Daulat Ram Dharam Bir Auto (P.) Vs. Inspecting Assistant - Court Judgment

Excerpt:
1. this appeal by the assessee is directed against the order of the commissioner of income-tax, delhi made under section 16 of the companies (profits) surtax act, 1964 for the assessment year 1983-84 on 27-3-1987. the contention of the assessee is that issuance of the notice under section 16 of the companies (profits) surtax act, 1964 and the subsequent completion of the proceedings terminating in the passing of the impugned order under section 16 of the act is without jurisdiction, because the id. commissioner was legally wrong in holding that the order passed by the iac (assessment), new delhi under section 6(2) of the companies (profits) surtax act, 1964 was erroneous as well as prejudicial to the interest of the revenue. on this issue, we have heard the parties and carefully considered their rival submissions.however, before we come to deal with the rival submissions, we record the factual backdrop of the case on the basis of which the commissioner made the impugned order.2. the assessee is a private limited company. for the year under appeal and for some of the earlier assessment years, the assessee had been taxed under the companies (profits) surtax act, 1964. for the assessment year 1983-84 as the previous year of the assessee ended on 30th june, 1982, return under this act was filed on 28-10-1983 declaring chargeable profits of rs. 6,23,358. the surtax officer, who, in this case, was iac (assessment) range-ill, new delhi issued statutory notices to the assessee and after discussion proceeded to determine net chargeable profits. the surtax officer has recorded in the impugned order made under section 6(2) on 2-2-1985 that the finally assessed income after giving appeal effect to the appellate orders for the asst. year 1983-84 for purpose of income-tax came to rs. 36,05,010.thereafter, he computed the chargeable profits. taking into consideration, the total income of rs. 36,05,010 the surtax officer deducted income-tax payable thereon to arrive at the net income of rs. 13,87,929. from this amount, he reduced the statutory deduction, which he had arrived at rs. 7,05,205. the balance was rs. 6,82,724 (rs. 13,87,929-rs. 7,05,205). now, this statutory deduction at rs. 7,05,205 was arrived at by surtax officer at 15 per cent of the capital employed. the capital employed computation was arrived at by taking the paid up capital at rs. 5 lakhs and reserves at rs. 42,01,368. the total of the two figures came to rs. 47,01,368 and 15 per cent thereof, as statutory deduction, came to rs. 7,05,205. the surtax officer worked out surtax payable by the assessee at rs. 2,37,827. the assessee had paid surtax by way of advance tax amounting to rs. 2,52,458. thus, the balance refundable to the assessee was determined by the surtax officer at rs. 14,629 by his order dated 2-2-1985 made under section 16(2) as described supra.3. section 16 of the companies (profits) surtax act, 1964 invests the commissioner of income-tax with the powers of revision of orders prejudicial to revenue. it provides that the commissioner may call for and examine the record of any proceeding under this act and if lie considers, that any order passed therein by the income-tax officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry, as he deems necessary, pass such order thereon as the circumstances of the case justify., including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. the provisions contained in this section are in pari materia with the provisions of section 263 of the income-tax act, 1961. in view of these powers vested in the commissioner, he called for the record, in the case of the assessee and on perusal thereof, found thafthe order made by the surtax officer, in this case, being the iac(a), being erroneous as well as prejudicial to the interest of revenue issued notice under section 16(1) on 17-3-1987. the notice was issued for the following reasoning as recorded in the impugned order : surtax assessment for the assessment year 1983-84 was made by the inspecting asstt. commissioner of income-tax (asst.), range-ill new delhi on 2-2-1985. the net chargeable profits for levy of surtax were worked out at us. 10,28,623 (rs. 13,87,929-3,59,306). it is noticed that while computing the net chargeable profits, the iac erroneously worked out statutory deduction by including in the capital employed, the balance lying in the profit and loss account amounting to rs. 23,05,998. the wrong computation of statutory deduction has resulted in undercharge of surtax by rs. 1,55,653. the correct statutory deduction allowable is worked out as under :share capital : rs. 5,00,000development rebate reserve : rs. 1,12,206investment allowance reserve rs. 12,83,164general reserve : rs. 5,00,000 total : rs. 23,95,370above. rs. 3,39,306 instead of rs. 7,05,205 wrongly from the above facts, it is clear that the order passed by the iac (asst.) is erroneous and prejudicial to the interest of revenue.4. the assessee responded to this notice with a reply that a sum of rs. 23,05,998 which was appearing on the first date of the accounting year under the caption, "profit & loss appropriation account" was in fact and in substance part and parcel of the reserves and surpluses. it had, therefore, rightly been considered as reserve for the purpose of working out the capital to determine statutory deduction admissible to the assessee by the surtax officer. for this proposition, reliance was placed on the judgment of the calcutta high court in the case of dunlop india ltd. v. cit [1983] 141itr 542. reliance was also placed upon the judgment of the supreme court in the case of vasir sultan tobacco co.ltd. v. cit [1981] 132 itr 559.5. the 1d. commissioner, however, did not accept the contentions putforth on behalf of the assessee. he referred to the second schedule to the companies (profits) surtax act, 1964 and the rules thereunder made for computing the capital of a company for