Income Tax Appellate Tribunal - Madras
Inspecting Assistant Commissioner vs Tamil Nadu Printers And Traders (P.) ... on 23 August, 1988
Equivalent citations: [1989]29ITD62(MAD)
ORDER
George Cheriyan, Vice-President
1. This appeal is by the Revenue. The appeal relates to the assessment year 1978-79.
2. To appreciate the contentions of the Revenue, it is necessary to briefly state certain facts. The appeal before us relates to the assessment year 1978-79. This assessment year was one of the assessment years covered by a common order passed fry the Commissioner of Income-tax under Section 263 of the Income-tax Act, 1961 for the assessment years 1971-72, 1974-75, 1977-78 and 1978-79. This order of the Commissioner under Section 263 was dated 8-1-1985. The Commissioner of Income-tax found in the said order that the business loss originally computed for the assessment year 1971-72 at Rs. 8,66,000 was in the course of certain rectifications made by the ITO taken at a figure of Rs. 9,29,528 resulting in the business loss being overstated in 1971-72 by Rs. 63,528. This overstating of the business loss in the year 1971-72 had its effect on the carried forward business loss right up to the assessment year 1982-83 and it affected also the assessment year 1978-79 which is now under appeal before us.
3. The Commissioner of Income-tax also found that there was a mistake in allowing carry forward of unabsorbed 80J profits relating to the assessment year 1969-70 because the 7-year time limit had ended with the assessment year 1976-77 and it should not have been carried forward to the assessment year 1977-78. For rectifying these mistakes, the Commissioner of Income-tax issued notice under Section 263, considered the reply of the assessee and in paragraph 6 of his order dated 8-1-1985 stated as under:
To set right the mistakes pointed out in the carry forward of business loss of 1971-72 and 80J profits of 1969-70 and 1970-71, I am setting aside the assessments for 1971-72, 1974-75, 1977-78 and 1978-79 with a direction to the Inspecting Assistant Commissioner (Asst.) Range IV to re-do the same, after giving adequate opportunity to the assessee.
4. On receipt of the order of the Commissioner of Income-tax under Section 263, the IAC (Asst.) who held jurisdiction over the file proposed to make a rectification. The IAC has very fairly set out in the preamble to his common order relating to the assessment years 1971-72, 1974-75, 1977-78 and 1978-79 dated 2nd March, 1985 which is now in appeal before us that the Commissioner of Income-tax in his order dated 8-1-1985 has set aside the assessment orders for rectification of these mistakes:
(i) correct business loss for the year 1971-72 was Rs. 8,66,000 while set off was wrongly given at Rs. 9,29,528. Excess carry forward Rs. 63,528.
(ii) The incorrect carry forward loss of 1971-72 of Rs. 9,29,528 was given set off in 1974-75 against Rs. 8,66,000.
(iii) 80J relief relating to assessment years 1970-71 and 1971-72 has wrongly been given set off in 1977-78 as the limit of 7 years for carry forward of such relief lapsed in the asst. year 1976-77 itself. Such excess 80J relief set off amounted to Rs. 1,33,091.
(iv) Similarly, the unabsorbed 80J relief of Rs. 1,322 relating to asst. year 1970-71 was wrongly given set off in the asst. year 1978-79.
The IAC rectified the mistakes referred to above in the assessment years 1971-72, 1974-75, 1975-76 and 1976-77 as also in the assessment year 1978-79. With these rectifications, the assessee is not aggrieved.
5. In the assessment year 1978-79, however, the IAC was of the view that the assessee should not be allowed any deduction under Section 80QQ.
6. At this stage it would be relevant to state that in the original assessment for 1978-79 made on 23-12-1980, no relief was allowed under Section 80QQ nor was such relief allowed in the rectification made under Section 154 on 14-7-1981 nor in the further rectification under Section 154 on 11-3-1982. Thereafter, the assessment had been set aside to be re-done to recalculate depreciation and accordingly an order passed on 25-3-1983 in which also no Section 80QQ (deduction) was allowed but on 10-4-1984 an order of rectification was passed under Section 154 allowing deduction under Section 80QQ of Rs. 64,118, thus reducing the total income assessed of Rs. 3,20,591 by the order dated 25-3-1983 to Rs. 2,56,470. It is this relief of Rs. 64,118 which the IAC has sought to withdraw. He withdrew this relief under Section 80QQ observing as under:
The assessee is also not entitled to any deduction Under Section 80QQ as the net profit as per P & L A/c. included the following items which are not attributable to the publication of books.:
Rs.
