(a) Income-tax---

----Appeal to AAC---Revision---Competency of appeal---Point decided by C.I.T. on revision---Appeal against order on revision barred by limitation-- Order passed by I.T.O. on direction by C.I.T.---Appeal not maintainable on point decided by C.I.T.---Indian Income Tax Act, 1961, Ss.246 & 263.

Though an appeal is maintainable from a fresh order passed by the Income-tax Officer to give effect to a revisional order or an appellate order, only such issues can be agitated in such appeal which have not attained finality by virtue of earlier orders of the revisional or appellate authorities. It is not open in such an appeal to agitate any point which has already been decided by the revisional or the appellate authorities in their order.

Reference to and reliance on the operative part of an order without regard to the text of the order and the findings recorded therein is improper. To understand the true purport of an order, it has to be read as a whole.

The original assessment of the assessee for 1972-73 was completed by the Income-tax Officer on November 30, 1974. In the said assessment, the Income-tax Officer while computing the capital employed for the purposes of working out relief under section 80-J of the Income Tax Act, 1961, took into consideration Rs.2,70,023, being the value of capital work- in-progress. He also did not reduce the written down value of the assets entitled to depreciation by the amount of extra shift allowance allowed in the past. The Commissioner of Income-tax called for the records of the said assessment and- on examination thereof, was satisfied that the order of assessment passed by the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. He, therefore, initiated proceedings under section 263 of the Income Tax Act, 1961, and after giving the assessee an opportunity of being heard by his revisional order, dated November 25, 1976, withdrew the relief granted to the assessee by the Income-tax Officer under section 80-J of the Act and directed the Income-tax Officer to redetermine the relief afresh in accordance with law after giving an opportunity to the assessee of being heard in the matter. The appeal filed by the assessee before the Tribunal against the revisional order of the Commissioner of Income-tax under section 263 of the Act was dismissed as barred by limitation. In pursuance of the direction of the Commissioner in the revisional order, the Income-tax Officer recalculated the relief under section 80-J of the Act after giving the assessee an opportunity to be heard. Against this order of the Income-tax Officer, the assessee appealed to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), however, held that the appeal was not maintainable. This was upheld by the Tribunal. On a reference:

Held, that the order of the Commissioner of Income-tax read as a whole made it abundantly clear that the Commissioner had arrived at categorical and definite findings in regard to the contentions of the assessee about inclusion of work-in-progress in the capital employed for the purpose of claiming relief under section 80-J of the Act and in regard to deductibility of extra shift allowance allowed in the past from the value of fixed assets for the very same purpose and had remitted the matter to the Income-tax Officer merely to perform the ministerial function of recalculating the amount of relief under section 80-J of the Act. The Tribunal was right in holding that the revisional order, wherein a definite finding was recorded on both the points at issue, having become final on account of the failure of the assessee to pursue the statutory remedies provided in the Act against that order, the assessee could not be allowed to challenge such concluded findings collaterally in an appeal filed against the fresh order passed by the Income- tax Officer with a view to giving effect to the same.

(b) Income-tax---

----General principles---Order must be read, as a whole

CIT v. Gabriel India Limited (1993) 203 ITR 108 (Bom.) and CIT v. R.K. Metal Works (1978) 112 ITR 445 (P&H) ref.

P.F. Kaka instructed by Crawford Bayley & Co. for the Assessee,

Dr. V. Balasubramaniam with J.P. Deodhar instructed by H.D. Rathod for the Commissioner.

JUDGMENT

DR. B. P. SARAF, J. ---By this reference under section 256(1) of the Income Tax Act, 1961, made at the instance of the assessee, the Income-tax Appellate Tribunal, Bombay Bench "C", Bombay, has referred the following questions of law to this Court for opinion:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in view of the order of the Commissioner under section 263 of the Income-tax Act, 1961, it was not open to the Income-tax Officer to consider afresh the issue of the claim of the assessee for inclusion of work-in-progress in the capital employed for the purpose of computing the relief under section 80-J?

(2)Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no appeal will lie against the order of the Income-tax Officer with regard to matters already decided by the Commissioner in exercise of his powers under section 263 of the Income-tax Act, 1961?"