the purpose of surtax.in the impugned order, he reproduced rule 1 of this schedule and relevant explanation for ready reference. after such reproduction, he observed that the position regarding capital computation is to be seen on the first day of the previous year relevant to the assessment year under consideration. the commissioner observed that a perusal of the annual accounts for the accounting year 1981-82, ending on 30th june, 1982 as shown that on the first day of the previous year or for that matter on the last day of the last accounting period, there was a credit balance of rs. 23,05,998 under the head "profit & loss appropriation account". he pointed out that the profit & loss appropriation account worked out for the year under consideration showed a total credit from five accounts amounting to rs. 51,23,447, which included the amount of rs. 23,05,998 as balance profit brought over from last year. we may clarify at this stage that the 1d.commissioner has inadvertantly recorded the figure of total credit from five accounts amounting to rs. 61,23,447. in the court, it was clarified by both the sides, that the figure, in fact, should be as recorded by us above at rs. 51,23,447. the 1d. commissioner noticed that after providing for taxation, dividend and transferring a sum of rs. 1 lakh to general reserve account, the balance of rs. 32,70,678 was carried over to balance sheet. this obviously, according to him, included profit of the previous year and the current year after adjustments for the amounts mentioned by him. thereafter, he pointed out that in the report of the directors for the current year, it had been clearly, stated that this sum of rs. 32,70,678 is proposed to be carried forward to the next year in balance sheet under the head profit & loss appropriation account. this reference to the directors' report was to the report dated 3rd december, 1982.6. having so noted, the relevant material in his impugned order, the 1d. commissioner observed that the above facts clearly show that the amount though shown under the head "reserves & surpluses" had continued to be unappropriated balance of profit & loss appropriation account and there was no resolution either by the board of directors of the company or any other confirmation by the body of the shareholders that this amount should be treated as general reserve in the balance-sheet. to such facts of the case, according to the 1d. commissioner, the judgment of the madras high court in the case of cit v. vasantha mills ltd. [1957] 32 itr 237 was applicable. according to him, legal position, in this regard, had been settled by a judgment of the supreme court in the case of cit v. mysore electrical industries ltd. [1971] 80 itr 566. he also pointed out to a number of judgments of the high courts in which the above judgment of the hon'ble supreme court was followed. the learned commissioner, thereafter, observed that in view of the predominant view as mentioned by him in the notice to the assessee-company, he was not in a position to accept the view projected to him on the basis of the judgment of the calcutta high court in the case of dunlop india ltd. {supra) and the supreme court judgment in the case of vasir sultan tobacco co. ltd. (supra). according to him, the point at issue before the supreme court in the case of vasir sultan tobacco co. ltd. (supra) was not exactly the same, as it was before him. finally, he held that the iac(a) being the surtax officer, in this case, erred for giving statutory deduction after including the abovementioned sum of rs. 23,05,998 and the decision of the sto on this issue required to be modified. he directed the surtax officer to recompute the amount of statutory deduction on the capital computed after excluding the above mentioned amount of rs. 23,05,998. directions were also issued to him that demand notice and challan for the revised demand found to be due from the assessee consequent upon the rectification made as a result of this order of his, should be issued.7. the 1d. counsel for the assessee submitted that the 1d. commissioner has not appreciated the relevant provisions of law and has erroneously interferred with the assessment made by way of invoking the powers under section 16 of the surtax act because the order made by the surtax officer was neither erroneous nor prejudicial to the interests of revenue as that order had been made in a bona fide manner by the sartax officer considering all the relevant material and the relevant provisions of law including the various judgments of the courts. the order of the commissioner therefore, is nothing but a superimposition of the view that the commissioner considers to be better view than that of the surtax officer because he says so in his impugned order when he observes that, "i respectfully disagree with the view taken by the calcutta high court in the case of dunlop india ltd." he submitted that the order of the surtax officer could not be considered as erroneous and prejudicial to the interests of revenue if he had applied his mind to the facts of the case and duly considered the relevant provisions of law. as to whether there could be a different view on the same facts under the same law, could not lead to an error embedded in the said order so as to make it erroneous and prejudicial to the interests of revenue.8. he specifically brought to our notice the judgment of the hon'ble calcutta high court, which, according to him, applied squarely to the facts of the case of the assessee and the commissioner had, in fact, accepted that it applied but opted not to follow it. his order, therefore, cannot be said to be an order in accordance with law. 1b may be set aside and in its place that of the surtax officer restored. on the other hand, the revenue relied upon the order made by the 1d.commissioner and wholly supported it with reference to the authorities cited therein. it was submitted that the order of the sto as pointed out by the 1d. commissioner was