Income Tax Appellate Tribunal - Chennai
Smt. N. Sasikala vs Deputy Commissioner Of Income Tax on 18 October, 2007
Equivalent citations: (2008)115TTJ(CHENNAI)563
ORDER
Chandra Poojari, A.M.
1. This appeal by the assessee is directed against the order of the CIT under Section 263 dt. 14th March, 2002. The ground raised by the assessee is that the CIT should have appreciated that the powers conferred under Section 263 do not permit a roving enquiry for reopening of issues already considered and concluded.
2. The brief facts of the issue are that for the asst. yr. 1994-95 the assessment order was passed by the AO under Section 144 on 27th March, 1997 determining income at Rs. 29,60,900 as against declared income of Rs. 24,06,900 by the assessee. The assessee went in appeal before CIT(A) disputing the additions relating to disallowance of depreciation on vehicles; disallowance of loss from M/s Metal King; disallowance of agricultural income by treating it as undisclosed income totalling to Rs. 5,62,621. The CIT(A) vide order dt. 26th March, 1998 set aside the assessment order with following observations:
(i) The AO had failed to conduct investigation in respect of the claim of the assessee that she was carrying on business;
(ii) The AO should conduct further enquiues in respect of names and addresses of customers to find out whether or not the business was carried on;
(iii) The claim of loss from business should be further gone into;
(iv) The AO should examine the confirmation of the lease transactions concerned.
In pursuance to the above directions the AO completed the assessment on 20th March, 2000 and determined the income at Rs. 28,86,030. This assessment order was a giving effect order in pursuance to CIT(A)'s order dt. 26th March, 1998. Incidentally this assessment order was also passed under Section 144 of the IT Act. The CIT considered this order as erroneous and prejudicial to the interests of the Revenue and accordingly he issued notice under Section 263 on 18th Jan., 2002 on the following reasons:
(i) Assets totalling Rs. 3,49,683 referred to in that report were not reflected in the trial balance filed and, therefore, remained to be explained;
(ii) Item No. 33 of the assets list mentioned acquisition of machinery costing Rs. 20,16,000. There is no mention regarding explaining the nature of this transaction;
(iii) There is mention in the charge-sheet about the construction of a house amounting to Rs. 6,38,325 in Trichy 'said to be between June 1992 and 1993' and the sources for this investment may have to be considered;
(iv) Jay Real Estate had acquired a property at T. Nagar for which Rs. 2,00,000 was paid in cash on 31st March, 1994. The sources for this payment 'had to be' capital contribution of the partners and it is not reflected in the accounts of the other partners. Therefore, it had to be explained by the assessee;
(v) Similarly, Jay Farm House of which the assessee was a partner had acquired a property for Rs. 6,50,000 at Sholinganallur and the income-tax records of the other partners do not show any contribution. Therefore, this 'has to be' enquired in the assessee's hands;
(vi) Similarly, sources for the cash deposits in the firm of Jay Farm House totalling Rs. 11,34,000 had to be considered in the assessee's hands;
(vii) Similarly, sources for investments totalling Rs. 20,05,800 in Green Farm House had to be considered;
(viii) No enquiry was made in the course of the assessment proceedings which culminated in an order under Section 144 of the Act.
Accordingly, the CIT considered the reply of the assessee. Finally he set aside the assessment order dt. 20th March, 2000 and directed the AO to make full enquiry and complete the assessment in accordance with law. Against this order of the CIT, the assessee is in appeal before us.
3. The learned Counsel for the assessee submitted as follows:
(a) The assessment order in question which is the subject-matter of order under Section 263 was in pursuance of the directions of the CIT(A) contained in his order dt. 26th March, 1998 and the AO had to obey his order and could not travel beyond his directions, therefore, the said order of AO cannot be considered erroneous.
(b) The AO has no power to ignore binding decision-Garden Silk Mills Ltd. v. CIT .
(c) CIT(A) himself could not have travelled beyond the subject-matter of appeal and given a 'wide' set aside.
(d) If at all, there was a mistake, it was in the order dt. 27th March, 1997 which cannot be rectified after 27th March, 1999.
