COMMISSIONER OF INCOME-TAX VS G. ARUN KUMAR
1999 P T D 3016
[229 I T R 175]
[Andhra Pradesh High Court (India)]
Before Syed Shah Mohammed Quadri and V. Rajagopala Reddy, JJ
COMMISSIONER OF INCOME-TAX
Versus
G. ARUN KUMAR
Case Referred No. 103 of 1988, decided on 19/06/1997.
Income-tax---
----Appeal to A.A.C.---Competency of appeal---Previous year---Rejection of request for change of previous year---Amount of income assessed to tax has direct nexus with period for which it is assessed---Appeal competent against order passed under S.3(4)---Indian Income Tax Act, 1961, Ss.3, 143 & 246.---[Delhi Registered Stockholders (Iron and Steel) Association Ltd. v. CIT (1966) 59 ITR 16 (P&H) dissented from].
It is clear from a perusal of clause (c) of section 246 of the Income Tax Act, 1961, that an order of assessment under section 143(3) or section 144 can be questioned by the assessee if he is objecting to the amount of income assessed or the amount of tax determined or the amount of loss computed or the status under which he is assessed. The amount of income which is assessed to tax has direct nexus with the period for which it is assessed. The rejection of a request for change of the accounting year under section 3(4) can appropriately be a ground of appeal. Under clause (c) an assessee can validly agitate in an appeal against the order of assessment, the period for which his income has been assessed. Such a plea can be entertained in an appeal against the order of assessment though the order rejecting the request for change of accounting, year under section 3(4), is not by itself an appealable order. Though section 105 of the Code of Civil Procedure, 1908, is alien' to the scheme of the Act, an application of the underlying principle will not be repugnant; just as in an appeal against the decree, any error, defect or irregularity in any non-appealable order can be objected to, so also against the order of assessment, the objections need not be confined to only such orders against which.-an appeal is specifically provided under section 246 of the Act. Any order passed by the Income-tax Officer, which has a bearing on the order of assessment either in regard to the amount of income assessed or the amount of tax determined or the amount of loss computed or to the status under which an assessee is assessed, can be validly objected to in the appeal, filed against the order of assessment. In an appeal filed under section 246 of the Act against the order of assessment under section 143(3) or under section 144 of the Act, there may be various grounds available to an assessee under law; each of such grounds need not necessarily arise out of an appealable order. There is only one appeal but not as many appeals as there are grounds and pleas taken in the appeal. In an appeal against the order of assessment the crux of the matter is whether the ground urged in appeal has merit in law but not whether on each of the pleas taken an appeal is maintainable. Therefore, the contention that no appeal against an order passed under section 3(4) of the Act is provided and so the validity of the order declining to grant permission for the change cannot be assailed against the order of assessment, is misconceived. In an appeal against the composite order of assessment under section 143(3) or section 144 of the Act the ground with reference to the period for which the income or loss can be computed and assessed to tax, may be a valid plea even though no specific appeal is provided against such an order passed under, section 3(4) of the Act. Computation of income and determination of tax for a period which is questioned in an appeal is part of the order of assessment under section 143(3) of the Act which is made appealable.
CIT v. Sri Hari Prosad Lohia (1983) 143 ITR 276 (Cal.) fol.
Delhi Registered Stockholders (Iron and Steel) Association Ltd. v. CIT (1966) 59 ITR 16 (P&H) dissented from.
S.R. Ashok for the Commissioner.
M.J. Swamy for the Assessee.
JUDGMENT
SYED SHAH MOHAMMED QUADRI, J. ---In this reference under section 256(1) of the Income Tax Act, 1961 (for short "the Act"), at the instance of the Revenue, the following question is referred. to this Court for opinion:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in holding that the Income-tax Officer's order under section 3(4) of the Income-tax Act is appealable under section 246 of the Income-tax Act?"
