COMMISSIONER OF INCOME-TAX VS SUNDARAM CLAYTON LTD.
2001 P T D 1722
[241 I T R 57]
[Madras High Court (India)]
Before N. V. Balasubramanian and Mrs. A. Subbulakshmy, JJ
COMMISSIONER OF INCOME‑TAX
Versus
SUNDARAM CLAYTON LTD.
T.C. No.‑ 852 of 1984 (Reference No. 767 of 1984), decided on 04/01/.
Income Tax-----
‑‑‑‑Appeal to CIT (Appeals)‑‑‑Powers of Commissioner of Income‑tax (Appeals)‑‑‑Powers under S.251 are very Wide ‑‑‑CIT (Appeals) can direct Assessing Officer to consider question of status of assessee alone‑‑‑Indian Income Tax Act, 1961, S.251.
Under section 251 of the Income Tax Act, 1961, the Commissioner of Income‑tax (Appeals) in appeal against the order of assessment is empowered to pass any order by way of confirming, refusing, enhancing or annulling the assessment order or to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the direction given by the Commissioner (Appeals) and after making such inquiry as may be necessary. If he thought fit, he is also empowered to make enhancement of the income assessed The powers of the Commissioner (Appeals), while exercising his appellate powers are wide and it lies purely within his discretion to set aside the entire order of assessment or, to set aside a part of the assessment order, with a direction to the Assessing Authority to consider the point after making such further enquiry as may be directed by him. The Commissioner of Income‑tax (Appeals) can direct the Income‑tax Officer to consider the question of status alone, while considering the appeal preferred before him.
CIT v. S.K. Ulagammal Achi (1987) 166 ITR 210 (Mad.) fol.
C.V. Rajan for the Commissioner.
P.P.S. Janarthana Raja for the Assessee.
JUDGMENT
N. V. BALASUBRAMANIAN, J.‑‑‑In pursuance of the direction of this Court the Appellate Tribunal has stated a case and referred the following question of law for our consideration:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Commissioner of Income‑tax (Appeals) was justified in partially setting aside the assessment of the Income‑tax Officer for considering the question of status?"
The assessee is a company and it was assessed for the assessment year 1974‑75 in the status of a company in which the public are not substantially interested. The assessee went on appeal against the order of assessment to the Commissioner of Income‑tax (Appeals) challenging the part of the order holding that the assessee is a company in which the public are not substantially interested and in the appeal filed, it challenged certain other disallowances made in the computation of its income. The Commissioner of Income‑tax (Appeals) granted relief in respect of certain additions made but set aside the order of assessment on the question of status alone. The Commissioner of Income‑tax (Appeals) held that it was fair and reasonable to send back the matter to the Income‑tax Officer to deal with the question of status de novo on .the lines indicated in the order of the Appellate Tribunal for the preceding assessment year 1973‑74 in I.T.A. No175(Mad.) of 1977‑78, dated December 12, 1978. The Revenue appealed to the Income -tax Appellate Tribunal in respect. of the relief granted and contended that the order of the Commissioner of Income‑tax (Appeals) setting aside the assessment only on .one point, viz., the determination of the status of the assessee would create an anamolous situation for the .Income‑tax Officer while making the reassessment in pursuance of the direction of the Commissioner of Income‑tax (Appeals). The Tribunal did not accept the contention urged on behalf of the Revenue on the ground that‑it was purely a matter of judicial discretion on the part of the Commissioner of Income‑tax (Appeals) and when the Revenue did not dispute the position that the question of status was required to be reconsidered after a thorough investigation of all necessary facts, it will not affect in any way the consideration of the other matters of the assessment. In this view of the matter, the Tribunal dismissed the appeal preferred by the Revenue and on the basis of the directions of this Court, the question of law set out supra has been referred to us.
Mr. C.V. Rajan, learned counsel for the Revenue, submitted that if the direction of the Commissioner of Income‑tax (Appeals) is given effect it will create an anamolous situation for the Revenue to give effect to his order as only the question regarding the status of the assessee was set aside and it would have been better if the entire assessment. was set aside.
Mr. P.P.S. Janarthana Raja, learned counsel for the assessee, on the other hand, supported the order of the Tribunal.
Under section 251 of the Income‑tax Act the Commissioner of Income‑tax (Appeals) in appeal against an order of assessment is empowered to pass any order by way of confirming, refusing, enhancing or annulling the assessment order onto set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the direction given by the Commissioner (Appeals) and after making such further inquiry as may be necessary. If he thought fit, he is also empowered to make enhancement of the income assessed. The powers of the Commissioner, while exercising his appellate powers are wide and it lies purely within his discretion to set aside the entire order of assessment or to set aside a part of the assessment order with a direction to the assessing authority to consider the point after making such further enquiry as may be directed by him. The discretion exercised by the Commissioner of Income‑tax (Appeals) in the instant case was found by the Appellate Tribunal neither arbitrary nor unreasonable. The Commissioner felt that the order of assessment should be set aside only on one point in view of the fact that there was an earlier order by the Appellate Tribunal for the earlier assessment year and he, therefore, directed the Assessing Officer to determine the question of status after investigating the necessary factual materials. We are of the view that, the anamolous situation that is apprehended on behalf of the Revenue does not exist as the question of status has to be reconsidered after investigating all necessary facts and it would not in any way affect the consideration of the other matters of the assessment. Hence we are of the view that the Commissioner of Income‑tax (Appeals) has exercised his discretion properly and the exercise of his discretion in the manner he has‑done cannot be regarded as neither arbitrary nor unwarranted. We, therefore, hold that the Tribunal was correct in holding that the direction given by the Commissioner of Income‑tax (Appeals) does not call for any interference.
In CIT v. S.K. Ulagammal Achi (1987) 166 ITR 210, this Court held that the powers of the Commissioner of Income‑tax (Appeals) are very wide and when the Appellate Assistant Commissioner has decided with respect to two items in the appeal preferred before him and has not decided with reference to the third item and directed the Income‑tax Officer to reconsider the order, such an order passed by the Appellate Assistant Commissioner was held to be within the powers conferred upon him under the Income‑tax Act. Following the said decision we are of the view that it is open to the Commissioner of Income‑tax (Appeals) either to set aside the entire assessment or to pass such an order as he thinks fit. In the instant case, the Appellate. Tribunal for an earlier year directed the Income‑tax Officer to determine the question of status and when the Income‑tax Officer determines the status of the assessee the logical consequences that would flow from such a determination of the Income‑tax Officer would be well‑reflected in the order of assessment made by the Income‑tax Officer. Therefore, we do not find that the Commissioner of Income‑tax (Appeals) has exceeded his jurisdiction in directing., the Income‑tax Officer to consider the question of status alone. We are, therefore, of the view that there is no infirmity in the order of the Appellate Tribunal in upholding the order of the Commissioner of Income‑tax (Appeals).
Since the question of law proceeds on the basis that there was a partial setting aside of the order by the Commissioner of Income‑tax (Appeals) we are of the view that the question should be reframed and the proper question is as under:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law holding that the Commissioner of Income‑tax (Appeals) was justified in directing the Income‑tax Officer to consider the question of status alone, while considering the appeal preferred before him?"
We hold there is no infirmity in the order of the Appellate Tribunal and accordingly we answer the question of law reframed by us in the affirmative and against the Department. There will be no order, as to costs.
M.B.A./550/FCReference answered.