He further submitted that without prejudice to the above,
(i) the copy of the report of the DVAC is a mere statement of allegations by a police officer, the correctness of which, till date had not been established;
(ii) the CIT had no material, except the vague allegations contained therein to be satisfied that the order was erroneous or prejudicial to the Revenue;
(iii) the CIT had not even applied his mind to satisfy himself whether allegations therein were correct;
(iv) his order itself is vague;
(v) The charge-sheet filed by DVAC cannot be considered as 'record relating to the proceedings under this Act;
(vi) Power cannot be exercised for starting fishing and roving enquiries- CIT v. Gabriel India Ltd. .
It was further submitted on behalf of the assessee that the AO could not have travelled beyond the directions of the CIT(A) in view of the judgment in the cases of:
(a) CIT v. Late Jawaharlal Nagpal Through LRs wherein it is held that in the fresh assessment proceedings after the original assessment had been set aside the ITO had no jurisdiction to tax new source of income;
(b) Kartar Singh v. CIT wherein it is held that where an assessment is set aside by the Tribunal and remanded to the ITO, it is not open to him to introduce into the assessment new sources of income so as to enhance the assessment. Any power to enhance is confined to the old sources of income which were the subject-matter of appeal to the Tribunal [Sri Gajalakshmi Ginning Factory Ltd. v. CIT applied];
(c) pp. 4865 to 4870 of Chaturvedi.-The learned Counsel for the assessee submitted that the order of the AO cannot be said to be erroneous if he merely follows a decision of a higher authority. The orders of the Tribunal and High Court are binding upon the AO [K.N. Agrawal v. CIT (1991) 100 CTR (All) 170 : (1991) 189 ITR 769 at p. 772 (All)]. The CIT(A) had no power to go beyond the source of income considered in the original assessment (pp. 7678 to 7680 of Chaturvedi). If at all there was an error, it was in the order dt. 27th March, 1997 which is beyond 2 years of the date of the CITs order [CIT v. Alagendran Finance Ltd. }. The learned Counsel submits that the DVAC's report is a mere complaint by a police officer, the correctness of which is not yet established and that even in the charge-sheet, DVAC has alleged that the assessee is a merely benamidar of JJ. Many of the additions suggested are already considered by the same AO in the same circle under the same CIT. He further submitted that DVAC's report is not a record relating to the 'proceedings under this Act': CIT can under Section 263 call for and examine the 'record' of 'any proceedings under this Act'. He submitted that DVAC's charge-sheet is not a proceeding under this Act; it cannot use his power as a substitute for action under Section 147 [58 STC 65; H. Kenche Gowda v. State of Karnataka of Chaturvedi}. He submitted that even DVAC has merely alleged that the assessee was a benamidar of CM. He contended that the order of AO is (sic-not) erroneous and prejudicial to the interest of Revenue. He placed reliance here on:
(a) Malabar Industries Co. Ltd. v. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC);
(b) CIT v. Seshasayee Paper & Boards Ltd. ;
(c) CIT v. Trustees Anupam Charitable Trust (1987) 65 CTR (Raj) 30 : (1987) 167 ITR 129 (Raj);
(d) K.N. Agarwal v. CIT (supra);
(e) Garden Silk Mills Ltd. v. CIT (supra).
He submitted that power is not arbitrary or unchartered and cannot be used for starting fishing enquiry [CIT v. Gabriel India Ltd. (supra)]. He further submitted that on facts additions suggested by him have been considered and accepted by same officer in the hands of the respective owners, all of whom are assessees on the file of the same AO and same CIT. He submitted that the entire property had been let out for 12 months and therefore there could not have been any reconstruction. He further submitted that during the course of the last hearing the learned Departmental Representative had referred to a number of decisions to which the assessee responds as follows:
(i) In the cases reported in (i) K.A. Ramaswamy Chettiar and Anr. v. CIT (ii) CIT v. M.N. Sulaiman and (iii) CIT v. Lakshmi Machine Works Ltd. deal with materials found during the course of search under the IT Act or the valuer's report which the AO had asked for but not received at the time of assessment and it was held that these were 'records relating to the proceedings under this Act';
(ii) In (supra) it was found that the relief which the AO had given in the original assessments was found by the CIT by-perusing the assessment records as having been given by not following the procedure;
(iii) In (i) CIT v. Arunaben Sumankumar (ii) 255 ITR 357 (sic) (iii) CIT v. Vallabhdas Vithaldas and (iv) CIT v. Shree Manjunathesware Packing Products & Camphor Works (1997) 143 CTR (SC) 406 : (1998) 231 ITR 53 (SC). the statements recorded from third person during the search proceedings would come within the meaning of the word 'record'.
