9911796707
TMI Blog1983 (6) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... has been argued by the assessee's ld. representative that the CIT in the show-cause notice dt. 6th February,1982 did not specify the reasons for his satisfaction that the IAC's order of assessment was erroneous and prejudicial to the interest of revenue and in this connection, he made particular reference to paragraph 2 of the CIT's letter dt. 6th February, 1982 requiring the assessee to show cause as to why the IAC's assessment should not be revised in terms of s. 263 of the Act. Reliance in this connection was placed on the Calcutta High Court in the case of CIT vs. Shakuntala Devi (1971) 82 ITR 416 (Cal). It has been further argued that the CIT issued the show-cause notice at the instance of the Revenue Audit Department without exercising his own discretion and judgment inasmuch as the ITO, 'A' Ward, Foreign Company Circle by his letter dt. 23rd November, 1981 informed the assessee that a sum of £ 1,02,367 though credited to the profit Loss Account under the head "gain on revaluation of rupee" was not brought to tax. The ITO, it has been stated, had no occasion to raise the query as the assessment for the relevant year had already been completed by the IAC, Foreign Companies R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to Indian Development Trust which resulted in underassessment of income. The assessee, in fact, admitted the mistake in reply to the CIT's show-cause notice and it would be wrong to say that the CIT did not record his reasons before making up his mind that the impugned order of assessment was erroneous and prejudicial to the interest of revenue. In regard to the point that the CIT did not exercise his discretion as he issued the notice at the instance of the Revenue Audit Department, it has been argued that the CIT was well within his rights to consider the revenue audit note on the basis of which the ITO issued his enquiry letter dt. 23rd November 1981 seeking clarification from the assessee in regard to the taxability of £ 1,02,367 credited to the Profit Loss Account. In regard to the question of merger in consequence to the passing of the appellate order, the departmental representative stated that the matters which were not covered by the appellate order could be considered by the CIT while exercising his powers u/s. 263 of the Act. For this proposition, he relied on a Full Bench decision of the Madhya Pradesh High Court in CIT, M.P.-II v. R.S. Banwarilal (1983) 140 ITR 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed deduction u/s. 80G. This resulted in under-assessment of income. 2. I, therefore, propose to pass such orders thereon u/s. 263 of the Act, as the facts of the case justify including an order setting aside the said assessment and directing the IAC/ITO to make a fresh assessment in accordance with law. 3. Before, however, I do so I hereby give you an opportunity of being heard on 17th February, 1982 at 11.30 A.M. to show cause as to why such an order u/s. 263 should not be passed in this case. You may appear either through your Director /Managing Director or duly authorised representative and adduce such evidence as you may rely upon in support of your contentions. You may also, if you like, put in your objections in writing on or before the said date. The same will be duly considered before any order u/s. 261 is passed in this case." The assessee explained in letter dt. 18th February, 1982 in response to the CIT's show-cause notice that during the course of assessment it was explained to the assessing officer that the credit entry of £ 1,02,367 under the head "extraordinary item-gain on revaluation" represented notional profit on revaluation of assets and liabilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the question of merger it is found on perusal of the CIT (A)'s order for the relevant assessment year that the assessee disputed the addition of Rs. 1,67,915 made in the assessment in terms of s. 44C of the Act. On the ratio decided by the Full Bench of the Madhya Pradesh High Court on which reliance has been placed by the departmental representative, there can be no dispute that the IAC's order merges with the appellate order in respect of the disallowable amount quantified by the CIT in his s. 263 order. The CIT observed that the head office expenses exceeded the limit envisaged in s. 44C by Rs. 6,97,981 as against the disallowance made by the IAC only to the extent of Rs. 1,67,915. It is however true, as has been pointed out by the ld. Counsel, that the CIT has given any basis in working out the disallowable sum of Rs. 6,97,981. In regard to the two other items mentioned in the CIT(A)'s order namely, taxability of revaluation gain amounting to £ 1,02,367 and the IAC's failure to add back Rs. 14,850 being the amount donated to Indian Development Trust, we are of the opinion that the entire assessment order framed by the IAC having merged with the CIT(A)'s order, the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
