Income Tax Act (XI of 1922)---

----Ss.10(2-A) & 34---Additions under S.10(2-A) were made on remand-- Original assessment order was set aside on two points i.e. disallowance of administrative expenses and fixed capital expenditure---Income Tax Officer thus was restricted to the examination of the assessment on said two questions---Assessment order having been restricted to the said two points, income Tax Officer, while dealing with case on remand, could not make additions under S.10(2-A) without first following the procedure provided under S.34 of the Act---No notice required to be given under S.34 having been sent to the assessee, addition could not have been made under S.10 (2-A) by the Income Tax Officer after remand.

Rambilas Chandram v. Commissioner of Income-tax (1985) 156 ITR 344 distinguished.

Shaikh Haider for Applicant.

Dr. Nasim Ahmad Khan for Respondent.

Date of hearing: 12th November, 1991.

JUDGMENT

NASIR ASLAM ZAHID, J.---This judgment will govern the following five applications under section 136(2) of the Income-tax Ordinance, 1979, filed by the Commissioner of Income-tax, Central Zone `B', Karachi:-

(1) ITR No. 44/86 -- assessment year 1970-71;

(2) ITR No. 45/86 -- assessment year 1971-72;

(3) ITR No. 46/86 -- assessment year 1972-73;

(4) ITR No. 47/86 -- assessment year 1973-74 and

(5) ITR No. 48/86 -- assessment year 1974-75.

In all these applications, the respondent/assessee is National Cement Industries Ltd. We have heard Mr. Shaikh Haider, Advocate for the Department and Dr. Nasim Ahmad Khan, Advocate for the respondent/assessee.

2. The original assessment order passed by the concerned Income-tax Officer in the case of the respondent/assessee for the assessment year 1970-71 was challenged in direct appeal by the assessee before the Income-tax Appellate Tribunal. The Tribunal, by its order, dated 19-8-1975, set aside the assessment order on two points, namely, disallowance of administrative expenses and fixed capital expenditure but allowed the provision made for payment of interest. Appeals for the subsequent four assessment years from 1971-72 to 1974-75 against the assessment orders framed by the Income-tax Officer were filed by the assessee before the Appellate Assistant Commissioner. The Appellate Commissioner, following the Tribunal's order relating to the assessment year 1970-71, disposed of the said four appeals, passing similar orders and remanded the cases to the Income-tax Officer. While giving effect to the orders of the Appellate Authorities under sections 31 and 33 of the Repealed Income-tax Act, the Income-tax Officer made additions of the following amounts under section 10(2-A) of the Repealed Income-tax Act:-

(a) Rs.11,47,974 for the year 1970-71.

(b) Rs.11,26,893 for the year 1971-72.

(c) Rs.9,39,445 for the year 1972-73.

(d) Rs.8,87,349 for the year 1973-74.

(e) Rs.8,87,297 for the year 1974-75.

The assessee, being aggrieved, filed appeals before the Commissioner of Income-tax (Appeals), who allowed the appeals, while coming to the conclusion that the Income-tax Officer had no jurisdiction to make additions under section 10(2-A) while giving effect to the orders in appeals under section 33 or 31 of the Act but he upheld all the additions under section 10(2-A)(iii) of the Act. The Assessee, being aggrieved, filed second appeals before the Tribunal pleading that the Commissioner of Income-tax (Appeals) was not justified in supporting the order of the Income-tax Officer by applying section 10(2-A)(iii) of the Act when he himself held that the Assessing Officer had acted beyond his jurisdiction in making additions under section 19(2-A) while giving effect to the previous appellate orders. The Tribunal accepted the second appeals filed by the assessee. The department then moved applications under section 136 (1) of the Income-tax Ordinance, 1979 before the Tribunal praying that the following question be referred to the High Court for opinion:-

"Whether the learned Income-tax Tribunal was justified in deleting the additions made under section 10(2-A) during the course of appeal effect by the Income-tax Officer under section 33, holding that no addition can be made at the time of giving appeal effect?"