The facts leading to the reference of this question are briefly stated hereunder: The assessee is an employee of the Peerless General Finance and Investment Company Limited. For the assessment year 1982-83, for which the previous year ended by March 31, 1982, he filed a nil return alongwith a letter seeking permission, presumably under section 3(4) of the Act, to change the previous year from March 31, 1981 to June 30, 1982, and undertook to offer the income during the period April 1, 1981, to June 30, 1982, for assessment for the assessment year 1983-84. This request was, however, rejected on the ground that the accounting year ended on March 31, 1982, and that such a request ought to have been made before the said date but the letter was filed on August 31, 1982. He, thus, completed the assessment for the said assessment year. Against that order of assessment, the assessee filed an appeal before the Appellate Assistant Commissioner; the learned Appellate Assistant Commissioner disposed of the appeal holding that for changing the accounting year the Income-tax Officer's consent should have been obtained under the provisions of section 3(4) of the Act and that as no appeal lies under section 246 of the Act, if the Income-tax officer refused to allow the assessee's claim for change of accounting year under section 3(4) of the Act, the plea cannot be entertained in appeal.
On further appeal to the Income-tax Appellate Tribunal, two points were urged before it. The first point which is relevant for our purpose, is that the refusal of the Income-tax Officer to change the accounting year was appealable and that the first Appellate Authority went wrong in refusing to go into that question on the ground that no appeal was available against the order under section 3(4) of the Act. The Tribunal took the view that as there are conflicting decisions of different High Courts on the point, the one which supports the assessee had to be adopted by it and held that the plea of. improperly rejecting the request of change of accounting year, was available to the assessee in the appeal. Consequently, the Tribunal set aside the order of the Appellate Assistant Commissioner by its order, dated July 31, 1986, directed him to entertain the appeal on that point and give a decision on the merits and, thus, allowed the assessee's appeal. It is from that order of the Tribunal, the above question had arisen.
It will be apt to refer to section 246 of the Act, in so far as it is relevant for our purpose, under which an appeal may be preferred by an assessee:
"246. Appealable orders.---Any assessee aggrieved by any of the following orders of an Income-tax Officer may appeal to the Appellate Assistant Commissioner against such order-- ....
(c) an order against the assessee, whore the assessee denies his liability to be assessed und& this Act or any order of assessment under subsection (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed;..."
From a perusal of clause (c), extracted above, it is clear that an order of assessment under section 143(3) or section 144 can be questioned by the assessee if he is objecting to the amount of income assessed or the amount of tax determined or the amount of loss computed or the status under which he is assessed. The amount of income which was assessed to tax has direct nexus with the period for, which it is assessed. The rejection of a request for change of the accounting year under section 3(4) can appropriately be a ground of appeal. ID our view, under clause (c) an assessee can validly agitate in an appeal against the order of assessment the period for which his income has been assessed. Such a plea can be entertained in an appeal against the order of assessment though the order rejecting the request for change of the accounting year under section 3(4), is not by itself an appealable order. Though section 105 of the Code of Civil Procedure is alien to the scheme of the Act, yet it appears to us that application of the underlying principle will not be repugnant; just as in an appeal against the decree, any error, defect or irregularity in any non ?appealable order can be objected to, so also against the order of assessment, the objections need not be confined to only such orders against which an appeal is specifically provided under section 246 of the Act. Any order passed by the Income-tax Officer, which has a bearing on the order of assessment either in regard to the amount of income assessed or the amount of tax determined or the amount of loss computed or to the status under which an assessee is assessed, can be validly objected to in the appeal, filed against the order of assessment.
