Research › Browse › Judgment

Madras High Court · body

1997 DIGILAW 20 (MAD)

Commissioner of Income Tax v. V. V. A. Shanmugam

1997-01-07

K.A.THANIKKACHALAM, S.M.SIDICKK

body1997
Judgment :- K. A. THANIKKACHALAM J. At the instance of the Department, the Tribunal referred the following question for the opinion of this court under section 256(1) of the Income-tax Act, 1961 "Whether, section 263 of the Income-tax Act, 1961, can be invoked to revise an order of assessment passed by the Income-tax Officer on the basis of directions issued by the Inspecting Assistant Commissioner under section 144A of the said Act ?" In the assessment year 1971-72, the Income-tax Officer had made an assessment. The principal matter was assessment of capital gains arising on the sale of buses. The assessment matter came up in appeal at the instance of the Income-tax Officer before the Tribunal. Then the Tribunal referred the case back to the Income-tax Officer to make a fresh assessment. While making the fresh assessment, the Inspecting Assistant Commissioner to whom the Income-tax Officer had under section 144A of the Income-tax Act, 1961, referred the matter for guidance had issued directions for the guidance of the Income-tax Officer, which directions according to the said provision are binding on the Income-tax Officer. In the directions issued by the Inspecting Assistant Commissioner about the computation of capital gains, the Inspecting Assistant Commissioner had permitted deduction of Rs. 1, 72, 500 as cost of improvements borne by the assessee. The fresh assessment was completed on that basis The Commissioner of Income-tax, acting under section 263 of the Income-tax Act, 1961 In order to support his contention, learned standing counsel for the Department relies upon various decisions of various High Courts. According to learned standing counsel, the assessment order passed by the Income-tax Officer in accordance with the direction given by the Inspecting Assistant Commissioner under section 144A is also amenable to the jurisdiction of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961. Therefore, according to learned standing counsel, this order by the Tribunal in holding that the Commissioner of Income-tax was not correct in exercising the jurisdiction under section 263 of the Act is not sustainable On the other hand, learned counsel for the assessee supported the order passed by the Tribunal We have heard the rival submissions. The fact remains that originally an assessment was made by the Income-tax Officer for the assessment year 1971-72. The principal matter in the assessment was levy of capital gains against sale of buses. The fact remains that originally an assessment was made by the Income-tax Officer for the assessment year 1971-72. The principal matter in the assessment was levy of capital gains against sale of buses. The matter went up to the Tribunal. The Tribunal remanded back this issue before the Income-tax Officer to ascertain whether the sale of buses and the route permit would have had any value for the purpose of levying capital gains tax. The Income-tax Officer after receiving directions from the Inspecting Assistant Commissioner under section 144A of the Act, determined the capital gain. While determining the capital gain the Income-tax Officer ascertained the cost of the improvement at Rs. 1, 72, 500 and deducted the same. According to the Commissioner of Income-tax, this deduction is erroneous and prejudicial to the interests of the Revenue. Therefore, by exercising his jurisdiction under section 263 of the Act, after hearing the assessee, revised order was passed by the Commissioner and directed the Income-tax Officer to redetermine the value of capital assetAs against the order passed by the Commissioner of Income-tax under section 263 of the Act, the assessee went in appeal before the Tribunal. The Tribunal held that the Commissioner of Income-tax has no jurisdiction under section 263 of the Act to interfere with the order passed by the Income-tax Officer in the present case. The Tribunal held that the Commissioner of Income-tax has no jurisdiction under section 263 of the Act to interfere with the order passed by the Income-tax Officer in the present case. Accordingly, the order passed by the Commissioner of Income-tax under section 263 of the Act was set aside and the order passed by the Income-tax Officer was restored The question whether the order passed by the Income-tax Officer in accordance with the directions given by the Inspecting Assistant Commissioner under section 144A or under section 144B of the Act is amenable to the jurisdiction of the Commissioner of Income-tax under section 263 of the Act came up for consideration before the Gauhati High Court in Tarajan Tea Company Pvt. Ltd. v. CIT 1994 (205) ITR 45, 1994 (117) CTR 179, 1994 (2) TLR 152, 77 Taxman 220, 1994 (117) CTR(Gau) 179, wherein the Gauhati High Court following the decisions cited hereunder CIT v. Christian Mica Industries Ltd. 1979 (120) ITR 627 (Cal) ; CIT v. K.L. Rajput 1987 (164) ITR 197, 1987 (32) TAXMAN 326, 1987 (59) CTR(MP) 65 (MP) [FB] ; Torson Products Ltd. v. CIT 1988 (173) ITR 611, 1988 (73) CTR 209, 1988 (38) TAXMAN 72 (AP); CIT v. Vithal Textiles 1989 (175) ITR 629, 1988 (73) CTR 49, 1988 (40) TAXMAN 401, 1988 (73) CTR(MP) 49 (MP); CIT v. Dulichand Bhatia 1989 (175) ITR 634, 1988 (41) TAXMAN 94 (MP) ; CIT v. East Coast Marine Products (P.) Ltd. 1990 (181) ITR 314 , 1990 (88) CTR 156 , 1990 (51) TAXMAN 32 (AP) ; CIT v. Satishkumar and Co. 1990 (181) ITR 57, 1989 (44) TAXMAN 215 (MP) ; CIT v. Gangaram Mohanlal Mittal and Sons 1990 (181) ITR 392, 1989 (76) CTR 78, 1989 (44) TAXMAN 4 (MP) ; Premier Cable Co. Ltd. v. CIT 1992 (193) ITR 719, 1992 (2) TLR 824 (Ker) and CIT v. Vincentian Orissa Society 1992 (194) ITR 743, 1991 (100) CTR 211, 1993 (69) TAXMAN 62 (Orissa) CIT v. Vithal Textiles 1989 (175) ITR 629, 1988 (73) CTR 49, 1988 (40) TAXMAN 401, 1988 (73) CTR(MP) 49 (MP) ; CIT v. Dulichand Bhatia 1989 (175) ITR 634, 1988 (41) TAXMAN 94 (MP) ; CIT v. Satishkumar and Co. 1990 (181) ITR 57, 1989 (44) TAXMAN 215 (MP); CIT v. Gangaram Mohanlal Mittal and Sons 1990 (181) ITR 392, 1989 (76) CTR 78, 1989 (44) TAXMAN 4 (MP) and CIT v. East Coast Marine Products (P.) Ltd. 1990 (181) ITR 314 , 1990 (88) CTR 156 , 1990 (51) TAXMAN 32 (AP), held that the order passed the Income-tax Officer as per the direction given by the Inspecting Assistant Commissioner under section 144B of the Act is amenable to the jurisdiction exercised by the Commissioner of Income-tax under section 263 of the Act. A similar view was taken by the Bombay High Court in CIT v. M. M. Virwani 1994 (207) ITR 255. In view of the foregoing decisions, we hold in the present case that the Tribunal was not correct in coming to the conclusion that the Commissioner of Income-tax has got no jurisdiction under section 263 of the Act to interfere with the order passed by the Income-tax Officer as per the direction given by the Inspecting Assistant Commissioner under section 144A of the Act. The Tribunal though dealt with the question relating to jurisdiction did not deal with the appeal on the merits. Inasmuch as we held that the order passed by the Tribunal with regard to the jurisdiction clause under section 263 of the Act is unsustainable, now the matter has to go back to the Tribunal for the purpose of disposing of the appeal on the merits. In that view of the matter, we answer the question referred to us in the negative and in favour of the Department. No costs.