The Tribunal dismissed the applications of the department. In the circumstances, the department has approached this Court under section 136(2) of the Income-tax Ordinance, 1979, seeking answer to the aforesaid question.

3. Mr. Shaikh Haider, learned counsel for the department, has submitted that once the original assessment orders had been set aside and the matters remanded to the Income-tax Officer, he was free to pass fresh assessment orders and was not restricted in any way in being confined to the two points on which the matters were remanded. It was submitted that although in the original assessment orders no additions had been made under section 10(2-A) of the Act, once the matters had been remanded through appellate orders, the Income-tax Officer could frame assessment orders in which additions could be made under section 10(2-A) of the Act. In support of his contention, learned counsel relied upon a judgment of the Rajisthan High Court from the Indian jurisdiction in the case of Rambilas Chandram v. Commissioner of Income-tax (1985) 156 ITR p.344. In the said decision it was held that where in an appeal or assessment, the Appellate Commissioner sets aside the assessment and directs the ITO to make a fresh assessment, the ITO is bound by the directions of the Appellate Authority in making the fresh assessment but, subject to such directions, the ITO has the same powers in fresh assessment as he had originally in making the assessment.

4. On the other hand, Dr. Nasim Ahmad Khan, learned counsel for the assessee submitted that the Income-tax Officer on remand could not make additions under section 10(2-A) of the Act and in case it was considered necessary to make such additions, proceedings should have been initiated under section 34 of the Repealed Income-tax Act, 1922. Section 34 makes provision regarding income escaping assessment. Under this provision, if for any reason income, profits or gains chargeable to income-tax had escaped assessment in any year, the Income-tax Officer may serve on the person liable to pay such income profits or gains a notice and may proceed to assess or re assess such income profits or gains. According to the learned counsel, the procedure under section 34 was not followed as no notice was given for re assessment.

5. After going through the orders passed in this case and hearing the arguments of the learned counsel for the parties, we have reached the conclusion that the Tribunal decided the question correctly and in accordance with the applicable provisions of the repealed Income-tax Act, 1922. In these cases, it follows from a perusal of the orders of the Income-tax Officer and the Appellate Authorities that the orders remanding the cases to the Income-tax Officer were not without limitations or restrictions. According to the order, dated 31-1-1985 of the Tribunal, the original assessment orders had been set aside on two points only i.e. disallowance of administrative expenses and fixed capital expenditure. The Income-tax Officer was, in the circumstances of these cases, restricted to the examination of the assessment on these two questions. The learned counsel for the department was unable to show us that the assessment orders were without any limitations or restrictions. The Tribunal in its order rightly held as under:-

"After giving our earnest consideration to the facts, we uphold the finding of the learned Commissioner of Income-tax (Appeals) that the impugned assessments made by the Income-tax Officer tantamount to fresh assessments on the issue because the additions made under section 10(2A) were neither taken up in the original assessment made under section 23(3) nor it formed a part of the appellate order. The additions made by the Income-tax Officer under section 10(2-A) in all the years, not being in accordance with the law, have been correctly deleted by the learned Commissioner of Income tax (Appeals)."

In the circumstances, reliance on the decision of the Rajasthan High Court reported in (1985) 156 ITR 344, therefore, does not help the contention raised on behalf of the department.

6. Dr. Nasim Ahmed Khan, learned counsel for the assessee, is right in his submission that as the assessment orders had restricted the Income-tax Officer to the two points mentioned earlier, the Income-tax Officer, while dealing with the cases on remand, could not make additions under section 10(2-A) without first following the procedure provided under section 34 of the repealed Income-tax Act, 1922. Admittedly, no notice required to be given under section 34 was given to the assessee.In the present cases without following the procedure provided under section 34, additions could not have been made under section 10(2-A) of the Act.

7. Finding no merit in these cases, ITRs Nos.44, 45, 46, 47 and 48 of 1986 are dismissed.

There will be no order as to costs.

M.B.A./C-254/K Appeals dismissed.