erroneous as well as prejudicial to the interests of revenue and, therefore, the commissioner rightly assumed jurisdiction under section 16 of the act.9. we have carefully considered the submissions of the rival parties, the facts of the case and the relevant provisions of law. we find that the surtax assessment for the year under appeal was made by the iac (asst.) range-ill, new delhi on 2-2-1985. we have to proceed on the assumption that while deciding the various issues for the purpose of assessment, the 1d. assessing officer was aware of not only the statutory provisions of law but of the judge-made law that was available to him on a particular issue. when looked upon from this position, we find that the assessing officer had before him the judgment of the hon'ble supreme court decided on 25th september, 1981 in the case of vasir sultan tobacco co. ltd. (supra). in this judgment, the supreme court had referred to the earlier judgment of the supreme court in the case of mysore electrical industries ltd. (supra) and duly considered the facts of that case and the ratio of that judgment while laying down the law in their judgment in the case of vazir sultan tobacco co. ltd. (supra). the calcutta high court in the case of dunlop india ltd. (supra) decided on 10th and 16th november, 1981 and applied vasir sultan tobacco co. ltd.'s case (supra). now, it is pertinent to note that these judgments were available to the s rtax officer to consider whether a particular amount shown in the profit and loss appropriation account and balance sheet of the assessee for the year under appeal, when considered in juxtaposition with the treatment given to such account in the earlier such final accounts by the assessee could be treated as reserve or not for the purpose of working out the capital employed on the basis of which statutory deduction was to be allowed to the assessee. the impugned order of the commissioner does not show that the sto made any factual mistake or that "in any manner, the order made by the surtax officer was not made in a bona fide manner i.e. with due care, caution and diligence. on such facts, it is clear that the view taken by the surtax officer was bona fide in accordance with law when he came to the conclusion that the sura of rs. 23,05,998 was includible as a reserve to determine the capital employed. that view cannot be said to be bringing any mistake into the order so as to make it erroneous as well as prejudicial to the interests of revenue.10. it appears that even the commissioner, when, he made the impugned order was aware of this anomalous situation in which he was placed because he thought it fit to observe in his order that the view that he was adopting was a better view. however, we find that even that claim of the commissioner also could not be said to be something which could make the order of the sto as erroneous as well as prejudicial to the interests of revenue. the commissioner apparently did dot consider the subsequent judgment of the supreme court in the case of vazir sultan tobacco co. ltd. (supra) but preferred to rely upon an earlier judgment in the case of mysore electrical industries ltd. (supra) not appreciating that the earlier judgment of the supreme court had been considered in the subsequent judgment in the case of vazir sultan tobacco co. ltd. (supra). therefore, even taking into consideration the relevant provisions of law, it cannot be said that there was a mistake, a legal mistake, in the order of the surtax officer making it erreneous as well as prejudicial to the interests of revenue.11. now, we find that the said amount of rs. 23,05,998 was appearing in the profit & loss appropriation account for the year ending 1981. first of july, 1981 is the first day of the accounting period relevant to the assessment year 1983-84 because the previous year for this assessment year ended on 1982. in the balance sheet of the company for the year ending on 30th june, 1981 from the profit & loss appropriation account, the sum of rs. 23,05,998 was taken to schedule ii under the caption "reserves and surplus" and was shown under the caption "profit & loss appropriation account." this amount, therefore, as such was available, despite the nomenclature of the account under which it was shown, as reserve to the company. we also find that in the profit & loss account for the year ending 30th june, 1982, the assessee had. net profit carried down to profit & loss appropriation account. in that account, the last year's balance of rs. 23,05,998 was incorporated. the excess provision for taxation was also brought into this account of rs. 2,22,189 along with other minor accounts. against the total of rs. 61,23,477 there was a provision for taxation of rs. 26,52,799. an amount of rs. 1 lakh was transferred to general reserve. the balance carried over to balance sheet was rs. 32,70,678. this was shown in second schedule under the caption "reserve and surplus" for the period ending on 30th june, 1982.12. we have brought into this judgment the facts and figures relating to this account because an argument was raised on behalf of the assessee and it was not controverted by the revenue that the amount standing as surplus in the profit and loss appropriation account had earlier been treated as reserve by the surtax officer and, there was no action taken for these years. we may observe that the amount in question was not reflected against any contingency and liability and as such, it was available to the company for being employed as capital in the industrial undertaking. that being so, it had taken into consideration, while computing the capital employed on the basis of which statutory deduction was to be worked out. the order made by the sto was, thus, absolutely in accordance with law and it could neither be held as erroneous nor prejudicial to the interests of revenue. we, therefore, cancel the order of the commissioner and restore in its place that of the surtax officer. appeal allowed.