The controversy pertains to the assessment year 1972-73, the relevant previous year being the year ended on December 31, 1971. The original assessment of the assessee was completed by the Income-tax Officer on November, 30, 1974. In the said assessment, the Income-tax Officer while computing the capital employed for the purposes of working out relief under section 80-J of the Act took into consideration Rs.2,70.023, being the value of capital work-in-progress, He also did not reduce the written down value of the assets entitled to depreciation by the amount of extra shift allowance allowed in the past. The Commissioner of Income-tax called for the records of the said assessment and on examination thereof, was satisfied that the order of assessment passed by the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. He, therefore, initiated proceedings under section 263 of the Income-tax Act, 1961 ("the Act"), and after giving the assessee an opportunity of being heard, by his revisional order, dated November 25, 1976, withdrew the relief granted to the assessee by the Income-tax Officer under section 80-J of the Act and directed the Income-tax Officer to redetermine the relief afresh in accordance with law after giving an opportunity to the assessees of being heard in the matter. The appeal filed by the assessees before the Tribunal against the above revisional order of the Commissioner of Income-tax under section 263 of the Act was dismissed as barred by limitation.

In pursuance of the direction of the Commissioner in the revisional order, the Income-tax Officer took up the case for redetermination of the amount of relief under section 80J. A notice was given to the assessees for that purpose. In pursuance thereof, the assessees appeared before the Income tax Officer and claimed that "work-in-progress" formed part of the capital employed for the purpose of relief under section 80-J. This contention of the assessee was rejected by the Income-tax Officer as this issue, according to him, stood concluded by the revisional order of the Commissioner under section 263 of the Act which had attained finality after dismissal of the appeal of the assessees against the same by the Tribunal. With regard to the value of the fixed assets, the Income-tax Officer took the written down value as on January 1, 1971, after giving effect to certain orders of the Income-tax Appellate Tribunal ("the Tribunal") in respect of the assessment for other years. He recalculated the relief under section 80-J accordingly. Against the above order of the Income-tax Officer, the assessees appealed to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), however, held that the appeal was not maintainable, as according to him, in view of the definite finding of the Commissioner of Income-tax in his revisional order under section 263 of the Act to the effect that the value of work-in-progress was not includible in the value of assets for the purpose of computation of capital employed and the same having attained finality consequent upon dismissal of the appeal of the assessees against the same by the Tribunal, it was obligatory on the part of the Income-tax Officer to give effect to the same and to recalculate the relief due under section 80-J of the Act in the light thereof. It was not open to the Income-tax Officer to decide the issue afresh. It was held that the Income-tax Officer was fully justified in doing so and no fault can be found in his action. The impugned order of the Income-tax Officer is in fact and reality an order giving effect to the revisional order of the Commissioner. No fresh determination of any issue has been done by him therein except recalculating the amount of relief under section 80-J of the Act in the light of the directions of the Commissioner. No fault can be found with such order of the Income-tax' Officer. The Commissioner of Income-tax (Appeals) held that no appeal was maintainable from such order of the Income-tax Officer. The Commissioner of Income-tax (Appeals) held that no appeal was maintainable from such order of the Income-tax Officer giving effect to the revisional order. of the Commissioner of Income-tax. The assessees went in further appeal to the Income-tax Appellate Tribunal ("the Tribunal") against the above order of the Commissioner of Income-tax (Appeals). The Tribunal heard the assessees and its counsel, and on careful consideration of the same, summed up the legal position in regard to the maintainability of appeal against such orders in the following words

"While an appeal will be maintainable from the fresh order passed by the Income-tax Officer, only matters which had not become final by the earlier orders of the appellate or revisional authorities can be agitated in the appeal. If in the earlier orders, the appellate or revisional authorities had recorded definite findings and if they had become final on account of the assessee not pursuing the statutory remedies prescribed against such orders, the assessee cannot attack these findings collaterally in an appeal filed against the fresh order passed by the Income-tax Officer. "

