(a) Income-tax---

----Revision---Appeal<--Powers of CIT---Matters not considered on appeal to A.A.C. and Tribunal ---CIT has power to revise, order with regard to such matters---Indian Income Tax Act, 1961, S.263.

The powers of the Commissioner of Income-tax under section 263 of the Income Tax Act, 1961, shall extend and shall be deemed always to have extended to such matters which had not been considered and decided in the appeal by the appellate authorities.

CIT v. Shri Arbuda Mills Ltd. (1998) 231 ITR 50 (SC) fol.

(b) Income-tax---

----Revision---Assessment---Powers of CIT---Draft assessment order---Order passed under S. 144B with approval of IAC---CIT has power to revise such an order---Indian Income Tax Act, 1961, Ss. 144B & 263.

The order passed by the Income-tax Officer under section 144B on the basis of the direction given by the Inspecting Assistant Commissioner is also amenable to the revisional jurisdiction under section 263.

CIT v. V.V.A. Shanmugam (1999) 236 ITR 878 (Mad.) fol.

CIT v. Shree Manjunathesware Packing Products and Camphor Works (1998) 231 ITR 53 (SC) ref.

C.V. Rajan for the Commissioner.

K. Mani for the Assessee.

JUDGMENT

N.V. BALASUBRAMANIAN, J.---Mr. K. Mani, learned counsel undertakes to file Vakalatnamah for the respondent.

At the instance of the Department, the following two questions of law have been referred for our consideration under section 256(1) of the Income Tax Act, 1961:

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Commissioner of Income-tax had no jurisdiction to revise the assessment under section 263 after it formed the subject-matter of appeal before the Appellate Assistant Commissioner and the Income tax Appellate Tribunal even in respect of matters not contested before them?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Commissioner of Income-tax had no jurisdiction under section 263 to revise an order passed by the Income-tax Officer with the approval of the Inspecting Assistant Commissioner under section 144B?"

In so far as, the first question of law that is referred to us is concerned, the point that arises is whether the Tribunal was right in holding that the Commissioner of Income-tax had no jurisdiction to exercise the, powers of revision conferred on him under section. 263 of the Income-tax Act, to revise an order of assessment, when the order of assessment was the subject-matter of appeal before the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal in respect of matters not contested before them. The Appellate Tribunal has clearly recorded a finding that the question of allowance of interest, which was the subject-matter of revision by the Commissioner of Income-tax did not and could not form the subject-matter of proceedings in appeal before the Appellate Assistant Commissioner, as well as before the Tribunal. But in spite of holding that the question of allowance of interest was not the subject-matter of appeal, the Appellate Tribunal held the Commissioner had no jurisdiction to revise the order of the Income-tax Officer on the ground that the Appellate Assistant Commissioner had wide power and jurisdiction over the entire matter of the assessment. The Supreme Court, however, in CIT v. Shree Manjunathesware Packing Products and Comphor Works (1998) 231 ITR 53, referred to its earlier decision in the case of CIT v. Shri Arbuda Mills Ltd. (1.998) 231 ITR 50 (Tax Reference Case No. 1 l of 1983), wherein the Supreme Court held that the effect of the amendment made in section 263(1) of the Act by the Finance Act, 1989, whereby clause (c) of the Explanation was also inserted with retrospective effect from June 1, 1988, was that the said amendment was made with retrospective effect and that the powers under section 263 of the Act shall extend and shall be deemed always to extend to such matters which had not been considered and decided in an appeal. The decision of the Supreme Court makes it clear that the powers of the Commissioner of Income-tax under section 263 of the Act shall extend and shall be deemed always to have extended to such matters which had not been considered and decided in the appeal by the appellate authorities. Following the decision of the Supreme Court, we are of the view that the Tribunal was not correct in holding that the Commissioner of Income-tax has no jurisdiction to revise the order of the Income-tax Officer merely on the ground that the order of assessment formed the subject-matter of appeal before the Appellate Assistant Commissioner though the point for the revision. was not the subject-matter of appeal either before the Appellate Assistant Commissioner or before the Income-tax Appellate Tribunal. Following the said decision of the Supreme Court in CIT v. Shri Arbuda Mills Ltd. (1998) 231 ITR 50-T.C. No.11 'of 1983, we are of the view that the first question of law referred is liable to be answered in favour of the Department.

In so far as the second question of law is concerned, the point that arises is whether the Commissioner of Income-tax has jurisdiction to pass an order under section 263 of the Income-tax Act to revise an order of the Income-tax Officer, passed with the approval of the Inspecting Assistant Commissioner under section 144B of the Act. A similar question of law came up for consideration before this Court in T.C. No. 1090 of 1980 (CIT v. V.V.A. Shanmugam (1999) 236 ITR 878) and this Court by the judgment, dated January 7, 1997, in the above tax case held that the order passed by the Income-tax Officer on the basis of the direction given by the Inspecting Assistant Commissioner is also amenable to the revisional jurisdiction under section 263 of the Act. Following the unreported judgment of this Court in T.C. No. 1090 of 1980---since reported in CIT v. V.V.A. Shanmugam (1999) 236 ITR 878, dated January 7, 1997, the second question of law is also liable to be answered in favour of the Department.

Accordingly, we answer both the questions of law referred to us in the negative and in favour of the Department. No costs.

M.B.A./97/FCReference answered.