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TMI Blog1984 (2) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to the actual amount of deduction which resulted in consequent under-assessment. He, therefore, issued a show-cause notice under section 263 in response to which the argument of the assessee was that the Commissioner (Appeals) had already heard an appeal against the IAC's order and, therefore, the said order could not be the subject-matter of revision under section 263. The Commissioner was, however, of the opinion that in the appeal the assessee had only disputed the applicability of section 44C and not the amount disallowable thereunder. Regarding the provision for obsolete stores, the assessee's contention was that it really represented the cost of obsolete stores actually written off during the year. This was evidenced by the fact that no such provision appeared as a separate item on the liability side nor as a deduction from the cost of stores appearing in the asset side of the balance sheet. The Commissioner in this behalf was of the opinion that the IAC had not verified the items which had been written off and a considerable amount was involved therein. He, therefore, was of the opinion that the assessment order should be set aside and directed the assessing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. 4. In reply, it was contended on behalf of the assessee that the Calcutta High Court judgments were not directly in point. The two authorities, namely, Jeewanlal (1929) Ltd.'s case and Russell Properties (P.) Ltd.'s case were not concerned with the question of merger in the sense that the appeal had not been decided at the time the Commissioner (Appeals) had initiated proceedings and so far as the other two authorities, namely Premchand Sitanath Roy's case and Singho Mica Mining Co. Ltd.'s case are concerned, they had already been considered by the Special Bench in the case of Dwarkadas Co. (P.) Ltd. and notwithstanding these authorities., the Special Bench had taken a decision in favour of the assessee on the ground that in both these cases the question involved was only of interest under section 217 of the Act, which could not be the subject-matter of appeal before the AAC. As regards the Madhya Pradesh High Court decision, it was contended that a Full Bench of the same High Court had come to a contrary decision in CIT v. Mandsaur Electric Supply Co. Ltd. [1983] 140 ITR 677. 5. We have carefully gone through all these authorities and to our mind the contention of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the assessee is that the whole assessment becomes open before the appellate authority who can also enhance the same. Therefore, the Commissioner cannot revise the same. This argument is certainly contrary to some of the observations in these decisions of the Calcutta High Court. Again in Premchand Sitanath Roy's case, the actual observations of their Lordships are that the interest which was sought to be charged in the order of the Commissioner under section 263 was not the subject-matter of appeal before the AAC. Therefore, there could be no question of merger of that order. In Singho Mica Mining Co. Ltd.'s case the direct question referred to their Lordships in this behalf reads as under : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer's order got merged with that of the Appellate Assistant Commissioner only in respect of those issues which had been adjudicated upon by the Appellate Assistant Commissioner ? " The answer to this question was in the affirmative and in favour of the revenue. What we mean to emphasize is that if the question is to be considered in the light of the decisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITO otherwise has no right to appeal against his own order. It is the AAC's sole discretion to enhance an assessment. He need not do so and if he does not do it the ITO cannot come in appeal against his refusal to do so. In fact the ITO, if he has made an underassessment, is not legally entitled as of right to ask the AAC to enhance the same. He can only reopen the assessment in circumstances justifying an action under section 147 or 154 of the Act so that if he has formed an erroneous opinion on any matter, he cannot get it corrected in the appeal before the AAC and if the AAC does not choose to do the same suo moto, he cannot come before the Tribunal against the AAC's order refusing to do so. Therefore, apparently when the AAC has not considered the matter, there is no reason why the order should be deemed to have merged in respect of that matter also. 7. It was argued before us that the question of allowance under section 44C had been the subject-matter of consideration before the Commissioner (Appeals). At the time of the hearing of this appeal, we had directed the representative of the assessee to produce the order of the Commissioner (Appeals) so that we could find out fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held in Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi) that it is not necessary for the Commissioner to make further enquiries before cancelling the assessment order of the ITO. The Commissioner can regard the order as erroneous on the ground that in the circumstances of case the ITO should have made further enquiries before accepting the statements made by the assessee in his return because the ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. The order becomes erroneous because such an enquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. The Commissioner (Appeals) had no occasion to consider this aspect of the matter and, therefore, it cannot be held that the ITO's order in this behalf had merged in the order of the appellate authority. 9. Since the Commissioner has already directed the assessing authority to redo the assessment after going into the details of the items mentioned and after giving sufficient opportunity to the assessee to put forward its cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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