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TMI Blog1989 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Officer in respect of the first two items and, accepting the assessee's submissions, deleted Rs. 28,214 from the total income of the assessee. On a scrutiny of the income-tax records, the Commissioner of income-tax observed that (1) the Income-tax Officer had not included Rs. 68,386 in the total income of the assessee, representing the profit under section 41(2) of the Act in respect of the house property situated at 8, Old Court House Street, Calcutta, which was sold by the assessee in the relevant accounting year, (ii) the capital gains that arose to the assessee in respect of the said house property was Rs. 3,29,788 and not Rs. 3,00,000 as worked out by the Income-tax Officer, and (iii) the Income-tax Officer had wrongly allowed deduction of Rs. 1,200 per annum being entertainment allowance paid to each of the three directors of the assessee which should have been disallowed under section 37(2B) of the Act. He, therefore, concluded that the order passed by the Income-tax Officer on March 15, 1975, was erroneous and prejudicial to the interests of the Revenue. Under the circumstances, on February 22, 1977, the Commissioner of Income-tax issued a notice under section 263 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, a limited company, carried on the business of supplying electrical energy at Mandsaur. The undertaking of the assessee was, however, taken over by the Madhya Pradesh Electricity Board on March 5, 1973, and compensation under the provisions of the Indian Electricity Act, 1910, became payable to the assessee. While making an assessment for the assessment year 1973-74, the Income-tax Officer did not examine the chargeability of profits and capital gains. The Income-tax Officer, while making assessment, did not allow certain deductions claimed by the assessee and, hence, aggrieved by the order of assessment, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Commissioner also issued a notice under section 263 of the Act to the assessee to show cause why the order of assessment passed by Income-tax Officer should not be revised, inasmuch as it appeared to be prejudicial to the interests of the Revenue as the Income-tax Officer had failed to examine the chargeability of profits and capital gains. The assessee showed cause but the Commissioner set aside the order of assessment and directed the Income-tax Officer to make fresh assessment in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner in revision directed the Income-tax Officer to compute and recover interest although in the meantime the order of assessment had been the subject-matter of appeal before the Appellate Assistant Commissioner. The Calcutta High Court held that the merger of the order of assessment was only in respect of matters which were taken up in appeal and as the question of charging interest was not involved in the appeal, the Commissioner could direct the Income-tax Officer to charge interest under section 217. It will be noticed that in this case the Commissioner had not set aside the order of assessment passed by the Income-tax Officer which was the subject-matter of appeal. The order of the Commissioner directing the Income-tax Officer to compute and recover interest was passed without disturbing the order of assessment. In the instant case, the Additional Commissioner in revision set aside the order of assessment passed by the Income-tax Officer. The case of the Calcutta High Court is, therefore, distinguishable and is not applicable.' We respectfully agree with the aforesaid observations." Thus, the Full Bench fully agreed with the aforesaid observations in Narpat Singh M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 156. If the tax assessed is reduced by the Appellate Assistant Commissioner, then it naturally follows that, as a consequence, the interest levied by the assessing authority has also to be reduced. In the instant case, as stated earlier, the Appellate Assistant Commissioner reduced the assessable income by Rs. 12,000. If any interest had to be levied, then the same could be only on the amount of tax as determined by the Appellate Assistant Commissioner. The order of assessment that has become final is the order of the Appellate Assistant Commissioner. That being the case, the Additional Commissioner had no jurisdiction to take proceedings under section 263 of the Act." Reliance has also been placed on a decision of this court in the case of General Beopar Co. (Pvt.) Ltd.. v. CIT [1987] 167 ITR 86. In that case, the assessee was assessed to income-tax in the assessment year 1973-74, the accounting year ending on June 30, 1972. In the said year, the total income of the assessee was assessed at Rs. 1,84,399 of which Rs. 50,083 was found to have arisen from the business of the assessee. The rent from the sub-lease of the said property which was accruing in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rent realised from the sub-lease. The assessment was corrected accordingly by the order of the Income-tax Officer dated October 1, 1975. Subsequently, by a notice issued under section 148 of the Income-tax Act, 1961, dated November 11, 1976, the assessment for the said assessment year 1973-74 was sought to be reopened. During the pendency of the said proceedings, the Commissioner of Income-tax issued a notice dated December 13, 1976, under section 263 of the Income-tax Act, 1961, stating, inter alia, that the original order of assessment dated February 13, 1975, and the subsequent order passed under section 154 of the Income-tax Act, 1961, dated October 1, 1975, appeared to be erroneous and prejudicial to the interests of the Revenue inasmuch as business losses of earlier years had been set off against income from other sources in the said assessments. The assessee was asked to appear in the proceedings and show cause why an order under section 263 of the Act should not be passed revising the assessment. The Commissioner has set aside both the original order of assessment dated February 13, 1975, as also the order dated October 1, 1975, passed under section 154 of the Act and dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r also to go into the questions which are not the subject-matter of appeal. The exceptions which have been considered by this court are cases where the question involved cannot be the subject-matter of appeal before the appellate authority. From the facts in the instant case, the question of setting off of carried forward business losses of earlier years was considered in the assessment and, therefore, it was a matter which was within the purview of the appellate authority when an appeal was preferred from the assessment order. To that extent, it appears on the view which has been taken and followed by this court that there has been merger in the instant case of the order of assessment with the order of the Appellate Assistant Commissioner. That being so, the Commissioner could have no further jurisdiction to revise the assessment under section 263." According to the assessee, this decision in General Beopar Co. P. Ltd. [1987] 167 ITR 86 (Cal) has settled the controversy so far as this court is concerned and, accordingly, when the original assessment order was taken on appeal, though the question involved in the revision by the Commissioner was not adjudicated in the appeal, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in Singho Mica Mining Co. Ltd. [1978] 111 ITR 231, held that the merger of the order of assessment was only in respect of matters which were taken up in appeal and as the question of charging interest was not involved in the appeal, the Commissioner could direct the Income-tax Officer to charge interest. According to the Madhya Pradesh High Court, another distinguishable feature in Singho Mica Mining Co. Ltd. [1978] Ill ITR 231 (Cal) was that the Commissioner directed the Income-tax Officer to compute and recover interest without disturbing the order of assessment. In General Beopar Co. P. Ltd. [1987] 167 ITR 86, this court held that once the order of assessment was under appeal before the Appellate Assistant Commissioner and order is passed by the appellate authority, there is merger of the assessment order with the appellate order in all respects. It was also laid down that when an appeal is preferred from an order of assessment, the entire assessment is at large before the Appellate Assistant Commissioner who has jurisdiction and power to go into the questions which are not the subject-matter of appeal. The exceptions are only Where the question involved cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Assistant Commissioner. The Department has got no right to prefer an appeal against the order of the Income-tax Officer. The only way in which an erroneous order in so far as it is prejudicial to the interests of the Revenue as made by the Income-tax Officer either in not charging interest or by not including some income, which ought to have been included or by allowing deductions or reliefs which ought not to have been allowed can be set right by the Commissioner of Income-tax by resorting to his revisional power. The power of rectification under section 154 or reopening of the assessment under section 147 has to be exercised by the Income-tax Officer. It is not open to the Commissioner of Income-tax to direct the Income-tax Officer either to rectify the assessment or reopen the assessment. In such a case, in our view, when the order of assessment passed by the Income-tax Officer is made the subject-matter of appeal before the first appellate authority, and an order is passed by such appellate authority, the Commissioner of Incometax is not competent to set aside the entire assessment order/in exercise of his revisional jurisdiction. He can only revise the assessment to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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