1978 (8) TMI 109 - AT - Income Tax

Summary

Issues:
Assessee's appeal against CIT's order under s. 263 of the IT Act setting aside assessment and directing fresh assessment.

Detailed Analysis:

1. The assessment year in question is 1971, where the assessee derived income from business in Beddi Leaves and house property. The ITO assessed the business income by applying a higher rate of gross profit, resulting in an addition of Rs. 5,000. The AAC later deleted this addition but confirmed the disallowance of expenditure.

2. The CIT, under s. 263 of the IT Act, issued a notice to the assessee, alleging that the ITO's order was erroneous and prejudicial to the Revenue's interests due to failure to examine certain items of income and expenditure. The CIT set aside the ITO's order, noting discrepancies in the income from agriculture and disallowing messing expenses and interest on a loan.

3. The appeal raised the jurisdictional issue of whether the CIT's order was valid as the ITO's order had merged with the AAC's order. The Tribunal observed that the AAC had not considered the points raised by the CIT, focusing only on the rate of gross profit and expenditure disallowance.

4. The Tribunal referred to various High Court decisions regarding the merger of orders and jurisdiction under s. 263. The principles established in cases like CIT vs. Tetaji Farasram Kharawala and CIT vs. Amrit Lal Bhogilal Co. were analyzed to determine the validity of the CIT's revision.

5. The Tribunal concluded that the CIT's order was not sustainable as the AAC had already disposed of the appeal before the CIT's intervention. Citing previous judgments and following the principle that the Commissioner's jurisdiction under s. 263 is limited to matters not appealable before the AAC, the Tribunal set aside the CIT's order.

6. Relying on the decisions of the Jabalpur Bench of the Tribunal and various High Court judgments, the Tribunal allowed the appeal, holding that the CIT's order under s. 263 was not maintainable as the AAC had already adjudicated on the issues raised by the CIT.

7. Therefore, the Tribunal set aside the CIT's order under s. 263, emphasizing the limited jurisdiction of the Commissioner in revising orders that have already been considered by the AAC, thereby ruling in favor of the assessee.