Judgment:
1. This appeal by the assessee is directed against the order of the Commissioner of Income-tax, Delhi made under Section 16 of the Companies (Profits) Surtax Act, 1964 for the assessment year 1983-84 on 27-3-1987. The contention of the assessee is that issuance of the notice under Section 16 of the Companies (Profits) Surtax Act, 1964 and the subsequent completion of the proceedings terminating in the passing of the impugned order under Section 16 of the Act is without jurisdiction, because the Id. Commissioner was legally wrong in holding that the order passed by the IAC (Assessment), New Delhi under Section 6(2) of the Companies (Profits) Surtax Act, 1964 was erroneous as well as prejudicial to the interest of the revenue. On this issue, we have heard the parties and carefully considered their rival submissions.

However, before we come to deal with the rival submissions, we record the factual backdrop of the case on the basis of which the Commissioner made the impugned order.

2. The assessee is a private limited company. For the year under appeal and for some of the earlier assessment years, the assessee had been taxed under the Companies (Profits) Surtax Act, 1964. For the assessment year 1983-84 as the previous year of the assessee ended on 30th June, 1982, return under this Act was filed on 28-10-1983 declaring chargeable profits of Rs. 6,23,358. The Surtax Officer, who, in this case, was IAC (Assessment) Range-Ill, New Delhi issued statutory notices to the assessee and after discussion proceeded to determine net chargeable profits. The Surtax Officer has recorded in the impugned order made under Section 6(2) on 2-2-1985 that the finally assessed income after giving appeal effect to the appellate orders for the asst. year 1983-84 for purpose of income-tax came to Rs. 36,05,010.

Thereafter, he computed the chargeable profits. Taking into consideration, the total income of Rs. 36,05,010 the Surtax Officer deducted income-tax payable thereon to arrive at the net income of Rs. 13,87,929. From this amount, he reduced the statutory deduction, which he had arrived at Rs. 7,05,205. The balance was Rs. 6,82,724 (Rs. 13,87,929-Rs. 7,05,205). Now, this statutory deduction at Rs. 7,05,205 was arrived at by Surtax Officer at 15 per cent of the capital employed. The capital employed computation was arrived at by taking the paid up capital at Rs. 5 lakhs and reserves at Rs. 42,01,368. The total of the two figures came to Rs. 47,01,368 and 15 per cent thereof, as statutory deduction, came to Rs. 7,05,205. The Surtax Officer worked out surtax payable by the assessee at Rs. 2,37,827. The assessee had paid surtax by way of advance tax amounting to Rs. 2,52,458. Thus, the balance refundable to the assessee was determined by the Surtax Officer at Rs. 14,629 by his order dated 2-2-1985 made under Section 16(2) as described supra.

