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TMI Blog1987 (1) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... iled appeals before the Tribunal. The Tribunal took up these appeals along with some other appeals of the same assessee relating to some other years. The Tribunal's orders are in IT Appeal Nos. 8 and 2760 (Delhi) of 1977-78, for these two years and the order of the Tribunal was passed on16-4-1980. The Tribunal found that this question of disallowance under section 40A(3) had not been considered by the ITO and the AAC in terms of Circular No. 220 dated31-5-1977. The Tribunal, therefore, set aside the orders of the AAC and restored it to his file for fresh disposal in the light of the said circular and in accordance with law. 3. Though it is not directly connected with the present appeals, it May be mentioned that the Tribunal also disposed of the departmental appeals for the years 1974-75 and 1975-76 where the Commissioner (Appeals) had set aside the order of the ITO on certain points and had directed him to decide the issues. The Tribunal, however, directed that the Commissioner (Appeals) himself should look into this matter and decide it on the basis of the facts available. 4. It is in these circumstances that the present orders were passed by the Commissioner (Appeals). After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directing fresh disposal it would become a pending appeal and would stand transferred to the Commissioner (Appeals). However, where the Tribunal passed an order after the appointed date, the power to take follow up action would be with the AAC and not with the Commissioner (Appeals). It may be mentioned that the appointed date for the purpose of non-company- assessee was10-7-1978. In view of this circular it was contended that the learned Commissioner (Appeals) had no jurisdiction to hear this matter after the set aside order of the Tribunal and the proper jurisdiction was only with the AAC. 7. The learned counsel for the assessee raised a preliminary objection to the admission of this ground and he submitted that this ground should not be admitted at all. He contended that the ground itself refers to a circular of the Board which has no legal sanction and it was only for the guidance and information of the departmental officers. He also submitted that the matter was heard by the Commissioner (Appeals) after giving due notice to the ITO and the ITO has not chosen to raise the question of jurisdiction before the Commissioner (Appeals). He, therefore, contended that in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the category in which the assessee fall was to be under the jurisdiction of the Commissioner (Appeals) and, therefore, there was no error when the Commissioner (Appeals) passed this order. He also pointed out to the anamoly of the situation that if the order of the Tribunal was passed before the appointed date the appeal would still be transferred to the Commissioner (Appeals) but if the order of the Tribunal was passed after the appointed date it will go back to the AAC himself. He contended that this would be a wrong interpretation and effort should be made to avoid any such interpretation which makes the position look absurd. In the end it was pointed out that this ground does not arise out of the order of the Commissioner (Appeals) as he had no occasion to decide this matter as no party raised it before him. The Tribunal, it was submitted, should not exercise its discretion in admitting this ground. It does not arise out of the order of the Commissioner (Appeals). He contended that permitting the revenue to raise such frivolous ground when a senior officer has applied his mind and has decided the case on merit, would result in unnecessary harassment and delay, in the adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the Board sought to clarify in its circular. There can certainly be some debate regarding the correctness of the interpretation placed by the Board's circular in respect of such cases where the appeal has been set aside and the first appellate authority has to pass afresh order. If on that date it is considered as a fresh appeal it will have to go to the Commissioner (Appeals). Obviously the attention of the learned Commissioner (Appeals) had not been drawn to the circular and the ITO had also not raised any objection before him about his jurisdiction. It is true that jurisdiction cannot be conferred by consent but in the circumstances of the present case the difficulties arose as a result of interpretation of the provisions of law, notification and of the Finance (No. 2) Act. In fact none of these were considered by the Commissioner (Appeals) and one can very well understand that the first appellate authority who was dealing with the case of an assessee for several other years would not think it necessary to go suo motu into the question of jurisdiction for another year of the same assessee. 9. Thus, I find that in the present case, there was no inherent lack of jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made from Bansal Chemicals,Firozabad. Three items were just marginally above Rs. 2,500 and the fourth item was for Rs. 3,160. Before the Commissioner (Appeals) it was pointed out that besides the fact that most of the items were only marginally above Rs. 2,500 being in excess by Rs. 2 or Rs. 3 only, the payment should be allowed as a deduction as the party from whom the purchases were made had insisted on cash payment. Reliance has been placed on rule 6DD(j) of the Income-tax Rules, 1962 read with the circular off the Board. The Commissioner (Appeals) found that the stock position of the appellant of the raw material was nil on the date when they were purchased and the assessee was in badly need of those chemicals. He also found that several other purchases have also been made from the same party which were less than Rs. 2,500 and he, therefore, allowed. There was no doubt about the identity of the party or the genuineness of the transaction. After looking into the cash memos, purchase bills and having regard to the Board's circular the Commissioner (Appeals) deleted this addition. 