capital expenditure incurred on scientific research (section 35(2)(i); capital expenditure on acquisition ofpatent rights and copyrights (section 35A(1); unabsorbed amount of certainpreliminary expenses which are amortisable against profits (section 35D(1);expenditure on prospecting for or development of specified mineralsamortisable against profits (section 35E(1); capital expenditure on familyplanning incurred by an Indian company (section 36(1)(ix), 1st proviso);unabsorbed losses brought forward from earlier years which are admissible asset off (sections 72(1 ), 73(2), 74(1) and 74(3); and the deficiency in taxholiday profits which is eligible for set off (section 80J(3). scientific research (section 35(2)(i); capital expenditure on acquisition ofpatent rights and copyrights (section 35A(1); unabsorbed amount of certainpreliminary expenses which are amortisable against profits (section 35D(1);expenditure on prospecting for or development of specified mineralsamortisable against profits (section 35E(1); capital expenditure on familyplanning incurred by an Indian company (section 36(1)(ix), 1st proviso);unabsorbed losses brought forward from earlier years which are admissible asset off (sections 72(1 ), 73(2), 74(1) and 74(3); and the deficiency in taxholiday profits which is eligible for set off (section 80J(3). The adjustments to be made in the summary assessment in regard toitems specified in (iv) above are to be based on the computation made in theregular assessment, if any, for the earlier assessment year or years." 11. It is clear that an assessment under section 143(1)(a) ofthe Act is a summary assessment and in making summary assessment, theassessing officer is required to make assessment of the total income withreference to the return without requiring the presence of the assessee toproduce any evidence in support of the return. The summary exercise of powerto make assessment under section 143(1)(a) of the Act does not contemplate anyenquiry as required in the case of regular assessment and an order of summaryassessment is required to be made only in cases where there are no disputedquestions of fact or law involved. In other words, where there are disputedquestions of facts or law in making the assessment, the assessing officer maynot resort to the summary assessment. We are of the opinion that thedeductions contemplated under sections 80 HH and 80 HHC of the Act involve adetailed enquiry as to the factual aspects of the matter and the satisfactionof the assessing officer of various conditions prescribed in sections 80 HHand 80 HHC of the Act for claiming deduction. It is axiomatic that beforegranting deduction, the assessee must establish that the assessee is entitledto the statutory deduction under sections 80 HH and 80 HHC of the Act byproducing necessary materials in support of its claim and the assessingofficer should also be satisfied that the conditions prescribed in both thesections are complied with by the assessee. In other words, only after adetailed enquiry and the satisfaction of the assessing officer that therequirements of sections 80 HH and 80 HHC are complied with, the assesseewould be entitled for the grant of deduction. In other words, the deductionunder sections 80 HH and 80 HHC cannot be granted automatically, nor can it bedisallowed automatically. The assessing officer, either for granting ordisallowing the deduction should be satisfied after due enquiry that theassessee is eligible or not eligible for deduction. We are of the view thatthe order of the assessing officer granting deduction without an enquiry isplainly erroneous and prejudicial to the interests of the Revenue.12. Learned counsel for the assessee referred to number ofcases and we are of the view that it is not necessary to consider all thedecisions as the decision of the Supreme Court in MALABAR INDUSTRIAL CO. LTD.v. C.I.T. (243 ITR 83) would govern the facts of the case. The SupremeCourt in Malabar Industrial Co. case considered the jurisdiction of theCommissioner under section 263 of the Act. The Supreme Court, whileconsidering the question whether the order of the assessing officer iserroneous and prejudicial to the interests of the Revenue, considered the phrase, 'prejudicial to the interests of the Revenue' and held that thephrase, 'prejudicial to the interests of the Revenue' should be read inconjunction with an erroneous order passed by the assessing officer. TheSupreme Court noticed the earlier decisions in Rampyari Devi Saraogi v.C.I.T. (67 ITR 84) and Dara Devi Aggarwal (Smt.) v. C.I.T. (88 ITR 323)wherein the Supreme Court held that where a sum not earned by a person isassessed as income in his hands on his so offering, the order passed by theassessing officer accepting the same as such will be erroneous and prejudicialto the interests of the Revenue. The Supreme Court in Malabar Industrial Co.Ltd. case laid down the law as under:- "... the Commissioner noted that the Income-tax Officer passed the order of nil assessment without application of mind. Indeed, theHigh Court recorded the finding that the Income-tax Officer failed to applyhis mind to the case in all perspective and the order passed by him waserroneous. It appears that the resolution passed by the board of theappellant-company was not placed before the assessing officer. Thus, therewas no material to support the claim of the appellant that the said amountrepresented compensation for loss of agricultural income. He accepted theentry in the statement of the account filed by the