(iv) If the CIT had perused the records which he should have of (i) Anjaneya Printers (P) Ltd., (ii) Jay Farm House, and (iii) Green Farm ;House, etc. who are all assessees under the same AO and CIT he could have found that all of them have been fully accounted for and explained. Thus, the CIT has not followed the principles laid down by the Supreme Court and Gujarat High Court.
(v) It was found that in Indian Textiles v. CIT and South India Steel Rolling Mills v. CIT that the AO has wrongly allowed development rebate.
(vi) The learned Counsel submitted that it would be seen from all the cases cited supra that the words 'relating to the proceedings under the IT Act' had been interpreted to mean (i) papers seized at the time of search including third person, (ii) valuation report, (iii) wrong relief already granted and (iv) perusal of income-tax records relating to other assessees-all under the IT Act-and nowhere it has been held that the records in any proceedings under some other Act can be used for Section 263 even though they could have been used for purposes of reopening under Section 147 of the Act.
4. The learned Departmental Representative submitted that the CIT(A) vide order dt. 26th March, 1998 set aside the order of the AO dt. 27th March, 1997 passed under Section 144 de novo and passed fresh order and there is no surviving assessment order. The assessment order was cancelled to pass fresh order after carrying out detailed enquiry and giving proper opportunity to the assessee. He drew our attention to para 13 of the CIT(A)'s order which is as follows:
The AO is directed to conduct further enquiries in respect of names and addresses of customers, programme organizers, technical persons and other such staff members and examine them to find out whether or not the business was in fact carried out. The appellant should be given fresh opportunity to produce relevant books of account, documents and employees for examination and other such evidence. The ownership and use of vehicles as also the claim that the actual expenses on running and maintenance were reimbursed by the customers concerned should also be examined. It should also be found out whether any evidence in the form of documents, books of account, etc. were found during the course of search of the appellant's or some connected persons premises by the State agencies. The material so found, if any, should be taken into consideration. Similarly statements given to the State authorities for explaining the deposits, investments, etc. should also be taken into consideration while deciding the issue.
Further he submitted that the report from the Directorate of Vigilance and Anti Corruption, Government of Tamil Nadu (DVAC) which carried out the search in the case of Miss J. Jayalalitha on 7th Dec, 1996 was submitted to the AO on first occasion on 24th July, 1997. As per this report the following assets not reflected in the income-tax records of the assessee were:
Description of the asset Amount
4.41 acres of dry land in S. No. 198/180 F of Velagapuram 37,410.00
(Doc No. 1573/93 dt 28.10.93 of SRO, Uthukottai)
1.42 acres of dry land in S. No. 198/130 F3, 198.159 B of 12,060.00
Velagapuram Village (Doc. No. 1574/93 of SRO, Uthukottai)
1.42 acres of dry land in S. No. 198/180 F12, 198/161 A, 12,060.00
198/160A, 198/159 D2, 198/158 B2, 198/157 B1 of
Velakkapuram (Doc No. 1576/93 dt. 28.10.93 of SRO,
Uthukottai)
1.42 acres of dry land in S. No. 198/180 F11, 179A, 163A, 12,060.00
16 2A, 161B, 160B, 157B2, 156B, 155 Bl of Velakkapuram
Village (Doc No. 1576/93 dt. 28.10.93 of SRO, Uthukottai)
4.41 acres of dry land in S. No. 198 of Velagappuram (Doc 37,385.00
No. 1577/93 dt. 28.10.93 of SRO, Uthukottai)
1.42 acres of dry land in S. No. 198 of Velagapuram Village 12,060.00
(Doc No. 1578/93 dt. 28.10.93 of SRO, Uthukottai)
1.42 acres in S. No. 198 of Velagapuram Village (Doc No. 12,060.00
