9911796707
TMI Blog2003 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment years 1981-82, 1982-83, 1983-84 and 1984-85. The assessing authority, on consideration of the return filed by the assessee, passed an order of assessment dated May 31,1989, under section 19(3) of the Act. The assessing authority had granted initial depreciation of Rs. 49,071 (rupees forty nine thousand seventy one only); Rs. 99,446 (rupees ninety nine thousand four hundred forty six only); Rs. 47,311 (rupees forty seven thousand three hundred eleven only) and Rs. 41,482 (rupees forty one thousand four hundred eighty two only) on new assets for the assessment years 1981-82, 1982-83, 1983-84 and 1984-85, respectively. However, the assessee being aggrieved by the part of the assessment order, in so far as the assessing authority had refused to accept the computation of income made by the assessee in estimating the income of coffee and to the extent the assessing authority had disallowed proportionate overheads allocated to coffee and cardamom and disallowed the insurance premium paid on cardamom crop, filed appeals before the Deputy Commissioner of Commercial Taxes (Appeals), Mysore Division, Mysore (hereinafter referred to as "the appellate authority"). The appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was also asserted that the additional depreciation claim made by the assessee which was allowed by the assessing authority was justified in law and does not call for modification by the revisional authority in exercise of his suo motu powers under section 35 of the Act. However, the revisional authority negativing the contentions urged by the assessee referred to above, passed the order annexure M dated October 16,1995. As noticed by us earlier, aggrieved by order annexure M dated October 16, 1995, these revision petitions are filed. When these revision petitions came up for consideration before the Division Bench of this court on February 3,1999, the Division Bench (hon'ble Mr. Justice Ashok Bhan and hon'ble Mr. Justice K. R. Prasada Rao, as they then were) was of the view that the decision of the Full Bench of this court rendered in the case of CIT v. Hindustan Aeronautics Ltd. [1986] 157 ITR 315, wherein the Full Bench of this court has taken the view that the order of the assessing authority merges with the order of the appellate authority, may not have a direct bearing to the suo motu power of revision under the Act as the provisions under the Act are slightly different fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission that since the language employed under section 35(1) of the Act which confers suo motu power, requires the revisional authority to look into the original order passed by the assessing authority which is erroneous and prejudicial to the interests of the Revenue, the revisional authority has seriously erred in law in proceeding to pass the impugned order on the ground that the order dated August 24,1991, passed by the appellate authority as well as the orders dated November 11,1991, passed by the assessing authority are erroneous in law. Secondly, he submitted that the conclusion reached by the revisional authority that the depreciation allowed by the assessing authority was not sustainable in law, is totally erroneous in law. Elaborating this submission, he pointed out that the Act provides for special deductions and these deductions are available even in respect of tea and one such deduction is, initial depreciation under rule 3(2) of the Karnataka Agricultural Income-tax Rules, 1957 (hereinafter referred to as "the Rules"). It is his submission that the allowance of depreciation under the Act does not denude the assessee of its right to ask for and to obtain initial depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder alone should be taken into account. He also pointed out that there is no difference between the principle laid down in the decision of the Full Bench of this court in the case of Hindustan Aeronautics Ltd. [1986] 157 ITR 315 and also the decision of the Supreme Court in the case of Krishna Stores [1997] 104 STC 594, relied upon by learned counsel for the assessee. He further submitted that since the decision of the Full Bench of this court in the case of Hindustan Aeronautics Ltd. [1986] 157 ITR 315 has been approved by the Supreme Court in the case of Hindustan Aeronautics Ltd. v. CIT [2000] 243 ITR 808, the decision of the Full Bench of this court in the case of Hindustan Aeronautics Ltd. [1986] 157 ITR 315 has to be applied and the revision petition has to be dismissed. According to him, since the State interest is involved and when the appellate authority is conferred with the power of modifying the order of the assessing authority even in respect of the portion of the order where the appeal is not filed, in exercise of its power under sub-section (5) of section 32 of the Act, in the circumstances of the case, it must be held that the entire order passed by the assessing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f merger; but if the appellate authority does not have the jurisdiction under the law to deal with that issue, the doctrine of merger does not apply in respect of that issue. It is further laid down in the said decision that the application of doctrine of merger will depend upon the scope of the statutory provisions conferring the appellate or revisional jurisdiction. In the said case, while considering the scope or width of the power of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act"), the court took the view that since the Appellate Assistant Commissioner could look into and adjudicate upon the findings recorded by the Income-tax Officer not only against the assessee, which may expressly be the subject matter of the appeal, but also a matter which has been considered and determined by the Income-tax Officer in the course of the assessment. In other words, the court look the view that the entire subject matter of the assessment would be within the jurisdiction of the Appellate Assistant Commissioner; and therefore the entire assessment order would merge with the appellate order irrespective of the points ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected; or (b) in the case of any other order, confirm, cancel or vary such order: Provided that no enhancement of an assessment or penalty shall be made under this section unless the appellant has had a reasonable opportunity." Sub-section (5)(a)(i) of section 32 referred to above, makes it abundantly clear that while disposing of an appeal, the appellate authority is conferred with the power of either confirming, reducing, enhancing or annulling the assessment. Sub-section (5)(a)(ii) of the said section further confers power on the appellate authority to set aside the order of assessment and direct the assessing authority to make a fresh assessment, after such further enquiry, as may be directed. Therefore, reading of sub-section (5) of section 32 of the Act does not give scope for any doubt that very wide power is conferred on the appellate authority and it is competent to modify, confirm, reduce, enhance or annul the order of assessment made by the assessing authority in an appeal filed by an assessee. Therefore, as rightly pointed out by Sri Anand, that even if an appeal is filed by the assessee, aggrieved by the part of the order of assessment made which is adverse to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation. - In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." We do not find any substantial difference in the language employed in section 263 of the Income-tax