appellant in the absence ofany supporting material and without making any inquiry. On these facts theconclusion that the order of the Income-tax Officer was erroneous andirresistible." We are of the view that the ratio laid down by the Supreme Court wouldsquarely apply to the facts of the case. 13. This Court in INDIAN TEXTILES v. C.I.T. (157 ITR 112) was considering a case where the relief under section 35B of the Act wasgranted without verification whether the conditions prescribed under section35B were satisfied. This Court held that the order granting the relief was anerroneous order which would be prejudicial to the interests of the Revenue.This Court held as under:-" As already stated, in this case, the Income-tax Officer gaverelief to the assessee in respect of certain matters which, according to theCommissioner is not justified. Once that finding is reached by theCommissioner, the revisional jurisdiction under section 263 of the Income-taxAct could be validly invoked by the Commissioner as part of the order passedby the Income-tax Officer is in his opinion prejudicial to the assessee. Inthis case, without any proper verification, the Income-tax Officer has givenrelief, and that such an order being an order prejudicial to the Revenue, itcould properly form the subject matter of the revision under section 263 ofthe Income-tax Act by the Commissioner. The mere fact that subsequently theTribunal modifies the order of the Commissioner as one remitting the matter tothe Income-tax Officer will not mean that the Commissioner has no jurisdictionto deal with the matter earlier under section 263 of the Income-tax Act. Weare, therefore, in entire agreement with the view of the Tribunal that theCommissioner had jurisdiction to deal with the matter under section 263 of theIncome-tax Act." 14. A similar view was taken by this Court in K.A.RAMASWAMYCHETTIAR v. C.I.T. (220 ITR 657) wherein this Court held as under:-"... the Income-tax Officer is expected to make an enquiry before taxing the particular item of income or before granting deduction of a particular item of expenditure and if he does not make such an enquiry asexpected, that would be a ground for the Commissioner of Income-tax tointerfere under section 263 of the Act." 15. This Court in C.I.T. v. SESHASAYEE PAPER AND BOARDS LTD. (242 ITR 490) (in which one of us was a party), held that the powers ofthe Commissioner are very wide in exercising the revisional jurisdiction undersection 263 of the Act. This Court has held as under:-" The Commissioner is empowered to pass an order as the 14. A similar view was taken by this Court in K.A.RAMASWAMYCHETTIAR v. C.I.T. (220 ITR 657) wherein this Court held as under:-"... the Income-tax Officer is expected to make an enquiry before taxing the particular item of income or before granting deduction of a particular item of expenditure and if he does not make such an enquiry asexpected, that would be a ground for the Commissioner of Income-tax tointerfere under section 263 of the Act." 15. This Court in C.I.T. v. SESHASAYEE PAPER AND BOARDS LTD. (242 ITR 490) (in which one of us was a party), held that the powers ofthe Commissioner are very wide in exercising the revisional jurisdiction undersection 263 of the Act. This Court has held as under:-" The Commissioner is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing theassessment or he may modify the assessment. He is also empowered to cancelthe assessment and direct a fresh assessment. The Commissioner is fullyempowered to adopt any one of the three courses indicated by the provisions ofsection 263 of the Act and the Commissioner's power cannot be faulted becausehe cancelled the assessment and directed a fresh assessment. There is nothingin section 263 of the Act to show that the Commissioner of Income-tax shouldin all cases record his final conclusion on the points in controversy beforehim. It would all depend upon the facts of each case to decide whether theCommissioner had exercised the powers properly or not." 16. The same view was also taken by this Court in C.I.T. v. SOUTH INDIA SHIPPING CORPN. LTD. (233 ITR 546) and this Court held that itis enough for the Commissioner to come to the prima facie conclusion that theorder of the Income-tax Officer is prejudicial to the interests of the Revenueand it is not necessary for him to come to a final conclusion of the matter.17. Learned counsel for the assessee relied on the decision of the Bombay High Court in C.I.T. v. GABRIEL INDIA LTD. (203 ITR 108).The decision of the Bombay High Court, relied upon by the learned counsel forthe assessee, was considered by this Court in C.I.T. v. SESHASAYEE PAPER ANDBOARDS LTD. (242 ITR 490) and it was found that the case was distinguishable.Here also, the Commissioner found that the assessing officer has not conductedany enquiry before allowing the deduction which is not warranted under theprovisions of the Act. As far as the decision of this Court in C.I.T. v.SAKTHI CHARITIES (244 ITR 226) is concerned, that has no application as inthat case the Income-tax Officer followed a decision of the Supreme Court andheld that the assessee was entitled to exemption and in such circumstance,this Court held that the revisional order passed by the Commissioner was notjustified. 18. Learned counsel for the assessee placed strong reliance on the decision of this Court in C.I.T. v. SMT. D.VALLIAMMAL (230 ITR 695).It was a case of undisclosed income and the Income-tax Officer completed theassessment on the basis of accounts, but the Commissioner set aside the orderpassed by the Income-tax Officer on the ground that the verification ofaccounts was needed. That case turned out on the facts of its own case andnot a case of statutory deduction without verification. 