12. Another addition of Rs. 6,938 was made in respect of cash purchases made from Nand Lal Paliwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1972-73 also we have 'perused the order of the learned Commissioner (Appeals) and I find that there the purchases were from Bansal Chemicals,Firozabadwhich had occurred in the earlier year also and for the reasons given in the earlier year, it was deleted. In the case of transactions by Gopi Chand Aggarwal it was found that diesel oil had been purchased atAgraand had been duly accounted for in the books. It was pointed out that the assessee had no bank account atAgraand there no diesel dealer takes a crossed cheque or a draft. Considering this the Commissioner (Appeals) deleted this addition. In this year also the order of the Commissioner (Appeals) is very reasonable and the circular of the Board has been correctly followed. 17. In the result, the two grounds taken by the department in this year are also rejected. 18. While I have disposed of the above matter, I must state that the revenue could have avoided taking the first ground before the Tribunal and should have challenged the order of the Commissioner (Appeals) only on merits. Here there was some confusion regarding the position of the jurisdiction of the two first appellate authorities and the Commissioner (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une, 1980]. 2. The learned Commissioner (Appeals) has erred in law and on facts in deleting the addition of Rs. 53,909, made under section 40A(3) in respect of the payments made in cash exceeding Rs. 2,500, as the payment does not fall within clause (b) or para 4 of the Board's Circular No. 220 dated 31-5-1977 [CBDT Bulletin Tech. XXIII-3]." 3. For the assessment year 1972-73, the only difference involved is Rs. 12,273. 4. To start with, the revenue's first ground is required to be decided first. The various dates have been mentioned earlier. The Tribunal passed the setting aside order on16-4-1980. In terms of Circular No. 269 of the Board the appointed date for determining the jurisdiction of the learned Commissioner (Appeals)/AAC was 10-7-1978 and if the remand order restoring the appeal to the file of the learned AAC for disposal on a. particular date was passed before 10-7-1978, in the case of a non-assessee-company with assessed income or loss exceeding Rs. 1 lakh, the learned AAC alone will have the jurisdiction to decide the matter. Thus, in the cases before us, in view of the Tribunal's order and the circular supra, only the learned AAC had the jurisdiction to dispose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with some other appeals of the same assessee relating to some other years and insofar as the appeals for these two years were concerned, the Tribunal felt that the matter should be reheard by the AAC. By its order dated16-4-1980the Tribunal set aside the orders of the AAC and directed him to reconsider this matter afresh in the light of the Board's Circular No. 220 of31-5-1977. Thereafter the Commissioner (Appeals) took up these matters for consideration, and by applying the Board's Circular No. 220 dated31-5-1977held that no part of the assessee's claim could be disallowed. He was of the view that those payments were covered by the instructions contained in the Board's circular. The additions were, therefore, deleted by the Commissioner (Appeals). Aggrieved by the deletion of the additions made, the department filed further appeals before the Tribunal for the second time raising the following grounds: "1. The learned Commissioner (Appeals) has erred in law and on facts in deciding the appeals as the jurisdiction over this case for the assessment year under consideration lies with the AAC in terms of clarification made vide Circular No. 269 dated 29-4-1980 [CBDT Bulletin T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of jurisdiction by the Commissioner (Appeals). Not having objected to the jurisdiction of the Commissioner (Appeals) and having permitted the Commissioner (Appeals) to proceed with the appeal on merits, it was not open to the department to raise the question of jurisdiction for the first time before the Tribunal. The department could not have any grievance against the order of the Commissioner (Appeals) for the simple reason that be was a more senior officer than the AAC. Placing reliance upon sub-section (3) of section 246 it was urged that the circular of the Board could not have any application to a case where the order of the AAC was set aside in toto and the appeal was restored to the file of the AAC, in which case it should mean that the appeal was pending before the AAC and all such appeals stood transferred from that day onwards to the Commissioner (Appeals). Thus, the Commissioner (Appeals) rightly and correctly had and assumed jurisdiction to hear the appeal and no objection could be taken to that. The departmental representative, however, placed very great reliance upon the provisions of section 39(2) and also the Board's circular and contended for the contrary posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner before such commencement, under any Act referred to in sub-section (1), may be taken as if the amendments directed to be made in that Act by sub-section (1) had not been made." Sub-section (3) of this section provided that this section shall come into force on such date as the Central Government may by notification in the Official Gazette appoint. Now the appointed date is10-7-1978. What this section