COMMISSIONER OF INCOME-TAX VS PAUSHAK LIMITED
1999 P T D 2256
[227 I T R 216]
[Gujarat High Court (India)]
Before R. K. Abichandani and R. Balia, JJ
COMMISSIONER OF INCOME-TAX
Versus
PAUSHAK LIMITED
Income-tax Reference No.8 of 1984, decided on 17/02/1997.
Income-tax---
-----Revision---Commissioner---Scope of power---Doctrine of merger-- Commissioner directing ITO under S.263 to withdraw deductions allowed under Ss. 80HH & 35(1) and re-compute depreciation---Those aspects not subject-matter of appeal before Commissioner (Appeals) and not dealt with in the appellate order---Commissioner's order under S.263 valid---Indian Income Tax Act, 1961, S.263.
For the assessment year 1977-78, the Income-tax Officer allowed certain benefits to the assessee under various provisions of the Act in his order dated April, 30, 1979. The assessee preferred an appeal and the Commissioner of Income-tax (Appeals) partly allowed the game by his order dated November 12, 1980. However, another Commissioner of Income-tax proceeded under section 263 of the Act and by his order dated April 27, 1981, directed that the deduction under section 80HH to the tune of Rs.1,91,303 and the deduction under section 35(1) allowed by the Income tax Officer to the extent of Rs.94,669 on account of expenditure incurred in the earlier years on scientific research, should be withdrawn and the assessee's claim for depreciation on the written down value of the plant and machinery be recomputed and allowed after deducting the value of subsidy received and that the excess amount paid over the written down value on plant and machinery purchased from the holding company should be deducted before allowing depreciation. Against that order, the assessee appealed to the Tribunal and the Tribunal allowed the appeal holding that the entire order of the Income-tax Officer had merged in the appellate order of the Commissioner of Income-tax (Appeals), and, therefore, the order made by the Commissioner of Income-tax under section 263 was invalid. On a reference:
Held, that in the appeals which are filed by an assessee against any order that is adverse to him, the assessee would not be challenging any finding regarding deduction or depreciation, which might be in his favour. Therefore, in the appeal that was filed by the assessee before the Commissioner of Income-tax (Appeals), the three aspects which were already decided by the Income-tax Officer in his favour would not have figured. Therefore, when the Commissioner exercised his power under section 263 for taking up the Income-tax Officer's order in revision as regards those three aspects on the ground that the decision in that regard was erroneous and prejudicial to the interests of the Revenue, he had ample authority under that provision to adjudicate upon those aspects which never arose in appeal. The Tribunal was, therefore, in error in setting aside the order of the Commissioner of Income-tax made under section 263 of the said Act on the ground that the order of assessment should be treated as having merged with the appellate order dated November 12, 1980.
CIT v. Nanikram Sobhraj Mills (Pvt.) Ltd. (1994) 209 ITR 283 (Guj.) fol.
Mihir H Joshi instructed by Manish R Bhatt for the Commissioner.
JUDGMENT
R. K. ABICHANDANI, J. ---The following two questions have been referred by the Income-tax Appellate Tribunal, -Ahmedabad, for the opinion of this Court under section 256(1) of the Income Tax Act, 1961:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the order of assessment was-to be treated as merged in the appellate order even with regard to the issues not agitated before the Appellate Authority?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the order, dated April 27, 1983, passed by the Commissioner of Income-tax under section 263 of the Income Tax Act, 1961, was liable to be set aside?"
The matter pertains to the assessment year 1977-78. The Income-tax Officer had allowed certain benefits to the assessee under various provisions of the Act in .his order dated April 30, 1979. The assessee preferred an appeal and the Commissioner of Income-tax (Appeals) partly allowed the same by his order dated November 12, 1980. However, another Commissioner of Income-tax proceeded under section 263 of the Act and by his order, dated April 27, 1981 directed that the deduction under section 80HH to the tune of Rs. 1,91,303 and the deduction under section 35(1) allowed by the Income-tax Officer to the extent of Rs.94, 669 on account of expenditure incurred in the earlier years on scientific research should be withdrawn and the assessee's claim for depreciation on the written down value of the plant and machinery be recomputed and allowed after deducting the value of subsidy received and that the excess amount paid over the written down value-on plant and machinery purchased from the holding company shall be deducted before allowing depreciation. Against that order, the assessee appealed to the Tribunal and the Tribunal allowed the appeal holding that the entire order of the Income-tax Officer had merged in the appellate order of the Commissioner of Income-tax (Appeals) which was made on November 12, 1980 and therefore, the order made by the Commissioner of Income-tax under section 263 on April 27, 1981 was invalid.
Chapter XX of the said Act deals with "appeals and revision". The appealable orders are enumerated under section 246 of the Act. Under the said provision, any assessee aggrieved by any of the orders enumerated therein can prefer an appeal to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) as stated therein. Obviously, in the appeals, which are filed by the assessees against any order that is adverse to them, the assessees would not be challenging any finding regarding deduction or depreciation, which may be in their favour. Therefore, in the appeal that was filed by the assessee before the Commissioner of Income-tax (Appeals), the three aspects which were already decided by the Income-tax Officer in his favour would not have figured. Therefore, when the Commissioner exercised his power under section 263 for taking up the income-tax Officer's order in revision as regards those three aspects on the ground that the decision in that regard was erroneous and prejudicial to the interests of the Revenue, he had ample authority under that provisions to adjudicate upon those aspects which never arose in appeal. The Tribunal was, therefore, in error in setting aside the order of the Commissioner of Income-tax made under section 263 of the said Act on the ground that the order of assessment should be treated as having merged with the appellate order dated November 12, 1980, which was earlier made by the Commissioner of Income-tax (Appeals).
In CIT v. Nanikram Sobhraj Mills (Pvt.) Ltd. (1994) 209 ITR 283 (Guj.), while considering the doctrine of merger in the context of the revision power of the Commissioner of Income-tax, this Court held that against the order which was made by the Income-tax Officer allowing the deduction claimed by the assessee, there was no appeal filed and, therefore, it could not be said that the said order had merged into the order of the Appellate Assistant Commissioner. It was, therefore, held that the Commissioner of Income-tax could exercise his powers of revision under section 263 of the Act against the order of the Income-tax Officer allowing deduction to the assessee. We are in respectful agreement with the ratio of this decision.
Under the above circumstances, both the questions referred to us are answered in the negative in favour of the Revenue and against the assessee. The reference stands disposed of accordingly with no order as to costs.
M.B.A./2050/FCReference answered