Rent received 500.00
Interest 1,79,159.00
Misc. Receipts 30,964.00
Profit on Sale of Machinery 4,70,320.00
Total 6,80,943.00
If this is excluded, there is no profit attributable to the publication of books to grant deduction Under Section 80QQ.
Rs.
Total Income 3,21,940
Income-tax thereon 1,93,164
Surcharge 9,658
2,02,822
Less: At paid. 9,240
1,93,582
Add: Int. Under Section 215 as charged originally 61,664
Total tax payable 2,55,246.
7. The assessee went up in appeal to the CIT(A). The contention was that the order under Section 263 passed by the Commissioner dated 8-1-1985 was an order of limited setting aside and the IAC should have confined himself to rectifying mistakes relating to carried forward of loss and Section 80J relief and should not have withdrawn deduction allowed under Section 80QQ. The CIT(A), after quoting from the order of the Commissioner under Section 263 dated 8-1-1985, agreed with the assessee that the IAC had exceeded his powers since the setting aside was only for a limited purpose.
8. On merits also the Commissioner (A) was of the view that the withdrawal of relief under Section 80QQ was incorrect.
9. The department is aggrieved. The first submission of the learned Departmental Representative was that when the Commissioner of Income-tax under Section 263 had set aside the assessment, the entire assessment stood set aside and when this was so, in giving effect to that order and in making a fresh assessment the IAC was duty-bound to rectify all mistakes. Section 80QQ relief, it is stated, was wrongly allowed and, therefore, it had to be deducted. The learned Departmental Representative relied on the decisions of the Madras High Court in the case of CIT v. Seth Manicklal Fomra [1975] 99 ITR 470, of the Madhya Pradesh High Court in the case of Kundanlal Maru v. CIT [1982] 135 ITR 84 and of the Rajasthan High Court in the case of Rambilas Chandram v. CIT [1985] 156 ITR 344 in support of this proposition.
10. The learned counsel for the assessee, on the other hand, submitted that the decision in the case of Seth Manicklal Fomra (supra) was explained by the Madras High Court in the case of CIT v. S.K. Vlagammal Achi [1987] 166 ITR 210. He emphasised that this was a case where there was a limited setting aside of the assessment and, therefore, the IAC in giving effect to the order of the Commissioner should not have gone beyond rectifying the mistakes for which the assessment was set aside.
11. The learned Departmental Representative submitted that even under the provisions of Section 263 where the CIT was setting aside an assessment, then the whole assessment stood set aside and the ratio of the decision in the case of Seth Manicklal Fomra (supra) clearly and squarely applied.
12. We have considered the rival submissions. The powers of the AAC in disposing of appeals before him, as set out in Section 251, are as under:
251(1). In disposing of an appeal, the Appellate Assistant Commissioner shall have the following powers:--
(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or he may set aside the assessment and refer the case back to the Income-tax Officer for making a fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner and after making such further enquiry as may be necessary, and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment.
Section 251(1)(a) deals with his powers in relation to an appeal against an order of assessment. It speaks of one of the powers being "he may set aside the assessment". In the case of Seth Manicklal Forma (supra), stress was placed on this phraseology to canvass the contention that when an assessment was set aside, the whole assessment stood set aside. All the three cases relied on by the learned Departmental Representative relate to cases which were set aside by the AAO. In all the cases, the High Courts have held that when an assessment stood set aside, then all matters could be considered and fresh items could be broifght to tax. In the case of Kundanlal Maru (supra), there was express direction of the AAC that the whole matter was to be re-examined. In all the three cases, i.e., Seth Manicklal Forma (supra), Kundanlal Maru (supra) and Rambilas Chandram (supra), the setting aside was in toto factually of the assessment as far as the phraseology of the appellate orders were concerned.