3. Section 16 of the Companies (Profits) Surtax Act, 1964 invests the Commissioner of Income-tax with the powers of revision of orders prejudicial to revenue. It provides that the Commissioner may call for and examine the record of any proceeding under this Act and if lie considers, that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry, as he deems necessary, pass such order thereon as the circumstances of the case justify., including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The provisions contained in this section are in pari materia with the provisions of Section 263 of the Income-tax Act, 1961. In view of these powers vested in the Commissioner, he called for the record, in the case of the assessee and on perusal thereof, found thafthe order made by the Surtax Officer, in this case, being the IAC(A), being erroneous as well as prejudicial to the interest of revenue issued notice under Section 16(1) on 17-3-1987. The notice was issued for the following reasoning as recorded in the impugned order : Surtax assessment for the assessment year 1983-84 was made by the Inspecting Asstt. Commissioner of Income-tax (Asst.), Range-Ill New Delhi on 2-2-1985. The net chargeable profits for levy of Surtax were worked out at Us. 10,28,623 (Rs. 13,87,929-3,59,306). It is noticed that while computing the net chargeable profits, the IAC erroneously worked out statutory deduction by including in the capital employed, the balance lying in the profit and loss account amounting to Rs. 23,05,998. The wrong computation of statutory deduction has resulted in undercharge of Surtax by Rs. 1,55,653. The correct statutory deduction allowable is worked out as under :Share capital : Rs. 5,00,000Development Rebate Reserve : Rs. 1,12,206Investment Allowance Reserve Rs. 12,83,164General Reserve : Rs. 5,00,000 Total : Rs. 23,95,370above.

Rs. 3,39,306 instead of Rs. 7,05,205 wrongly From the above facts, it is clear that the order passed by the IAC (Asst.) is erroneous and prejudicial to the interest of revenue.

4. The assessee responded to this notice with a reply that a sum of Rs. 23,05,998 which was appearing on the first date of the accounting year under the caption, "Profit & Loss Appropriation Account" was in fact and in substance part and parcel of the reserves and surpluses. It had, therefore, rightly been considered as reserve for the purpose of working out the capital to determine statutory deduction admissible to the assessee by the Surtax Officer. For this proposition, reliance was placed on the judgment of the Calcutta High Court in the case of Dunlop India Ltd. v. CIT [1983] 141ITR 542. Reliance was also placed upon the judgment of the Supreme Court in the case of Vasir Sultan Tobacco Co.

Ltd. v. CIT [1981] 132 ITR 559.

5. The 1d. Commissioner, however, did not accept the contentions putforth on behalf of the assessee. He referred to the Second Schedule to the Companies (Profits) Surtax Act, 1964 and the rules thereunder made for computing the capital of a company for the purpose of surtax.

In the impugned order, he reproduced Rule 1 of this Schedule and relevant explanation for ready reference. After such reproduction, he observed that the position regarding capital computation is to be seen on the first day of the previous year relevant to the assessment year under consideration. The Commissioner observed that a perusal of the annual accounts for the accounting year 1981-82, ending on 30th June, 1982 as shown that on the first day of the previous year or for that matter on the last day of the last accounting period, there was a credit balance of Rs. 23,05,998 under the head "Profit & Loss Appropriation Account". He pointed out that the Profit & Loss Appropriation Account worked out for the year under consideration showed a total credit from five accounts amounting to Rs. 51,23,447, which included the amount of Rs. 23,05,998 as balance profit brought over from last year. We may clarify at this stage that the 1d.

Commissioner has inadvertantly recorded the figure of total credit from five accounts amounting to Rs. 61,23,447. In the Court, it was clarified by both the sides, that the figure, in fact, should be as recorded by us above at Rs. 51,23,447. The 1d. Commissioner noticed that after providing for taxation, dividend and transferring a sum of Rs. 1 lakh to general reserve account, the balance of Rs. 32,70,678 was carried over to balance sheet. This obviously, according to him, included profit of the previous year and the current year after adjustments for the amounts mentioned by him. Thereafter, he pointed out that in the Report of the Directors for the current year, it had been clearly, stated that this sum of Rs. 32,70,678 is proposed to be carried forward to the next year in balance sheet under the head Profit & Loss Appropriation Account. This reference to the Directors' Report was to the Report Dated 3rd December, 1982.

