9911796707
TMI Blog2002 (9) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... rvision charges were required to be reduced from the business profits. But, the AO did not consider this issue at all. The learned CIT observed that as per the mandatory provisions of Section 80 HHC, 90% of the said supervision charges amounting to Rs. 1,46,38,373/- should have been excluded from the business profits. The learned CIT, therefore, issued a show-cause notice to the assessee Under Section 263 of the IT Act and after allowing opportunity and after considering the submissions made before him, he held that the assessment order was erroneous and prejudicial to the interest of the Revenue on the ground mentioned above. The learned CIT, therefore, set aside the assessment with the direction that fresh assessment should be made. 2. The learned counsel appearing on behalf of the assessee submitted that the AO had passed the assessment order Under Section 143(3) of the IT Act after due application of mind with regard to deduction Under Section 80 HHC. It is pointed out that while computing deduction Under Section 80 HHC, the AO has made certain adjustments as discussed at para 19 of the assessment order. It is pointed out that 90% insurance claim (Rs. 20,833/-) and excess provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liability to pay interest had accrued or had materialized or was ascertained one and for that purpose the terms and conditions of the schemes, i.e., assessee's obligation under the scheme, and the system of accounting followed by the assessee were to be investigated. It was also necessary to verify the quantum of deposit which, inter alia, included verification of lapsed or unclaimed natured account. While considering an issue which is comprised of various aspects, the AO is supposed to consider the issue from all angles, i.e., to consider all the aspects and if the issue relates to allowability of a deduction, then the AO is supposed to have considered the allowability from all angles/aspects involved for allowability of the deduction under that issue. If the officer allows the whole of the claim or disallows the claim as a whole or any part by considering one or more or all aspects involved in that issue, it cannot be said that AO had not considered the issue or has considered only a few aspects. That being the case, if such an action of the AO is brought before CIT(A) by way of appeal - even with respect to those very few aspects which have been considered by the AO, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. The word used in this expression is 'matters'. A 'matter' may involve one or more aspects. Where there is only one aspect of the matter and that was the subject of appeal before the first appellate authority, the CIT cannot invoke revisionary power on that matter. Section 251 states the powers of the CIT(A) which include confirming, reducing, enhancing or annulling the assessment. Explanation to this section provides that in disposing of an appeal the CIT(A) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed notwithstanding that such matter was not raised before him. This shows that any matter arising out of the proceedings before the AO is open before the CIT(A) and he is competent to consider all such mattes. Powers of CIT(A) are co-terminus with that of the AO and he can do all that which AO is competent to do and can also direct him to do what he has failed to do. The CIT(A) is competent to consider all the aspects of the matter which is agitated before him. It is not only the right but the duty of the CIT(A) to examine various aspects of the issue which is the subject matter of controversy before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication of mind on the part of the AO with regard to his important issue. It is pointed out that since the AO had allowed the claim of the assessee, there was no question of assessee's filing any appeal on this issue with the result that the learned CIT(A) had no occasion to deal with this issue. It is argued that in these circumstances, the CIT was fully justified in passing the order Under Section 263 of the IT Act. The learned DR relied on the following cases: 1. CIT v. South India Shipping Corporation Ltd. - 233 ITR 546 (Mad.) 2. CIT v. Emery Stone Mfg. Co. - 213 ITR 843 (Raj.) 3. CIT v. Shri Arbuda Mills Ltd. - 231 ITR 50 (SC) 4. CIT v. A. Nageshwara Rao - 231 ITR 215 (AP) 5. CIT v. Paushak - 227 ITR 216 (Guj.) 4. We have given a very careful consideration to the rival submissions, relevant facts and circumstances and have gone through the precedents cited. It may be mentioned that upto 31.5.88, there was a conflict in judicial opinion as to whether, after an order has been subjected to first appeal, the points that were neither raised in appeal nor dealt with by the first appellate authority, do or do not merge in the appellate order and this may, or may not be subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng prior to amendment in Section 263 w.e.f. 1.6.88. We have given a very careful and serious consideration to the views expressed in the four cases of ITAT relied upon by the learned counsel, while interpreting the relevant provisions of Section 263 of the IT Act. However with profound respect to the ITAT, we have not been able to persuade ourselves to agree with the view proposed in these cases, for reasons to be discussed forthwith. 