13. When we come to the provisions of Section 263(1), the provision reads as under:
263(1). The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he 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.
The Commissioner under Section 263 can pass such orders as the circumstances of the case justify and the provision goes to clarify that such order may include "an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment". The present is not a case of cancelling the assessment. It is a case of setting aside an assessment and directing a fresh assessment. It cannot, therefore, be strictly said to be a specific type of order mentioned under Section 263, because cancellation and setting aside are two different concepts. The present is a case where the Commissioner has passed such order as the circumstances of the case justified. We now come to the phraseology used by the Commissioner. We have already set out paragraph 6 of his order which bears repetition as under:
6. To set right the mistakes pointed out in the carry forward of business loss of 1971-72 and 80J profits of 1969-70 and 1970-71, I am setting aside the assessments for 1971-72, 1974-75, 1977-78 and 1978-79 with a direction to the Inspecting Assistant Commissioner (Asst.) Range IV to re-do the same, after giving adequate opportunity to the assessee.
It is clear the setting aside is to set right mistakes pointed out by him in regard to two aspects, namely, carry forward of business loss and Section 80J profits. The judgment of the Madras High Court in the case of S.K. Ulagammal Achi (supra) which we reproduce in full reads as under:
V. Ramaswami, J. - We are not satisfied that any question of law arises out of the order of the Tribunal. Learned counsel for the Revenue vehemently contended, relying on a decision of this Court in CIT v. Seth Manicklal Fomra [1975] 99 ITR 470, that the Appellate Assistant Commissioner has no power to set aside an order of the Income-tax Officer partially and that, therefore, a question of law arises. Factually, we do not find that there is any partial setting aside of the order of assessment. In paragraph 10 of his order, the Appellate Assistant Commissioner has specifically stated that the aseessment is set aside. However, it is stated that since he had already deleted two items only and not decided with reference to the third item relating to cash credit, he has allowed the Income-tax Officer to reconsider. In form, however, he has set aside the entire order of the Income-tax Officer and remitted the matter.
The decision cited by learned counsel is also not an authority for the position that while setting aside the entire order of the Income-tax Officer, cannot restrict the enquiry or the points to be considered. Any other construction will only lead to an incongruous position. Though the Appellate Assistant Commissioner gave his findings on various items, his ultime findings, according to learned counsel, is that there should be a fresh enquiry and, therefore, the Income-tax Officer can stick to his earlier view. But, even if he sticks to his earlier view, when it comes up before the Appellate Assistant Commissioner, it could be reversed. Such a situation should not be created. In the circumstances, therefore, the petition will have to be and is dismissed with costs. Counsel's fee Rs. 250.
In the present case, though the terminology used by the Commissioner is that he was setting aside the assessments to re-do the same, such terminology cannot be read in isolation. The setting aside is for the express purpose of setting right the two mistakes pointed out, namely, relating to carry forward of business loss and 80J profits. It is only a setting aside in form but not setting aside in toto, which would permit de novo assessment being made examining all aspects afresh. The de novo assessment would have to be restricted to rectifying the two mistakes which had been pointed out by the Commissioner in his order under Section 263 which mistakes had been rectified by the IAC and relating to which the assessee has no dispute. The IAC could not have gone further. The ratio of the various judicial pronouncements relied on, on behalf of the revenue, do not help to further the case of the revenue. We are, therefore, in agreement with the CIT(A) that the IAC went beyond his jurisdiction in withdrawing the deduction allowed under Section 80QQ.
14. In the view that we have taken, the order of the IAC in so far as withdrawing the relief under Section 80QQ would stand modified. The relief of Rs. 64,118 stands allowed.
15. We have not expressed any opinion on merits for were the merits to be gone into, then each of the items which the IAC held was not attributable to the publication of books would have to be gone into afresh. The assessee had contended before us that the miscellaneous receipts related to sale of scrap, the profit on sale of machinery related to sale of printing machinery, etc., but on all these aspects we do not express any opinion as the issue had become academic in the light of our aforesaid conclusion. The result is the appeal of the department is dismissed.