Income‑tax‑‑‑

‑‑‑‑Revision‑‑‑Powers of CIT under S.264‑‑‑Assessment order subject‑matter of appeal to CIT (Appeals)‑‑‑Commissioner not empowered to revise under S.264 such assessment order‑‑‑Principle of constructive res judicata‑‑‑Indian Civil Procedure Code, 1908, S.11, Expln. IV; 0.2, R.2‑‑‑Indian Income Tax Act, 1961, S.264(4)(c).

Clause (c) of subsection (4) of section 264 of the Income Tax Act, 1961, is self‑explanatory. Even on a plain reading thereof, it is clear that where an order has been made the subject‑matter of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal, the Commissioner, is not empowered to revise such an order. The word "order" used in clause (c) of subsection (4) denotes an order in its entirety and not piecemeal. It is immaterial that only a part of the order is challenged. The provision is very clear and provides an express bar and prohibition against exercising revision jurisdiction under section 264, in a case where the order has already been made the subject‑matter of an appeal.

The scheme of providing an express bar and prohibition in entertaining revision applications where the order had already been made the subject‑matter of appeal is also consistent with the basic principles of the Civil Procedure Code, 1908, as relating to civil litigation. Under the procedural law also, multiplicity of litigation in respect of the same cause of action is deprecated and discouraged. Such bar is contained in Order 2, rule 2 of the Civil Procedure Code, and if the plaintiff omits to 'agitate or intentionally relinquishes any portion of the claim arising from the same cause of action, he shall be precluded from agitating in another litigation in another proceeding, the portion omitted or relinquished.

Even remotely the provisions of section 11 of the Civil Procedure Code, 1908, can also lend support to the express prohibition contained in section 264(4)(c) of the Income‑ Tax Act, 1961. Section 11 of the Civil Procedure Code deals with principles of res judicata. It provides an express bar to try the same issue which was directly or substantially in issue between the same parties in a former proceeding. This rule casts an obligation upon the party agitating rights to raise all the grounds of defence or attack available in a particular proceedings, and if the party fails to include the grounds of defence or attack, which' otherwise ought to have been made in the former proceeding he should be precluded from raising such grounds of attack or defence in any other proceeding.

The Income‑tax Officer completed the assessment of the appellant assessee for the assessment year 1975‑76. Aggrieved by the order of assessment, the appellant preferred an appeal to the Commissioner of Income‑tax (Appeals) contesting the additions to the income to the tune of Rs.3,73,341. The Commissioner (Appeals) allowed the appeal of the assessee which resulted in the proportionate reduction of tax. As the assessing authority also levied interest under section 215 of the Act, the appellant filed a revision application under section 264(1) for a consequential order, i.e., for corresponding reduction in the amount of interest which was also allowed by the Commissioner of Income‑tax. Thereafter, the appellant filed a second revision application before the Commissioner of Income‑tax claiming (a) grant of depreciation at the rate of 20 per cent. instead of 10 per cent. allowed initially by the assessing authority; and (b) deduction of Rs.6,20,023 being incremental liability towards gratuity for the relevant assessment year. The Commissioner of Income‑tax rejected the, second revision petition on the ground of non‑maintainability in view of he prohibition contained in section 264(4)(c). The appellant filed a writ petition challenging the order of rejection of the revision petition. A Single Judge dismissed the writ petition. On a writ appeal, the appellant contended that as the subject‑matter of revision, namely, depreciation and deduction of incremental liability towards gratuity, were not the subject‑matter of appeal before the Commissioner of income‑tax, the grievances in revision ought to have been considered in accordance with law:

Held, that though the disputes raised' in the revision were not at all raised in the appeal the fact remained that the order under appeal was a composite order dealing with all disputes and when challenged, should be deemed to have been examined by the Commissioner (Appeals) while exercising appellate jurisdiction. The cause of action was the original assessment order disallowing certain claims. The order of assessment had already been challenged once in appeal and, therefore,, while preferring the appeal, the appellant ought to have attacked the order on all the grounds available including the grant of depreciation and deduction of the amount of incremental liability towards gratuity. Therefore, the Commissioner of Income‑tax rightly rejected the second revision petition exercising powers under section 264(4)(c) of the Act.