6. Having so noted, the relevant material in his impugned order, the 1d. Commissioner observed that the above facts clearly show that the amount though shown under the head "Reserves & Surpluses" had continued to be unappropriated balance of Profit & Loss Appropriation Account and there was no resolution either by the Board of Directors of the Company or any other confirmation by the body of the shareholders that this amount should be treated as general reserve in the balance-sheet. To such facts of the case, according to the 1d. Commissioner, the judgment of the Madras High Court in the case of CIT v. Vasantha Mills Ltd. [1957] 32 ITR 237 was applicable. According to him, legal position, in this regard, had been settled by a judgment of the Supreme Court in the case of CIT v. Mysore Electrical Industries Ltd. [1971] 80 ITR 566. He also pointed out to a number of judgments of the High Courts in which the above judgment of the Hon'ble Supreme Court was followed. The learned Commissioner, thereafter, observed that in view of the predominant view as mentioned by him in the notice to the assessee-company, he was not in a position to accept the view projected to him on the basis of the judgment of the Calcutta High Court in the case of Dunlop India Ltd. {supra) and the Supreme Court judgment in the case of Vasir Sultan Tobacco Co. Ltd. (supra). According to him, the point at issue before the Supreme Court in the case of Vasir Sultan Tobacco Co. Ltd. (supra) was not exactly the same, as it was before him. Finally, he held that the IAC(A) being the Surtax Officer, in this case, erred for giving statutory deduction after including the abovementioned sum of Rs. 23,05,998 and the decision of the STO on this issue required to be modified. He directed the Surtax Officer to recompute the amount of statutory deduction on the capital computed after excluding the above mentioned amount of Rs. 23,05,998. Directions were also issued to him that demand notice and challan for the revised demand found to be due from the assessee consequent upon the rectification made as a result of this order of his, should be issued.

7. The 1d. counsel for the assessee submitted that the 1d. Commissioner has not appreciated the relevant provisions of law and has erroneously interferred with the assessment made by way of invoking the powers under Section 16 of the Surtax Act because the order made by the Surtax Officer was neither erroneous nor prejudicial to the interests of revenue as that order had been made in a bona fide manner by the Sartax Officer considering all the relevant material and the relevant provisions of law including the various judgments of the Courts. The order of the Commissioner therefore, is nothing but a superimposition of the view that the Commissioner considers to be better view than that of the Surtax Officer because he says so in his impugned order when he observes that, "I respectfully disagree with the view taken by the Calcutta High Court in the case of Dunlop India Ltd." He submitted that the order of the Surtax Officer could not be considered as erroneous and prejudicial to the interests of revenue if he had applied his mind to the facts of the case and duly considered the relevant provisions of law. As to whether there could be a different view on the same facts under the same law, could not lead to an error embedded in the said order so as to make it erroneous and prejudicial to the interests of revenue.

8. He specifically brought to our notice the judgment of the Hon'ble Calcutta High Court, which, according to him, applied squarely to the facts of the case of the assessee and the Commissioner had, in fact, accepted that it applied but opted not to follow it. His order, therefore, cannot be said to be an order in accordance with law. 1b may be set aside and in its place that of the Surtax Officer restored. On the other hand, the revenue relied upon the order made by the 1d.

Commissioner and wholly supported it with reference to the authorities cited therein. It was submitted that the order of the STO as pointed out by the 1d. Commissioner was erroneous as well as prejudicial to the interests of revenue and, therefore, the Commissioner rightly assumed jurisdiction under Section 16 of the Act.

