1995 (12) TMI 411 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was right in holding that the Income-tax Officer (ITO) could not reconsider the issue of the claim of the assessee for inclusion of work-in-progress in the capital employed for the purpose of computing the relief under section 80J.
2. Whether the Tribunal was right in holding that no appeal will lie against the order of the ITO with regard to matters already decided by the Commissioner in exercise of his powers under section 263 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Tribunal's Decision on Reconsideration of Work-in-Progress:
The controversy pertains to the assessment year 1972-73. The original assessment was completed by the ITO on 30-11-1974, including Rs. 2,70,023 as the value of capital work-in-progress for the purpose of relief under section 80J. The Commissioner, upon examining the records, found the assessment erroneous and prejudicial to the revenue's interests. He initiated proceedings under section 263, ultimately withdrawing the relief granted under section 80J and directing the ITO to redetermine the relief after giving the assessee an opportunity to be heard. The appeal against the Commissioner's revisional order was dismissed as barred by limitation.

In compliance with the Commissioner's direction, the ITO recalculated the relief under section 80J, excluding the work-in-progress from the capital employed, as per the Commissioner's findings. The assessee's appeal to the Commissioner (Appeals) was dismissed on the grounds that the ITO was merely giving effect to the Commissioner's revisional order, which had attained finality. The Tribunal upheld this view, stating that the ITO could not reconsider issues already decided by the Commissioner.

2. Tribunal's Decision on Maintainability of Appeal:
The Tribunal clarified that an appeal against a fresh order by the ITO is maintainable only for matters not concluded by previous orders of appellate or revisional authorities. The Tribunal examined whether the Commissioner, in his order under section 263, had recorded definite findings on the inclusion of work-in-progress in the capital employed for section 80J relief. The Tribunal found that the Commissioner had indeed decided that work-in-progress could not be included in the capital employed and had also determined that the written down value of assets should be reduced by the extra shift allowance. Consequently, the ITO was bound to follow these findings.

The Tribunal's decision was based on the principle that the findings of the Commissioner, which had become final due to the dismissal of the assessee's appeal, could not be challenged collaterally in an appeal against the ITO's fresh order. The Tribunal's view was that the ITO's order was merely implementing the Commissioner's revisional order, and no new determination of issues was involved.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that the Commissioner had made definite findings regarding the exclusion of work-in-progress from the capital employed and the reduction of the written down value of assets by the extra shift allowance. These findings had attained finality and could not be challenged in an appeal against the ITO's fresh order. The High Court answered both questions in favor of the revenue, confirming that the ITO was correct in not reconsidering the issue and that no appeal was maintainable against the ITO's order giving effect to the Commissioner's revisional order.