The Punjab High Court in Delhi Registered Stockholders (Iron and Steel) Association Ltd. v. CIT (1966) 59 ITR 16, took the view that no appeal would lie against the order of the Income-tax Officer refusing to change the assessment year. That case had arisen under the Indian Income-tax Act, 1922. The assessee therein made an application under sub-clause (a) of clause (i) of section 2(11) of the Act for change of the accounting period with respect to the assessment year 1951-52. The application was rejected. Such a request for the subsequent year 1952-53 was again declined and the order of assessment was made. On appeal, the Appellate Assistant Commissioner came to the conclusion that the point could not be agitated in the appeal as the discretion of the Income-tax Officer was final. The assessee unsuccessfully appealed to the Tribunal. The question referred to the Punjab High Court was whether an appeal would lie against the order of the Income?tax Officer refusing to change the previous year and whether the appellate authority was competent to judge in appeal as to whether the discretion so vested in the Income-tai: Officer had been judiciously and correctly exercised. The High Court took the view that as the appellate jurisdiction had to be exercised in terms of the statutory provisions no appeal would lie against the order of the Income-tax Officer refusing to change the previous year, it was observed that the issue of change of the previous year could be decided by the Income-tax Officer or the Commissioner and that it could not be said that the assessee who challenged that decision was either objecting to the amount of tax determined or denying its liability to be assessed under the Act and that what was being complained of, for the purpose of section 3, was that a different period should be taken for computation of income and, therefore, the Tribunal was right in holding that that matter could not be agitated in appeal and the fact that the order was a composite one would, in the opinion of the Division Bench, make no difference.
A similar point arose before the Calcutta High Court in CIT v. Sri Hari Prosad Lohia (1983) 143 ITR 276. That case had arisen under the Income Tax Act, 1961. The assessee therein sought the consent of the Income-tax Officer for the change of the accounting period from Diwali to the financial year. The Income-tax Officer had permitted the change. However, the successor-Income-tax Officer while passing the order of assessment under section 143(3) of the Act took the view that the assessee was not entitled to change the accounting period and accordingly he assessed the income with reference to the original period of the accounting year. That order was affirmed by the Appellate Assistant Commissioner in appeal. On further appeal before the Income-tax Appellate Tribunal, the Revenue contended that the order passed by the Income-tax Officer under section 3(4) of the Act, was not appealable, therefore, the order of the Income-tax Officer which was affirmed by the Appellate Assistant Commissioner, should not be disturbed. The Tribunal held that once an, assessee was given permission to change the accounting year by one Income-tax Officer, another Income-tax Officer could not subsequently revoke that order and that the appeal preferred by the assessee on that point was maintainable. On a reference to the Calcutta High Court, the Division Bench, which dealt with the case, held that in order to compute the total income for any assessment year and the amount of tax payable by the assessee, it was necessary to determine what was the accounting period; the determination of the accounting period was an integral part of the assessment process and an appeal could not be rejected on the ground that it was not an order under section 143(3) of the Act. In that view of the matter it came to the conclusion that an appeal would lie against the order of the Income-tax Officer under section 3(4) of the Act.
In our view, in, an appeal filed under section 246 of the Act against the order of assessment under section 143(3) or under section 144 of the Act there may be various grounds available to an assessee under law; each of such grounds need not necessarily arise out of an appealable order. There is only one appeal but not as many appeals as there are grounds and pleas taken in the appeal. In an appeal against the order of assessment, the crux of the matter is whether the ground urged in appeal has merit in law but not whether on each of the pleas taken an appeal is maintainable. Therefore, the contention that no appeal against an order passed under section 3(4) of the Act is provided so the validity of the order declining to grant permission for the change cannot be assailed against the order of assessment, is misconceived.. In our view in an appeal against the composite order of assessment under section 143(3) or section 144 of the Act, the ground with reference to the period for which the income or loss can be computed and assessed to tax, may be a valid plea even though no specific appeal is provided against such an order passed under section 3(4) of the Act. Computation of income and determination of tax for a period which is questioned in an appeal is part of the order of assessment under section 143(3) of the Act which is made appealable.
For the aforementioned reasons with respect we are in complete agreement with the view expressed by the Division Bench of the Calcutta High Court and regret our inability to agree with the view expressed by the learned Judges of the Punjab High Court.
In the result, we reframe the question and answer the same in the affirmative, that is, in favour of the assessee and against the Revenue. The question is refrained as follows:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in holding that the Income-tax Officer's order under section 3(4) of the Income-tax Act, is assailable in appeal against the order of assessment under section 246 of the Income-tax Act?"
The reference is accordingly answered
No costs
M.B.A./3076/FC???????????????????????????????????????????????????????????????????? ?????????? Reference answered.