1579/93 dt. 28.10.93 of SRO, Uthukottai)
4.41 acres of dry land in S. No. 198 of Velagapuram Village 37,380.70
(Doc No. 1580/93 dt. 28.10.93 of SRO, Uthukottai)
4.41 acres of dry land in S. No. 198 of Velagapuram Village 37,385.00
(Doc No. 1581/93 dt.28.10.93 of SRO, Uthukottai)
4.41 acres of dry land in S. No. 198 of Velagapuram Village 37,385.00
(Doc. No. 1582/93 dt. 28.10.93 of SRO, Uthukottai)
4.41 acres of dry land in S. No. 198 of Velagapuram Village 12,060.00
(Doc. No. 1583/93 dt. 28.10.93 of SRO, Uthukottai)
1.41 acres of dry land in S. No. 198 of Velagapuram Village 37,410.00
(Doc No. 1584/93 dt. 28.10.93)
4.41 acres of dry land in S. No. 198 of Velagapuram Village 37,410.00
(Doc No. 1585/93 dt. 28.10.93 of SRO, Uthukottai)
4.42 acres of land in S. No. 198 of Velagapuram Village (Doc 12,060.00
No. 1586/93 dt. 28.10.93 of SRO, Uthukottai)
41 cents of dry land in S. No. 198 of Velagapuram Village 3,498.00
(Doc No. 1587/93 dt. 28.10.93 of SRO, Uthukottai)
----------------
3,49,683.70
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These facts though available on record the AO while passing the assessment order dt. 20th March, 2000 did not consider them. Further the learned Departmental Representative submitted as follows:
(a) The CIT has revised the order of the AO under Section 263 on the ground that it is erroneous and prejudicial to the Revenue. The CIT(A) did not give any specific order or direction to the AO on remand but had clearly said that the entire assessment was set aside to be finalized afresh after carrying out enquiries and providing opportunity to the assessee. There is no direction regarding any aspect of income to be assessed or deductions to be granted etc. Thus, the entire assessment was open before the AO who ought to have made proper enquiries and thereafter passed the assessment order.
(b) The order of the AO was erroneous insofar as he had not made any enquiries regarding source of investment of several movable and immovable properties acquired by the assessee, although it was common knowledge even at the time of passing the assessment order that huge assets in the name of the assessee, being a close associate of the then Chief Minister, were also found from the charge-sheets filed in the case of Miss J. Jayalalitha under the Prevention of Corruption Act. This erroneous order resulted in great prejudice to the Revenue, inasmuch as large amounts were not brought into the tax net at all. Thus the twin conditions that the order to be revised under Section 263 should be both erroneous and prejudicial to the Revenue are satisfied.
(c) The following case law would clearly illustrate that the impugned order is correct and valid:
(i) It has been held by the Madras High Court in the case of Indian Textiles v. CIT (supra) that where the ITO has granted relief without verification, action under Section 263 is justified and the CIT was right in remitting the matter to the ITO to verify facts.
(ii) It has also been held by the Madras High Court in the case of Express Newspapers (P) Ltd. v. CIT that an order by the CIT under Section 263 setting aside the assessment to be re-done is not to be interfered with unless the exercise of power is arbitrary.
(iii) It has also been held in the case of CIT v. Seshasayee Paper & Boards Ltd. (supra) that the CIT's powers are very wide, and he can direct a fresh assessment and need not record a final conclusion.
(iv) In the case of A.A. Ramasamy Chettiar v. CIT (supra) it has been held that failure by the ITO to make enquiries, where such enquiry is warranted, results in an order erroneous and prejudicial to the Revenue.
(v) It has been held in the following cases that 'record' is not confined to material available with the ITO:
(i) CIT v. Shree Manjunatheswar Packing Products & Camphor Works (supra)-'record' is not confined to material available to the AO.