5. As per Clause (c) of the Explanation to Section 263(1) of the IT Act, the CIT has been conferred with the powers to exercise jurisdiction Under Section 263 in respect of matter which have not been considered and decided in appeal. The important words are considered and decided . In our view, the purpose and import of Clause (c) is absolutely clear and before a finding is recorded as to whether the AO's order has merged in the order of the appellate authority, it has to be examined as to whether any relevant matter has been considered and decided in appeal. Obviously if an issue is not at all raised in appeal and is also not considered suo motu by the appellate authority and decided in appeal, the powers of the CIT Under Section 263 will extend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior authority and the other by a superior authority, passed in an appeal or revision, there is a fusion or merger of the two orders irrespective of the subject matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. The application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the appellate or revisional jurisdiction. The observations of the Hon'ble Andhra Pradesh High court at Page 221 may also be reproduced below: In the case of CIT v. K.L. Rajput (1987) 164 ITR 197, a Full Bench consisting o five judges of the Madhya Pradesh High Court, has held that whenever a question arises as to whether the Commissioner is or is not competent to revise Under Section 263 of the Act, the order of assessment framed by the ITO which has been the subject matter of an appeal before the Appellate Assistant Commissioner, it has to be ascertained as to whether the Commissioner has set aside the entire order of assessment or only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al( filed on or before or after the 1st day of June, 1988), the powers of the Commissioner under the sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. The consequence of the amendment made with retrospective effect is that the powers Under Section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, in respect of the aforesaid three item, the power of the Commissioner Under Section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. Therefore, the order of assessment passed by the ITO on March 31, 1978, had not merged with that of the Commissioner (Appeals), dated December 15, 1979, in respect of the three items in dispute so as to exclude the jurisdiction of the Commissioner of IT Under Section 263. 7. The Hon'ble Gujarat High Court in the case of CIT v. Paushak Ltd. 227 ITR 216 which is relied upon by the learned DR, recorded the following finding which is reproduced from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, made in respect of the remaining items, the ITO's order merges with the appellate order of the Appellate Assistant Commissioner only to the extent it was considered and decided by the Appellate Assistant Commissioner. Matters which are not covered by the appellate order are left untouched and to that extent, the ITO's assessment order survives permitting exercise of revisional jurisdiction by the Commissioner Under Section 263 of the Act. 10. A reference may also be fruitfully made to the Hon'ble Calcutta High Court decision in the case of Hamilton Co. Pvt. Ltd. v. CIT - 187 ITR 568. The relevant portion from the headnote is extracted below: A narrow construction of the power of the Commissioner Under Section 263 of the IT Act, 1961, will defeat the purpose for which the provision was enacted. The order of the ITO will merge with the order of the Appellate Assistant Commissioner only with respect to that part of the order of the ITO which relates to the matters considered and decided by the appellate authority. Thus, there will be partial merger and not the merger of the whole order. By the Finance Act, 1988, the provisions of Section 263 have been amended to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T can exercise his powers Under Section 263 with regard to such aspects or such issues which have not been considered and decided in appeal. 12. In the present case before us, while framing the assessment Under Section 143(3), the AO was seized with the matter of computing deduction admissible to the assessee under the relevant provisions of Section 80 HHC of the IT Act. While doing so, the AO completely ignored the fact that the assessee received supervision charges of Rs. 1,46,38,373/-. There was no application of mind on the part of the AO to the nature of treatment Under Section 80 HHC of the aforesaid receipt. The AO did not consider at all as to whether or not the provisions of Clause (baa) of the Explanation to Section 80 HHC (4B) would be applicable. Adjustments were made on account of certain other items of income which caused grievance to the assessee and therefore such issues were made subject matter of appeal. Obviously, while deciding the appeal, the learned CIT(A) had no occasion to consider the implications for the purposes of Section 80 HHC of the Supervision Charges of Rs. 1,46,38,373/-. Thus, this specific aspect, issue or mater, whatever nomenclature is applied, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
