2001 (3) TMI 236 - AT - Income Tax

Summary

Issues Involved:

1. Jurisdiction of the CIT(A) under section 154 of the Income-tax Act, 1961.
2. Legality of reducing the deduction under section 35B of the Act.
3. Interpretation of section 251(1) and section 251(2) of the Act.
4. Applicability of judicial precedents on the powers of the Appellate Authority.

Issue-wise Detailed Analysis:

1. Jurisdiction of the CIT(A) under section 154 of the Income-tax Act, 1961:

The primary grievance in the appeal was whether the CIT(A) was legally competent to pass an order under section 154 to revise the order of the ITO and thereby withdraw the deduction granted by the Assessing Officer. The assessment under section 143(3) was framed on 16-12-1983, allowing a deduction under section 35B amounting to Rs. 44,004. The CIT(A) later reduced this deduction to Rs. 28,169, which the appellant contended was beyond his jurisdiction under section 154.

2. Legality of reducing the deduction under section 35B of the Act:

The CIT(A) reduced the deduction on the grounds that clauses (ii), (iii), (v), (vi), and (viii) of section 35B(1)(b) were omitted by the Finance Act No. (2) of 1980, effective from 1-4-1981. The appellant argued that the CIT(A) could not take recourse to section 154 at the instance of the Assessing Officer to withdraw the deduction or relief given at the assessment stage. The Revenue supported the CIT(A)'s action, asserting that the CIT(A) could pass an order under section 154 if any wrong and excessive relief had been given by the Assessing Officer.

3. Interpretation of section 251(1) and section 251(2) of the Act:

The judgment involved the interpretation of section 251(1) and section 251(2) of the Act. Section 251(1) outlines the powers of the Appellate Authority, including confirming, reducing, enhancing, or annulling the assessment. Section 251(2) stipulates that the Appellate Authority shall not enhance an assessment or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. The Explanation to section 251(1) allows the Appellate Authority to consider and decide any matter arising out of the proceedings, even if it was not raised by the appellant.

4. Applicability of judicial precedents on the powers of the Appellate Authority:

The Judicial Member and the Accountant Member had differing views on the applicability of judicial precedents. The Judicial Member opined that the CIT(A) could not reduce the deduction under section 35B as it was not an issue before him. Conversely, the Accountant Member relied on several judicial precedents, including the Hon'ble Supreme Court's decision in CIT v. McMillan & Co., which held that the Appellate Authority has broad revising powers. The Accountant Member also cited the Hon'ble Punjab & Haryana High Court's decision in Dalmia Dadri Cement Ltd., which supported the view that the Appellate Authority could rectify mistakes in the assessment order.

Separate Judgments Delivered:

The Judicial Member concluded that the CIT(A) could not pass the order under section 154 to reduce the deduction as it was not an issue before him. The Accountant Member disagreed, holding that the CIT(A) was justified in taking recourse to section 154 to correct the mistake in the deduction under section 35B. The matter was referred to a Third Member due to the difference of opinion.

Third Member's Decision:

The Third Member concurred with the Accountant Member, stating that the CIT(A) was fully justified in resorting to section 154 to amend the mistake. The Third Member emphasized that the Explanation to section 251(1) gave jurisdiction to the Appellate Authority to consider and decide any matter arising out of the proceedings, even if not raised by the appellant. The Third Member found no infirmity in the order of the Accountant Member.

Conclusion:

The appeal was ultimately decided in favor of the Revenue, upholding the CIT(A)'s action to reduce the deduction under section 35B from Rs. 44,004 to Rs. 28,169 by taking recourse to section 154 of the Act. The decision emphasized the broad revising powers of the Appellate Authority and the applicability of judicial precedents in interpreting these powers.