Andhra HC (Pre-Telangana)
Commissioner Of Income-Tax, ... vs New Srinivasa Construction Company on 5 August, 1998
Equivalent citations: 1998(5)ALD520, [1999]236ITR503(AP)
Author: Y.V. Narayana
Bench: Y.V. Narayana
ORDER--No attempt by revenue to show that entire assessment order had not merged Ratio: In view of the merger of the entire order of the assessing officer for the assessment year in appeal revisional jurisdiction under section 263 could not be exercised. Held: Entire order of the assessing authority has fallen for consideration before the Commissioner (Appeals) and, as such, the entire order of the assessing authority has merged with the order of the Commissioner (Appeals). That being the finding of fact, no referable questions of law are available for the revenue to seek further opinion from this court. Application: Also to current assessment year A.Y.: 1987-88 Dt.Judg.: 5-8-1998 Income Tax Act 1961 s.263 ORDER Motilal B. Naik, J.
1. This ITC is filed under Seaion 256(2) of the Income Tax Act, 1961 against the decision of the Income Tax. Appellate Tribunal, Hyderabad 'A' Bench in RA No.526/Hyd of 1996 dated 26-3-1997, by the Commissioner of Income Tax, Vijayawada seeking a direction from this Court to the Income Tax Appellate Tribunal (for short 'the Tribunal') to state the case 'and refer the following questions of law formulated by it for the opinion of this Court, viz., (1) Whether on the facts and in the circumstances of the case, the ITAT is correct in law in cancelling the order passed under Section 263 of the IT Act on the ground that the order of the Assessing Officer merged in the order of the CIT (A)?
(2) Whether on the facts and in the circumstances of the case, the ITAT is correct in law in holding that the order of the Assessing Officer merged with the order of the CIT (A) in toto when only certain points have been agitated before and decided upon by the CIT (A) ?
(3) Whether on the facts and in the circumstances of the case, the ITAT is not incorrect in law in holding that the order of the Assessing Officer merged in the order of CIT (A) in view of the provisions of clause (c) of explanation to sub-section (1) of Section 263 while as per the said provisions, where any order referred to in sub-section (1) and passed by the Assessing Officer had been the subject-matter of any appeal, the powers of the Commissioner under sub-section (1) of Section 263 shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal?
2. Facts in brief arc as under:
For the assessment year 1987-88, the Assessee-firm carried business in contracts for the construction of canals under Telugu Ganga Project. The firm carried on transport contract also. During the previous year relevant to the assessment year 1987-88, the assessee firm received net bills of Rs.1,58,20,592/-. The assessee was also in receipt of commission from sub-contract, lease income from lorry and hire charges from compressor. The assessee has filed a return for the assessment year 1987-88 declaring an income of Rs.3,83,040/-. The assessment was completed under Section 143(3) of the Income Tax Act, 1961 (for short 'the Act) on a total income of Rs.16,46,990/- after making certain additions by the assessing authority.
3. Aggrieved by the order of assessment made by the assessing authority under Section 143(3) of the Act, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) who partly allowed the appeal reducing the income of the assessee to Rs.4,74,483/- from 16,46,990/-. As against the order of the CIT (Appeals), the Revenue carried the matter before the Income Tax Appellate Tribunal, Hyderabad. However, the Tribunal dismissed the appeal filed by the Revenue while confirming the orders passed by the CIT (Appeals).
4. While the appeal was pending before the Tribunal, the Commissioner of Income Tax, Guntur has initiated revision proceedings under Section 263 of the Act on the ground that the Assessing Officer has failed to conduct proper enquiries and set aside the order of the Assessing Officer dated 19-9-1989.
5. The Assessee being aggrieved by the order of the Commissioner of Income Tax, Guntur passed under Section 263 of the Act, preferred an appeal before the Tribunal. The Tribunal allowed the assessee's appeal holding that the order of the Assessing Officer dated 19-9-1989 has merged with the order dated 28-2-1992 passed by the CIT (Appeals) and hence the assessment itself was not correct in the eye of law.
6. Aggrieved by the order of the Tribunal passed in ITA No.107/Hyd of 93 dated 21-5-1996, the Revenue filed RA No.526/Hyd of 96 before the Tribunal to state the case and refer the questions of law formulated by it, as indicated above, for the opinion of this Court. However, the Tribunal by its order dated 26-3-1997 rejected the said RA against which the present ITC is filed.