(ii) CIT v. Export House (supra)-'record' means record available at the time of examination by CIT.
(iii) (supra)-CIT is entitled to take into account events subsequent to the ITO's order.
(iv) CIT v. Arunaben Sumankumar (supra)-Record of third person can also be taken into account by the CIT for revision under Section 263.
(v) CIT v. Vallabhdas Vithaldas and Anr. (supra)-After amendment of Section 263, statements in third parties cases also can be treated as 'record'.
(vi) CWT v. S.V. Sivarathina Pandian ; CIT v. M.N. Sulaiman (supra)-CIT can direct the officer to re-do the assessment based on valuation report received subsequently.
(d) The appellant's contention and case law relied upon to the effect that the error envisaged under Section 263 cannot depend on the possibility of guesswork are not at all relevant to the facts of this case, where the error has been detected not on the basis of guesswork, but substantial evidence brought out in a proceeding under the Prevention of Corruption Act, as also the DVAC's report. The remand is not for the purpose of making a roving enquiry, but to look into facts available by way of DVAC's report, charge-sheet filed in a connected matter, etc. to come to the correct conclusion on facts.
(e) The order of the AO was clearly erroneous and prejudicial to the interest of the Revenue inasmuch as he had not made proper enquiries regarding source of funds of the assessee for purchase of agricultural land, machinery, renovation and additional construction of house, purchase of farm house by firm in such assessee is a managing partner, payment of cash by firm in which assessee is a partner, etc. resulting in huge loss of revenue.
(f) The CIT's order has only set aside the assessment order with a direction to enquire into the various aspects brought out in the DVAC report, and bring to tax unexplained investments. It is well within his powers under Section 263 as explained in the case law cited supra.
(g) The order of the CIT is not time-barred, as the order sought to be revised is dt. 20th March, 2000 and the CIT's order under Section 263 is dt. 14th March, 2002 within a period of two years.
It was therefore prayed that the appeal filed by the assessee may be dismissed as without merit.
5. We have heard the rival submissions and perused the material on record. Under Section 263 of the IT Act, the CIT may call for and examine the record of any proceeding if he considers that any order passed therein by the AO is erroneous and prejudicial to the interests of the Revenue. The CIT may after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. As per Section 263 the CIT can exercise such power when the following factors exist:
(i) There should be a proceeding under the Act;
(ii) In such proceeding the AO must have passed an order;
(iii) The CIT should consider that the order so passed is erroneous;
(iv) The CIT should consider that the order so passed is prejudicial to the interest of Revenue.
6. It is held in the case of CIT v. Gabriel India Ltd. (supra) that suo motu revision can be exercised by the CIT only on examination of record under this Act if he considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue. It is not an arbitrary power. It can be exercised only on fulfilling of requirements laid down in Section 263(1) of the IT Act. The consideration of the CIT as to whether the order is erroneous insofar as it is prejudicial to the interest of the Revenue must be based on material on record of proceedings called for. If there are no material on record on the basis of which it can be said that the CIT acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The CIT cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. The first requirement to exercise the power suo motu is that the order is erroneous. Secondly it should be prejudicial to the interests of Revenue. If the order is erroneous but not prejudicial, CIT cannot exercise the power under Section 263. Every erroneous order cannot be the subject-matter of revision because second requirement must also be fulfilled. There must be prima facie material on record to show that tax which was lawfully eligible was not imposed or by application of relevant statute on an incorrect interpretation a lesser tax than was just has been imposed. Thus under Section 263 the revisionary power can be exercised only if the order of the AO is erroneous and prejudicial to the interests of Revenue. In the absence of any one of the said conditions the revisionary power cannot be exercised by the CIT. The Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (supra) has observed as follows:
A bare reading of Section 263 of the IT Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the CIT suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interest of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it not erroneous but is prejudicial to the Revenue-recourse cannot be had to Section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the AO, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the ITO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of the AO, cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law.