Act which was considered by the Full Bench of this court in the case of Hindustan Aeronautics Ltd. [1986] 157 ITR 315 and sub-section (5) of section 32 of the Act. In the case of Madurai Mills [1967] 19 STC 144 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment" Further, the decision of the Full Bench in the case of Hindustan Aeronautics Ltd. [1986] 157 ITR 315 (Karn) was affirmed by the Supreme Court in a decision reported in Hindustan Aeronautics Ltd. v. CIT [2000] 243 ITR 808. At page 811 of the judgment, the Supreme Court has observed as follows: "What becomes merged in the order of the Tribunal is the order made by the Appellate Assistant Commissioner in its entirety and not in part Indeed where the Legislature intended to make a distinction in such circumstances where there will be no merger in such cases it is expressly provided. We may notice that section 263 of the Act where a revision is permissible in cases of orders which are prejudicial to the interests of the Revenue, in Explanation (c) thereto it has been provided that where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal, the powers of the Commissioner under this sub-section shall extend to such matters as had not been considered and decided in such appeal. Where the Legislature intended that the scope of revision should extend to a part of the order which had not been considered and decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that it was not in the specified format or that the requirements of form were not fully complied with, could not be considered as an appellate order within the meaning of rule 80 of the Orissa Sales Tax Rules and therefore, such a rejection or dismissal of the appeal cannot be treated as disposing of appeal on the merits. This is clear from the observation made by the Supreme Court at page 600 of the judgment, which reads as hereunder: "The application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provision conferring the appellate or revisional jurisdiction. Basically, therefore, unless the appellate authority has applied its mind to the original order or any issue arising in appeal while passing the appellate order, one should be careful in applying the doctrine of merger to the appellate order." The observation made by the Supreme Court in the case of Krishna Stores [1997] 104 STC 594, wherein the Supreme Court has observed that the application of the doctrine of merger depends on the nature of the appellate or revisional order in each case and the scope of the statutory provision conferring th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority, has merged with the order passed by the appellate authority. In the light of the said conclusion, the Tribunal has taken the view that the order annexure M dated October 16,1995, passed by the revisional authority in exercise of the power under section 35 of the Act is within the period of limitation. There is no dispute that if the order dated August 24, 1991, passed by the appellate authority is taken as an order sought to be revised, the power exercised by the revisional authority is within the period of limitation. Further, one other reason we may also add in support of our above conclusion is that since sub-section (5) of section 32 of the Act confers power on the appellate authority to modify, confirm, reduce enhance or annul the entire order appealed against or direct the original authority to make a fresh order of assessment after such further enquiry as the appellate authority may direct, in our view, it is open to the revisional authority, while exercising the power under section 35 of the Act, to examine whether the order, passed by the appellate authority was erroneous and is prejudicial to the interests of the Revenue; and on such examination if the revisional a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in the computation of the income for the purposes of the Income-tax Act, 1961. It is useful to extract section 8 of the Act which reads as hereunder: "8. Assessment of agricultural income in regard to tea. -In the case of cultivation and manufacture of tea, the agricultural income for the purpose of this Act shall be deemed to be that portion of the income from cultivation, manufacture and sale computed under the Income-tax Act, 1961 (Central Act 43 of 1961), which is excluded from taxation under that Act as being agricultural income, after deducting from the said portion any allowance authorised by this Act in so far as the same has not been allowed in the computation of the income for the purposes of the Income-tax Act, 1961, Central Act 43 of 1961." Section 5 of the Act deals with computation of agricultural income. It provides that the agricultural income of a person should be computed after making several deductions provided under clauses (a) to (n) of the Act. In this case, we are concerned with the depreciation under section 5(1)(e) of the Act. It is useful to extract the said section which reads as hereunder: "5. Computation of agricultural income,-(1) The agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is relevant for our purpose, reads as follows: "4. Mode of determination of capital assets for depreciation allowance. (1) In the case of assets acquired before the previous year but after the commencement of the Act, the written down value shall be the actual cost of the assets so acquired less all depreciation actually allowed under rule 3." The assessing authority had adopted 60 per cent. of the net income from tea which was excluded from taxation under the Income-tax Act, 1961, as being agricultural income in terms of section 8 of the Act after allowing initial depreciation allowance of Rs. 49,071, Rs. 90,446, Rs. 47,311 and Rs. 41,842 for the assessment years 1981-82, 1982-83, 1983-84 and 1984-85, respectively, calculated at 20 per cent. of the value of new buildings, plant and machinery and vehicles acquired during the relevant previous years. It is the case of the revisional authority that in the order of assessment passed by the income-tax authorities in which 60 per cent. of the net income was excluded from tax under the Income-tax as being agricultural income, the income-tax authorities had allowed normal depreciation allowance under section 32 of the Act on bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority, after considering the explanation offered by the assessee and also the submissions made by the authorised representative who had appeared on behalf of the assessee, has found that the allowance was wrongly claimed and allowed as the condition to avail of the allowance, i.e., deduction towards the initial depreciation allowance was not forthcoming. In other words, the revisional authority has found, as a question of fact, as there was no claim made for deduction towards initial depreciation allowance, deduction towards further depreciation being not allowable, the deduction wrongly allowed as initial depreciation allowance in the assessment order made by the assessing authority having not been disallowed in appeal by the appellate authority, the same needs to be set right by way of revision of the appellate order in exercise of its revisional jurisdiction. In this connection, it is useful to refer to the observation made by the revisional authority, which reads as hereunder: "The present case is different, in disallowing the claim of depreciation allowance, nothing is added to the computed (under the Income-tax Act) component of 60 per cent. of the agricultural income (t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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