Reiter Machine Works Ltd. v. CIT (1995) 211 ITR 144 (Mad.) and Coimbatore Cotton Mills Ltd. v. CIT (1995) 211 ITR 641 (Mad.) affirmed.

P.P.S. Janardhana Raja for Appellants.

S.V. Subramaniam for Respondents.

JUDGMENT

R. R. JAIN, J.‑‑‑Since both these appeals involve a common question of law, namely, scope and interpretation of section 264(4)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), they are disposed of by this common judgment. However, for the sake of convenience, the facts and figures as referred to and giving rise to W.A. No‑921 of 1994 are only referred to hereunder.

The appellant is a public limited company carrying on business of manufacture and sale of cloth. Necessary income returns were submitted for the assessment year 1975‑76. The second respondent Income‑tax Officer, Companies Circle‑1, Coimbatore, completed the assessment by his order, dated March 20, '1978. Aggrieved by that order, the appellant preferred an appeal before the Commissioner of Income‑tax (Appeals), disputing addition in the income to the tune of Rs.3,73,341, though according to the appellant, it was not an income defined under the Income‑tax Act. The Commissioner, the first respondent (sic) accepted the contention and allowed the appeal by his order, dated October 28, 1978, and thus, the liability to pay income‑tax was reduced proportionately. As the second respondent, assessing authority also levied interest under section 215 of the Act, the appellant also filed a revision application for a consequential order, i.e., for corresponding reduction in the amount of interest, and the same was allowed by an order, dated October 28, 1978, by giving benefit of reduction in interest liability owing to the revised assessment in the nature of reduction in the assessable income.

After some time, the appellant preferred a second revision application, dated January 9, 1979, before the Commissioner of Income‑tax, the first respondent, challenging the same order claiming (a) grant of depreciation at the rate of 20 per cent. instead of 10 per cent. as allowed initially by the assessing authority; and (b) deduction of Rs.6,20,023 being incremental liability towards gratuity for the relevant assessment year.

The first respondent, Commissioner of Income‑tax, passed order, dated June 19, 1982, rejecting the petition on the ground of non- maintainability in view of the prohibition contained in section 264(4)(c). Challenge to the order of rejection, dated June 19, 1982, passed by the first respondent was the subject‑matter of Writ Petition No.9293 of 1982 (Coimbatore Cotton Mills Ltd. v. CIT (1995) 211 ITR 641 (Mad.). The learned Single Judge, by his order, dated March 23, 1994, dismissed the writ petition, confirming the order of rejection passed by the first respondent. Feeling dissatisfied, the appellant has invoked the appellate jurisdiction by preferring the present appeal.

Learned counsel for the appellant has vociferously argued that as the subject‑matter of the revision, namely, depreciation and reduction in realisation of incremental liability towards gratuity, was not the subject matter of the appeal before the Commissioner, the first respondent (sic), the grievances in revision, ought to have been considered in accordance with law. Further, the disputes not having been appealed against, even the first respondent could have exercised sup motu power under section 263 of the Act independent of any other proceedings. To repeal this contention, learned counsel for the respondents has pleaded the specific bar under section 264(4)(c) of the Act, and justified the rejection order.