seeks to clarify and declare is that any action required to be taken after the commencement of this section, namely,10-7-1978in relation to any appeal disposed of by an AAC or a Commissioner before such commencement, such action may be taken as if the amendments directed to be made bad not been made. A doubt arose as to what exactly was meant by the expression 'that any action required to be taken' used in this section. Did it mean that giving effect to the orders of the appellate anthorities or rectification of mistakes creeping into those orders or did it mean anything else? It is only to give effect to the directions given by the Tribunal or any other appellate authority, that the Legislature envisaged that such action must be taken only by that authority, namely, the AAC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke in an order passed by him before the appointed day or take such action or pass such further orders as may be required in any appeal disposed of by him in pursuance of any remand order or other direction given by the Tribunal. The words 'any action required to be taken' connote that the requirement for any action to rectify a mistake in an order passed by the AAC before the appointed day would arise after the said date. Those words in section 39(2) of the Finance Act, 1977 would cover cases where the rectification application had been filed after the appointed day or the AAC had issued the show-cause notice on his own after that date. As for rectification application filed or show-cause notice for rectification issued before the appointed day, the normal rule in section 154 that the authority may amend any order passed by him would apply and the same AAC or any other AAC presently having jurisdiction in respect of the concerned case of the assessee may amend the previous order. Likewise section 39(2) of the said Finance Act would cover the cases where the Tribunal's order setting aside the AAC's order wholly or partly was passed after the appointed day, i.e.,July 10, 1978. Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal passed a remand order with orders setting aside the AAC's order either wholly or partly after the appointed day, namely, 10-7-1978. To say that the words 'further action to be taken' used in sub-section (2) of section 39 would cover cases where the Tribunal set aside the order of the AAC to pass a fresh order, in my opinion, is to state the proposition too broadly. When the Tribunal sets aside an order passed by the AAC, the appeal gets restored to the file of the AAC for disposal de novo and the AAC has to again follow the entire procedure that he is required to follow earlier while disposing of the original appeal. There is no difference in the procedure to be followed. That fresh disposal would create the same rights and liabilities on the parties as the earlier order. Against this order the aggrieved party can file a further appeal to the Tribunal. 9. Such being the case, it is, in my opinion, difficult to accept the position that those words would cover cases where the Tribunal sets aside the orders of the AAC for fresh disposal of the appeal. It may be that the Board in the interests of smooth administration and in order to avoid dislocation of work, might have pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not like rectification of mistakes or complying with direction of ministerial nature. Thus, the words used in section 39(2) cannot cover a case of an appeal which was set aside by the Tribunal in toto. 11. It may also be useful to notice the provisions of section 246(3) which also dealt with situations arising out of the creation of this new appellate authority. Section 246(3) is in the following terms: "(3) Every appeal against an order specified in sub-section (2) which is pending immediately before the appointed day before an Appellate Assistant Commissioner or a Commissioner and any matter arising out of or connected with such appeal and which is so pending shall stand transferred on that day to the Commissioner (Appeals) and the Commissioner (Appeals) may proceed with such appeal or matter from the stage at which it was on that day: Provided that the appellant may demand that before proceeding further with the appeal or matter, the previous proceeding or any part thereof be reopened or that he be reheard." The essence of this sub-section is that in every appeal pending on or before 10-7-1978 before the AAC or a Commissioner, if any action arising out of or connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Tribunal for the first time. The Commissioner (Appeals) assumed jurisdiction not at the instance of the assessee but at the instance of the department itself. If we turn to the order passed by the Tribunal the direction of the Tribunal was very categorical and clear that the whole assessment was set aside to be redone in accordance with the direction given by the Board in an earlier circular dealing with the provisions of section 40A(3). As I have pointed out earlier the whole appeal got restored to the file of the officer, who was holding jurisdiction at that time over the file. At that time, the officer who was holding the jurisdiction over the file was the Commissioner (Appeals) and not the AAC because the Commissioner (Appeals) has dealt with the other appeals of the assessee along with these appeals, as pointed out by the learned Accountant Member in his order. 13. I may also point out another point that occurred to me while reading the paragraph starting with the words 'likewise'. That paragraph was dealing with two situations; one a situation where the Tribunal had passed orders setting aside the orders of the AAC after the appointed day; the other was a situati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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