7. Sri J.V. Prasad, learned Standing Counsel for the Revenue contended that the Commissioner of Income Tax while exercising powers under Section 263 of the Act is entitled to examine the order of the assessing authority if it is prejudicial to the interests of the Revalue, even though such order of the assessing authority was carried in appeal before the CIT (Appeals) and was decided by the CIT (Appeals). Learned Standing Counsel further contended that such of the facets of the order of the assessing authority which have not fallen for consideration before the CIT (Appeals), are open to the Commissioner of Income Tax, for review under Section 263 of the Act. It is in this background, learned Standing Counsel for the Revenue states that the view of the Tribunal in holding that the order passed by the Assessing Authority has merged with the order passed by the CIT (Appeals) in view of the provisions of clause (c) of explanation to sub-section (1) of Section 263 of the Act, is incorrect. Placing strong reliance on a decision of the Supreme Court reported in Commissioner of Income Tax v. Shri Arbuda Mills Limited, 231 ITR 50, learned Standing Counsel for the Revenue submitted that the order passed by the Assessing Authority dated 19-9-1989 has not merged in toto with the order passed by the C1T (Appeals) dated 28-2-1992 and the Commissioner of Income Tax, under Section 263 of the Act, is entitled to revise such facets of the order of the Assessing Authority which have not fallen for consideration before the CIT (Appeals).
8. On the contrary, Sri K.K. Viswanatham, learned Counsel for the assessee pleads that it was not the case of the Revenue before the Tribunal that the CIT (Appeals) had not examined various aspects of the order passed by the assessing authority. Counsel further stated that the order of the assessing authority dated 19-9-1989 has totally merged with the order of the CIT (Appeals) dated 28-2-1992 and as such, no facets in the order passed by the assessing authority were left open undecided by the CIT (Appeals) and as such the Commissioner of Income Tax cannot revise the order of the Assessing Authority under Section 263 of the Act. Counsel further stated that the Revenue had made a solitary submission before the Tribunal that the order passed by the CIT (Appeals) was not made available to the Commissioner of Income Tax while passing an order in exercise of his powers under Section 263 of the Act. Counsel contended that it is not open for the Revenue to contend before this Court that certain facets of the order of the assessing authority which are left untouched by the CIT (Appeals) are available for the Commissioner of Income Tax to revise under Section 263 of the Act, as this Court would be exercising a limited jurisdiction under Section 256(2) of the Act and sought rejection of this ITC.
9. We have heard both the learned Counsel at length and we have given our anxious consideration to the submissions made before us. The decision cited (231 ITR 50 supra) by the learned Standing Counsel for the Revenue, no doubt makes it clear that certain facets which have not fallen for consideration before the CIT (Appeals) with regard to the order of the Assessing Authority, the Commissioner of Income Tax while exercising powers under Section 263 of the Act, is entitled to revise the order of the Assessing Authority. But the moot question is whether the entire order of the assessing authority or only a part thereof has fallen for consideration before the CIT (Appeals) ?
10. On a perusal of the order passed by the Tribunal in ITA No.107/Hyd of 93, dated 21-5-1996, what we have noticed is, surprisingly, there was no contention raised by the Revenue before the Tribunal to the effect that the total order of the Assessing Authority did not fall for consideration before the CIT (Appeals) and the untouched parts of the Assessment Order are still open to the Commissioner of Income Tax to revise under Section 263 of the Act. That apart, no attempt was made before the Tribunal on behalf of the Revenue to point out such of those specific aspects of the assessing authority's order which have not been considered by the CIT (Appeals) so as to justify the order of the Commissioner of Income Tax passed under Section 263 of the Act. Significantly, the said grounds are now sought to be raised before this Court in this ITC which is filed under Section 256(2) of the Act
11. Under Section 256 (2) of the Income Tax Act, 1961 what is required to be seen by this Court is if the decision of the Tribunal is improper, than a direction could be issued to the Tribunal to State the case and refer the questions of law formulated in that regard for the opinion of this Court. In other words, the High Court, if not satisfied with the correctness of the decision of the Tribunal, could give a direction to the Tribunal for stating the case and referring the questions of law for the opinion of this Court.
12. In this case, the Tribunal, on a consideration of the submissions, has categorically found that the entire order of the assessing authority has fallen for consideration before the C1T (Appeals) and as such, the entire order of the assessing authority dated 19-9-1989 has merged with the order of the CIT (Appeals) dated 28-2-1992. That being the finding of fact, we are of the view that no referable questions of law are available for the Revenue to seek opinion from this Court. As already discussed, the only ground urged before the Tribunal on behalf of the Revenue is that the order passed by the CIT (Appeals) dated 28-2-1992 was not made available before the Commissioner of Income Tax at the time of passing the revised order under Section 263 of the Act on 27-3-1992. That being the factual position, it is not open to the Revenue to raise fresh grounds before this Court keeping in view the scope of the petition filed under Section 256 (2) of the Income Tax Act.
13. Having regard to the above discussion, we are inclined to hold that there are no merits in this ITC and the same is accordingly rejected.