19. The decision of this Court in C.I.T. v. AMALGAMATIONS LTD. (238 ITR 963) is also not applicable. In that case, there was nomaterial before the Commissioner to show that the rent paid was too low andthe annual rent determined by the assessing officer was erroneous. This Courtheld that in the absence of any material on record, the exercise of revisionalpower by the Commissioner was not warranted. 19. The decision of this Court in C.I.T. v. AMALGAMATIONS LTD. (238 ITR 963) is also not applicable. In that case, there was nomaterial before the Commissioner to show that the rent paid was too low andthe annual rent determined by the assessing officer was erroneous. This Courtheld that in the absence of any material on record, the exercise of revisionalpower by the Commissioner was not warranted. 20. Learned counsel for the assessee placed strong relianceon the decision of the Madhya Pradesh High Court in NARIR SINGH v. C.I.T. (252 ITR 820), particularly the following observations:-" Section 147 indicates that the case pertaining to the periodranging between seven and ten years can be reopened. But there is a limit toit. It is not to be applied in the cases which appear to be ' flies' beforehuge evasion of tax and concealment of taxable income by usingclever/deceptive tricks. In this context, the observations of the SupremeCourt in the matter of Parashuram Pottery Works Co. Ltd. v. ITO (1977) 106ITR 1, has to be kept in view. In that judgment, after discussing the otherpoints which were involved, the Supreme Court pointed out its view in thefollowing paragraph (page 10): " It has been said that the taxes are the price that we payfor civilization. If so, it is essential that those who are entrusted withthe task of calculating and realising that price should familiarise themselveswith the relevant provisions and become well-versed with the law on thesubject. Any remissness on their part can only be at the cost of the nationalexchequer and must necessarily result in loss of revenue. At the same time,we have to bear in mind that the policy of law is that there must be a pointof finality in all legal proceedings, that stale issues should not bereactivated beyond a particular stage and the lapse of time must induce reposein and set at rest judicial and quasi-judicial controversies as it must inother spheres of human activity. So far as the income-tax assessment ordersare concerned, they cannot be reopened on the score of income escapingassessment under section 147 of the Act of 1961 after the expiry of four yearsfrom the end of the assessment year unless there be omission or failure on thepart of the assessee to disclose fully and truly all material facts necessaryfor the assessment. As already mentioned, this cannot be said in the presentcase.' These observations are to be applied in true spirit by theparties which are well conversant with the law and remain in existence fortheir work of assessment of tax and fixing the liability of paying the tax.This scale is not to be applied to simple 'flies' and innocent taxpayers whomay come under the purview of either being penalised or being pulled up forthe errors of filing the returns mentioning the self-assessment in respect ofthe liability of paying the tax. There should be an honest error ofcalculating the liability of payment of tax. There may be an error ofcalculation or clerical error in quoting the income in the returns. Suchcases need not be opened unless there are compelling grounds to do so. Leaveaside the existing need to reopen such case. In the present case, Shri NazirSingh quoted his income earned as income from dearness allowance and ad hocdearness allowance. However, he claimed the deduction and exemption from theliability of paying the tax. There was no case of concealment of the incomeor evasion of tax. In Parashuram Pottery Works Co. Ltd. v. ITO (1977) 106ITR 1(SC), the case was not permitted to be reopened after the lapse of timeof four years." We are of the view that the observations have no application to the facts ofthe case after the decision of the Supreme Court in Malabar Industries Co.Ltd. case (243 ITR 83). 21. We therefore hold that the Appellate Tribunal was correct We are of the view that the observations have no application to the facts ofthe case after the decision of the Supreme Court in Malabar Industries Co.Ltd. case (243 ITR 83). 21. We therefore hold that the Appellate Tribunal was correct in holding that the Commissioner has exercised his jurisdiction on proper andvalid grounds and he has exercised his jurisdiction properly when he foundthat the assessing officer had granted deduction under sections 80 HH and 80HHC of the Act without verifying the same. We do not find any infirmity inthe order of the Appellate Tribunal and accordingly, we answer the question oflaw referred to us in the affirmative, against the assessee and in favour ofthe Revenue. No costs. Index: YesWebsite: Yesna. To 1. The Assistant Registrar,Income-tax Appellate Tribunal,Rajaji Bhavan, Besant Nagar,Chennai 600 090 (five copies with records) 2. The Secretary,Central Board of Direct Taxes, New Delhi (3 copies)3. The Commissioner of Income-tax, Tamil Nadu V,Madras. 4. The Commissioner of Income-tax (Appeals),Coimbatore Range, Coimbatore. 5. The Income-tax Officer,Ward I(5), Vellore. �