9. We have carefully considered the submissions of the rival parties, the facts of the case and the relevant provisions of law. We find that the surtax assessment for the year under appeal was made by the IAC (Asst.) Range-Ill, New Delhi on 2-2-1985. We have to proceed on the assumption that while deciding the various issues for the purpose of assessment, the 1d. Assessing Officer was aware of not only the statutory provisions of law but of the judge-made law that was available to him on a particular issue. When looked upon from this position, we find that the Assessing Officer had before him the judgment of the Hon'ble Supreme Court decided on 25th September, 1981 in the case of Vasir Sultan Tobacco Co. Ltd. (supra). In this judgment, the Supreme Court had referred to the earlier judgment of the Supreme Court in the case of Mysore Electrical Industries Ltd. (supra) and duly considered the facts of that case and the ratio of that judgment while laying down the law in their judgment in the case of Vazir Sultan Tobacco Co. Ltd. (supra). The Calcutta High Court in the case of Dunlop India Ltd. (supra) decided on 10th and 16th November, 1981 and applied Vasir Sultan Tobacco Co. Ltd.'s case (supra). Now, it is pertinent to note that these judgments were available to the S rtax Officer to consider whether a particular amount shown in the profit and loss appropriation account and balance sheet of the assessee for the year under appeal, when considered in juxtaposition with the treatment given to such account in the earlier such final accounts by the assessee could be treated as reserve or not for the purpose of working out the capital employed on the basis of which statutory deduction was to be allowed to the assessee. The impugned order of the Commissioner does not show that the STO made any factual mistake or that "in any manner, the order made by the Surtax Officer was not made in a bona fide manner i.e. with due care, caution and diligence. On such facts, it is clear that the view taken by the Surtax Officer was bona fide in accordance with law when he came to the conclusion that the sura of Rs. 23,05,998 was includible as a reserve to determine the capital employed. That view cannot be said to be bringing any mistake into the order so as to make it erroneous as well as prejudicial to the interests of revenue.

10. It appears that even the Commissioner, when, he made the impugned order was aware of this anomalous situation in which he was placed because he thought it fit to observe in his order that the view that he was adopting was a better view. However, we find that even that claim of the Commissioner also could not be said to be something which could make the order of the STO as erroneous as well as prejudicial to the interests of revenue. The Commissioner apparently did dot consider the subsequent judgment of the Supreme Court in the case of Vazir Sultan Tobacco Co. Ltd. (supra) but preferred to rely upon an earlier judgment in the case of Mysore Electrical Industries Ltd. (supra) not appreciating that the earlier judgment of the Supreme Court had been considered in the subsequent judgment in the case of Vazir Sultan Tobacco Co. Ltd. (supra). Therefore, even taking into consideration the relevant provisions of law, it cannot be said that there was a mistake, a legal mistake, in the order of the Surtax Officer making it erreneous as well as prejudicial to the interests of revenue.

11. Now, we find that the said amount of Rs. 23,05,998 was appearing in the Profit & Loss Appropriation Account for the year ending 1981. First of July, 1981 is the first day of the accounting period relevant to the assessment year 1983-84 because the previous year for this assessment year ended on 1982. In the balance sheet of the company for the year ending on 30th June, 1981 from the Profit & Loss Appropriation Account, the sum of Rs. 23,05,998 was taken to Schedule II under the caption "Reserves and Surplus" and was shown under the caption "Profit & Loss Appropriation Account." This amount, therefore, as such was available, despite the nomenclature of the account under which it was shown, as reserve to the company. We also find that in the Profit & Loss account for the year ending 30th June, 1982, the assessee had. net profit carried down to Profit & Loss Appropriation Account. In that account, the last year's balance of Rs. 23,05,998 was incorporated. The excess provision for taxation was also brought into this account of Rs. 2,22,189 along with other minor accounts. Against the total of Rs. 61,23,477 there was a provision for taxation of Rs. 26,52,799. An amount of Rs. 1 lakh was transferred to general reserve. The balance carried over to balance sheet was Rs. 32,70,678. This was shown in Second Schedule under the caption "Reserve and Surplus" for the period ending on 30th June, 1982.

12. We have brought into this judgment the facts and figures relating to this account because an argument was raised on behalf of the assessee and it was not controverted by the revenue that the amount standing as surplus in the profit and loss appropriation account had earlier been treated as reserve by the Surtax Officer and, there was no action taken for these years. We may observe that the amount in question was not reflected against any contingency and liability and as such, it was available to the company for being employed as capital in the industrial undertaking. That being so, it had taken into consideration, while computing the capital employed on the basis of which statutory deduction was to be worked out. The order made by the STO was, thus, absolutely in accordance with law and it could neither be held as erroneous nor prejudicial to the interests of revenue. We, therefore, cancel the order of the Commissioner and restore in its place that of the Surtax Officer. Appeal allowed.