In our view, it would be worthwhile to pen down the provisions of section 264(4) in order to appreciate the rival contentions.Section 264(4) of the Act reads as under:

"The Commissioner shall not revise any order under this section in the following cases‑‑‑

(a)where an appeal against the order lies to the (Deputy Commissioner (Appeals)) or to the Commissioner of Income‑tax (Appeals) or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or in the case of an appeal to the Commissioner of Income‑tax (Appeals) or to the Appellate Tribunal, the assessee has not waived his right of appeal; or

(b)where the order is pending on an appeal before the DeputyCommissioner (Appeals); or

(c)where the order has been made the subject of an appeal to the Commissioner of Income‑tax (Appeals) or to the Appellate Tribunal. "

The text of clause (c) of subsection (4) of section 264 of the Act is self‑explanatory. Even on plain reading thereof, it is evidently clear that where an order has been made the subject‑matter of an appeal to the Commissioner of Income‑tax (Appeals) or . to the Appellate Tribunal, the Commissioner is not empowered to revise such an order. In, this case, it is an undisputed fact that the appellant had preferred an appeal against the order of assessment and claimed deduction of Rs.3,73,241. It is true that the disputes raised in the revision were not at .all raised in that appeal. But, the fact remains that the order under appeal was a composite order, dealing with all these disputes and when challenged, shall be deemed to have been examined by the first respondent (sic). While exercising appellate jurisdiction, the word "order" used in clause (c) of subsection (4) denotes an order in its entirety and not piece meal. It is immaterial whether only a part of that order was challenged. In our view, the provision is very clear and provides an express bar and prohibition against exercising revision jurisdiction in a case where the order has already been made the subject‑matter of an appeal.

Under these circumstances, we do not find that the interpretation as above requires any further fortification by judicial pronouncements. Of course, in support of his submissions, learned counsel has relied upon several judgments which were also cited before the learned Single Judge. The learned Judge has already dealt in detail with all these judgments and has come to an unimpeachable conclusion that in such circumstances, revision is not maintainable. On the facts, we also find no reason to interfere with the finding of the learned Judge since it is sans any infirmity, illegality or a patent error.

The scheme of providing an express bar and prohibition in entertaining a revision application where the order had already been made a subject‑matter of appeal is also consistent with the basic principles of the Civil Procedure Code, as relating to civil litigation. Under the procedural law also, multiplicity of litigation in respect of the same cause of action is depreciated and discouraged. The object of such rule is to avoid multiplicity and prevent further litigation. The entire claim arising from the same cause of action should be got adjudicated in the same proceedings. Such bar is contained in Order 2, rule 2 of the Civil Procedure Code, and if the plaintiff omits to agitate or intentionally relinquishes any portion of claim arising from the same cause of action, he shall be precluded from agitating in another litigation in another proceeding, the portion so omitted or relinquished. This bar is also based on the principle that the party resisting a claim should not be vexed again and again for the same cause of action.

Even remotely, the provisions of section 11 of the Civil Procedure Code, can also lend support to the express prohibition contained in section 264(4)(c). Section 11 of the Civil Procedure Code deals with principles of res judicata. It provides an express bar to try the same issue which was directly or substantially in issue between the same parties in a former proceeding. This rule casts an obligation upon the party agitating rights to raise all the grounds of defence or attack available in a particular proceeding, and if the party fails to include the grounds of defence or attack, which otherwise ought to have been made in the former proceedings, should be precluded from raising such grounds of attack or defence in any other proceeding. This principle is known as the principle of constructive res judicata as contained in Explanation IV to section 11 of the Civil Procedure Code. Explanation IV reads as under:

Any matter which might and ought to have been made a ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit.

The cause of action is the original assessment order disallowing certain claims. The order of assessment had already been challenged once in appeal and, therefore, applying the‑ above principles to the case in hand, while preferring the appeal, the appellant ought to have attacked the order on all the grounds available including the grant of depreciation or deduction of a sum of Rs.6,20,023, being the amount of incremental liability towards gratuity. This finding is also a part of the said composite order and is inseparable from the rest of the order.

For the reasons stated above, we affirm the judgment under appeal and hold that the first respondent rightly rejected the second revision application exercising powers under section 264(4)(c) of the Act. Thus, we find no merit in these appeals and dismiss the same with no order as to costs.

M.B.A./346/FC Appeals dismissed.