In the light of the above observation, the Tribunal considered the question whether in the instant case, the Commissioner of Income-tax had, in his order under section 263, recorded a definite finding on the question of inclusion of the value of work-in-progress in the capital employed for the purpose of computing relief under section 80-J or whether he had merely made some observations in regard to relief under section 80-J and remanded the matter to the Income-tax Officer without any finding on that question, leaving it open to him to decide the controversy fresh in the light of its observations. For that purpose, the Tribunal considered the revisional order of the Commissioner and on a careful perusal of the same, found that in the present case, the Commissioner had himself finally decided the issue and held that the value of work-in-progress cannot be included in the computation of capital employed for the purpose of calculating relief under section 80-J of the Act. The Tribunal further found that the Commissioner also decided himself the question whether written down value of assets entitled to depreciation should be reduced by the extra shift allowance allowed in the past and held in the affirmative. The Tribunal therefore, held that the Income-tax Officer could not have considered the above controversies while passing a fresh order of assessment to give effect to the revisional order and recomputing the amount of relief under section 80-J in accordance with the direction of the Commissioner contained therein. In that view of the matter, the Tribunal affirmed the view of the Commissioner (Appeals) and dismissed the appeal of the assessee and held that the appeal of the assessee before the Commissioner of Income-tax (Appeals) was not competent. Hence, this reference to this Court at the instance of the assessee.

We have heard Mr. P. F. Kaka, learned counsel for the assessee, at quite some length. He submits that in the instant case, the Commissioner in his revisional order under section 263 has given no finding of his own in regard to the claim of the assessees about the inclusion of the value of work-in-progress in the capital employed for the purpose of relief under section 80-J and in that view of the matter, it was open to the Income-tax Officer to examine this controversy which he failed to do. In such a situation, according to learned counsel, appeal is maintainable against the above order of the Income-tax Officer and the Commissioner (Appeals) was not justified in law in rejecting tire same. According to learned counsel, the Commissioner has opined that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue only for the purpose of assuming jurisdiction under section 263 of the Act and has not recorded any finding in regard to the question of includibility of the value of work-in -progress for computation of "capital employed" and the controversy regarding deductibility of extra shift allowance from the written down value of an asset for computing depreciation in the succeeding year. Counsel submits that these questions were left open to the Income-tax Officer for decision. Reliance was placed in support of the above contention on the operative part of the revisional order of the Commissioner which is in the following terms:

"In the circumstances, I hereby withdraw the relief under section 80-J of the Act granted by the Income-tax Officer of a sum of Rs.20,51,458 and direct the Income-tax Officer to determine the relief afresh in accordance with the law after giving an opportunity to the assessees of being heard in this regard."

In support of his above contention, learned counsel also relied on the decision of the Punjab and Haryana High Court in CIT v. R. K. Metal Works (1978) 112 ITR 445, and the decision of this Court in CIT v. Gabriel India Limited (1993) 203 ITR 108.

We have carefully considered the above submissions of learned counsel for the assessees. We, however, do not find any merit in the same because even on a plain reading of the revisional order of the Commissioner of Income-tax passed under section 263 of the Income-tax Act, it is obvious that the Commissioner has specifically decided the question whether value of work-in-progress would form part of the capital employed for the purpose of relief under section 80-J of the Act or not and has categorically held that it will not be so included. This is evident from the discussion contained in paragraphs 4 and 5 of the revisional order of the Commissioner. The following extracts from the said paragraphs are pertinent:

"The first contention of the assessee is that the item of capital works is an asset within the meaning of rule 19-A. It was stated that the said asset could be treated as an asset not entitled to depreciation within the meaning of rule 19-A(2)(ii)(iii). It was thus argued that the asset in question formed part of the capital employed by the industrial undertaking.

I have carefully considered the matter, and I cannot accept the assessee's view .... In the above sense of the word 'employed' the assets not brought into use cannot be treated as assets employed, though they may be owned by the industrial undertaking. For these reasons, I am unable to agree with the assessee's contention in this regard. The assessee's contention is, therefore, rejected."

