9911796707
TMI Blog1988 (4) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... of his intention to rectify a number of mistakes in the assessment orders. Here, it will be necessary to point out that the mistakes found by the IAC and of which show cause was given, were mistakes other than that of exclusion of interest from the chargeable profits. It was however, pointed out to the IAC that not only the mistakes proposed to be rectified by him in the show cause notice were not mistakes apparent from records and could not be rectified, the assessee-company had also made applications for rectification of the assessments by application dt. 9th June,1977 for the asst. yrs. 1971-72 and 1972-73 and by letter, dt. 15th April 1978 for the asst. yrs. 1966-67 to 1970-71, i.e., in other words, reference was made to the request for rectification of the assessments with a view to correct the mistake of non-exclusion of the interest income from the chargeable profits under r. 1(x) of the First Schedule. The IAC while rectifying the assessments by order under s. 13 of the Act dt. 10th July, 1978 did not deal with the assessee's claim of rectification of the assessments, as requested by the applications dt. 9th June, 1977 and 15th April, 1978, for the exclusion of the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1984. The assessee-company was not satisfied with these orders of the IAC and, therefore, went up, again, in appeal, to the CIT(A). 5. The CIT(A) held that in the first place, since the assessment orders sought to be rectified were dt. 30th July, 1974, the rectification of these assessments by orders under s.13 of the Act passed on 15th March, 1984, more than five years after the expiry of the limitations period, was invalid. He further held that this issue was raised before the CIT(A) in the appeals against the original order under s. 13 of the Act dt. 10th July, 1978 by the additional ground of appeal which was canvassed before him and, therefore, on this issue the order of the IAC had merged in the order of the CIT(A). The CIT(A) was of the view that the issue was not free from the doubt and, therefore, the mistake, if any, on this issue cannot he said to be a mistake apparent from the record. According to the CIT(A) if the claim was not made either in the Return or in the course of the assessment proceedings before the IAC, it cannot be said that there was any mistake in the assessment order if this claim was not considered. He, therefore, held that the orders of rectificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in the appeals against the orders under s.13. of the Act dt. 10th July 1978, the CIT(A) did not consider the assessee's claims made by applications for rectification dt. 9th June, 1977 and 15th April, 1978 and, therefore, it was wrong to say that on the issue of exclusion of the interest income from the chargeable profits under r.1(x) of the First Schedule, the order of the IAC had merged in the order of the CIT(A). Reference in this connection was also made by him to the ruling of the Hon'ble High Court of Bombay in the case of CIT vs. Sakseria Cotton Mills Ltd. (1980) 124 ITR 570 (Bom) wherein their Lordships laid down that the doctrine of merger applied only to that part of an order made which the appellate authority had actually dealt with and not the rest of the order. Sri Dastur, therefore, vehemently argued before us that the CIT(A) wrongly came to the conclusion that on the issue of exclusion of the interest income from the chargeable profits under r. 1(x) of the First Schedule the order of the IAC has merged in the order of the CIT(A), Our attention was invited to the CBDT Circular No.14 (XL-35) dt. 11th April, 1955, paragraph 3 of which was as follows: "Officers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21: (1986) 157 ITR 149 (Cal) wherein even the claim of exemption under s. 83 of the IT Act 1961, from warehousing not made before the ITO or Appellate authorities, was held to be a mistake apparent from the record which could be rectified by an order under s. 154 of the IT Act, 1961. He then referred to the copies of the audited Balance sheets and Profit Loss accounts and the notes of the auditors to the Profit Loss account wherein it was clearly mentioned that the income from other sources included interest on advance rent, security deposit and bank deposits in support of the contention that there was material on record in support of the claim or exclusion of the interest income from chargeable profits under r. 1(x) of the First Schedule. According to Sri Dastur even the interest on bank deposits with First National City Bank was interest from an India an concern because it was from the Indian branch of the First National City Bank. He was, however, fair enough to point out that on this issue the Tribunal in the assessee's own case for the asst. yrs 1973-74 to 1976-77 IB.M. World Trade Corpn. vs. IAC (1986) 26 TTJ (Bom) 442:(1986) 19 ITD 116 (Bom) in STA Nos. 12 to 14 and 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) at the time of hearing. Thus, according to the learned Departmental Representative, Sri Tiwari, clearly shows that the additional ground to this effect was not only raised before the CIT(A) but the ground was also canvassed at the time of hearing. He then referred to the ruling of the Hon'ble High Court of Bombay in the case of CIT vs. Sakseria Cotton Mills Ltd. relied upon by the assessee's learned counsel. Sri Dastur, and pointed out that since the first appellate authority had been called upon to deal with this claim made before the IAC even according to the ruling of the Hon'ble High Court of Bombay in this case, the order of the IAC merged or stood superseded by the order of the CIT(A) on this issue in respect of which the CIT(A) had exercised his appellate jurisdiction. He, therefore, submitted that on this issue the order of the IAC had merged or stood superseded by the order of the CIT(A) and the IAC did not have jurisdiction to rectify the assessment on this issue under s. 13 of the Companies (Profits) Surtax Act, 1964. Proceeding further, Sri Tiwari vehemently argued before us that whether the income from interest was to be excluded from the chargeable profits under r. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee moves an application within the specified time limit allowed, a right is conferred on the assessee to get an order from the authority concerned on his application and this right cannot be extinguished by reason of lapse or negligence of the authority concerned to pass the order within the prescribed time limit. We cannot, therefore, agree with the CIT(A) that since the IAC failed to pass the order on the assessee's request for rectification made within time, the assessee's right to have the order from the IAC on his request lapsed and no order on the assessee's request could be passed by the IAC after the expiry of the four year time limit. It is also necessary here to point out that the Hon'ble High Court of Bombay in the case of CIT vs. Sakseria Cotton Mills Ltd., while dealing with this very issue, had laid down that only that part of the order of the lower authority merged or was superseded by the order of the appellate authority in respect of which the appellate authority had exercised his appellate jurisdiction. Viewed in this context, it is found that there was not even a whisper in the order of the CIT(A) dt. 30th Jan., 1981 regarding the ground raised before him of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns or in the course of the assessment proceedings, it was open to the assessee to claim this relief by applications for rectifications of the assessments and the IAC rightly passed orders under s.13 of the Act entertaining such a claim. We, therefore, again do not agree with the CIT(A) that the claim of relief under r. 1(x) of the First Schedule was wrongly entertained by the IAC in the orders dt. 15th March, 1984. However, coming to the merits of the claim, we find that in the order of the Tribunal in the assessee's own case for the asst. yrs. 1973-74 to 1976-77, it was held that the First National City Bank cannot be considered as an Indian concern and consequently even if it had a branch in India which paid the interest to the assessee company, the interest from the First National City Bank would not be excluded from the chargeable profits under r. 1(x) of the First Schedule. On the issue of interest income from the First National City Bank not being excluded from the chargeable profits under r. 1(x) of the First Schedule therefore, there would be no mistake apparent from the record which could be rectified by the order under s. 13 of the Act. This means that only the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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