When an order of the AO is erroneous and granted relief not in accordance with law and secondly when the AO has failed to make out a case as is expected from him because he is an adjudicator as well as investigator, he cannot remain passive. It is the duty of the AO to invoke an enquiry. If the AO has failed to make an enquiry to unearth the true facts the order is said to be erroneous. In the present case the AO is not doing the original assessment. The AO was to give effect to CIT(A)'s order dt. 26th March, 1998. The CIT(A) in para 16 of that order directed as follows:
In the light of the foregoing the entire assessment is set aside with the direction to finalise the assessment afresh after carrying out enquiries providing proper opportunity to appellant considering her submissions and following due procedure laid down by the law.
What is important is the direction given by the CIT(A) is in pursuance to the grounds of appeal before him. The CIT(A) considered the grounds relating to the following issues:
(i) depreciation on vehicles;
(ii) disallowance from loss from M/s Metal King, and
(iii) disallowance of agricultural income.
7. The CIT(A) set aside the issue to the file of the AO to consider these three issues only. He has not given any direction to consider any other issue. In such circumstances, is the AO expected to go beyond the issues considered by the CIT(A), more precisely, which are not subject-matter of first appeal before the CIT(A) ? In our humble opinion when an assessment order is set aside by appellate authority to AO, it is not open to him to go beyond the issues, to new issues thereby enhancing the assessment. His jurisdiction is limited to the issues which were subject-matter of appeal. We place reliance on the decision in the case of Sri Gajalakshmi Ginning Factory Ltd. v. CIT (supra). In the present case, the AO has carried out the directions given by the CIT(A) and as such we cannot find that AO's action is erroneous. His duty is to follow the direction of the CIT(A). He followed the direction of the CIT(A). The CIT(A) never directed to consider the DVAC report dt. 7th Dec, 1996 issued in the case of Miss J. Jayalalitha under Prevention of Corruption Act. Further, in our opinion, the DVAC report is not a record to the proceedings under the IT Act. It can be considered for reopening the assessment, not for invoking the provisions under Section 263. When the order is set aside to consider de novo the issues which are subject-matter of appeal, it is not expected of the AO to consider fresh issues while passing the giving effect order. In our humble opinion the AO has not commited any mistake by not considering the DVAC report. To consider the DVAC report is out of his jurisdiction. Accordingly, it cannot be revised. There may be a mistake in not considering the DVAC report in the original assessment order dt. 27th March, 1997 but not in order passed on 20th March, 2000 which is only a giving effect order. The revision order passed on 14th March, 2002 is time-barred to consider the revision of order dt. 27th March, 1997. To sum up the assessment order dt. 20th March, 2000 is not erroneous though it was prejudicial to the interests of Revenue, since the AO has carried out the direction given by the CIT(A) vide order dt. 26th March, 1998 and he limited his findings to the extent which was subject matter of appeal before the C1T(A) and he is not expected to consider any extraneous issue while passing the giving effect order.
8. Further, we draw support from the judgment of the Supreme Court in the case of CIT v. Alagendran Finance Ltd. (supra) wherein it is held as follows:
Held, affirming the decision of the High Court, that the CIT had sought to revise only that part of the order of assessment which related to lease equalisation fund; but the proceedings for reassessment had nothing to do with that item of income. The doctrine of merger did not apply in a case of this nature : the period of limitation commenced from the dates of the original assessments and not from the reassessments since the latter had not had anything to do with the lease equalisation fund. This was not a case where the subject-matter of reassessment and the subject-matter of the assessment were the same.
9. There may not be any doubt or dispute that once an order of assessment is reopened, the previous underassessment will be held to be set aside and the whole proceedings would start afresh, but that would not mean that even when the subject-matter of reassessment is distinct and different, the entire proceeding would be deemed to have been reopened.
Explanation (c) appended to Sub-section (1) of Section 263 of the IT Act, 1961, which deals with the power of the CIT in revision, is clear and unambiguous, as in terms thereof the doctrine of merger applies only in respect of such items which were the subject-matter of appeal and not in respect of those which were not.
10. Accordingly, we quash the revision order of the CIT under Section 263.
11. In the result, the appeal is allowed.