The Commissioner also decided the second issue which is evident from the discussion contained in paragraph 6 of the order which reads:

"The second submission of the assessee was regarding the reduction of the written down value of the assets by the amount of extra shift allowance made in the earlier years. The Income-tax Officer had made the allowance for extra shifts without the same being claimed. The Appellate Assistant Commissioner had held that the allowance should not be thrust upon the assessee. The assessee's representative thus contended that the written down value could not be reduced by the amount of such allowance till the issue is finalised. I find that the Income-tax Officer had allowed extra shift allowance in the earlier years and had also reduced the opening written down value of the assets by such allowance made in the past for the purpose of depreciation. He had, however, failed to consider such reduction for the written down value for the purpose of computing the capital employed under rule 19-A of the Income-tax Rules. Since the assets had actually been subjected to extra shift as per the particulars furnished by the assessee itself, the Income-tax Officer in the earlier assessments was justified in allowing extra shift allowance. The Income-tax Officer, therefore erred in the course of 1972-73 assessment in not reducing the written down value accordingly for the purpose of relief under section 80 J " (Emphasis supplied)

It is abundantly clear from the above extracts that the Commissioner did decide both the issues raised before him and held in no less clear terms that the Income-tax Officer had allowed excessive amount under section 80-J on both the counts mentioned above. It was only after arriving at such a finding that the Commissioner withdrew the relief under section 80-J of the Act granted by the Income-tax Officer and directed him to determine the relief afresh in accordance with law after giving an opportunity to the assessee of being heard in this regard.

On a reading of the revisional order of the Commissioner, we have no doubt in our mind that the direction of the Commissioner to the Income tax Officer to determine the relief under section 80-J after giving an opportunity of being heard to the assessee was only for the purpose of recomputation of the amount of relief under section 80-J by reducing the value of work-in-progress from the capital employed as held by him in paragraphs 4 and 5 and by reducing the written down value of the assets by the extra shift allowance allowed in the pastas held in paragraph 6 of the revisional order. The direction to the Income-tax Officer in the operative part of the order cannot be read in isolation. The order of the Commissioner read as a whole makes it abundantly clear that the Commissioner arrived at categorical and definite findings in regard to the contentions of the assessee about inclusion of work-in-progress in the capital employed for the purpose of claiming relief under section 80-J of the Act and in regard to deductibility of extra shift allowance allowed in the past from the value of fixed assets for the very same purpose and remitted the matter to the income-tax Officer merely to perform the ministerial function of recalculating the amount of relief under section 80-J.

In such a situation, it is extremely, difficult on our part to accept the contention. of learned counsel for the assessee that in his revisional order, the Commissioner did not decide the points at issue and left it open to the Income-tax Officer to examine the same after hearing the assessee. In fact, as stated above, what was left to the Income-tax Officer was only the ministerial work of recomputing the relief under section 80-J of the Act, obviously, subject to the findings contained in the order.

In our view, reference to and reliance on the operative part of the order without regard to the text of the order and the findings recorded therein is wholly misplaced and improper. To understand the true purport of an order, it has to be read as a whole. The operative part of the order in this case has to be read and understood in the light of the controversy before the Commissioner and the questions decided by him. It cannot be read in isolation from the text of the order and the determination of the questions arising therein by the Commissioner. It is neither proper nor permissible to pick out any part of the order, and in the case of a remand order the operative part thereof and to read the same without regard to the questions decided therein to support the contention that all issues are left open for determination by the authorities below. The Tribunal, in this case, in our opinion, was right in holding that the revisional order, wherein a definite finding is recorded on both the points at issue, having become final on account of the failure of the assessee to pursue 'the statutory remedies provided in the Act against that order, the assessee cannot be allowed to challenge such concluded findings collaterally in an appeal filed against the fresh order passed by the Income-tax Officer with a view of giving effect to the same.

In our opinion, though an appeal is maintainable from the fresh order passed by the Income-tax Officer to give effect to a revisional order or an appellate order, only such issues can be agitated in such appeal which have not attained finality by virtue of earlier orders of the revisional or appellate authorities. It is not open in such an appeal to agitate any point which has already been decided by the revisional or the appellate authorities in their order.

In view of the above, we do not find any infirmity in the finding of the Tribunal in the instant case. Accordingly, question No. 1 is answered in the affirmative and in favour of the Revenue. On the very same reasoning, question No.2 is also answered in favour of the Revenue. In the facts and circumstances of the case, there shall be no order as to the costs.

M.B.A./1240/FCReference answered.