TMI Blog2003 (7) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... h March, 1995. Thereafter a notice under s. 143(2) was issued and in compliance to this notice, assessee filed return showing profit of Rs. 1,41,93,275. The AO made enquiries on various aspects and also sought verification from the assessee about deposits, claim of interest, expenses, service charges, liability of interest and on many other points and completed the assessment on a total income of Rs. 1,63,40,89,400 vide assessment order dt. 27th March, 1997 passed under s. 144 of the Act. For computing this income, the AO made additions and disallowances on several counts. (iii) The assessee assailed the assessment order before the learned CIT(A) by taking various grounds. The learned first appellate authority passed a detailed order dt. 15th Feb., 1998, running into 101 pages. He discussed various issues, additions and disallowances and allowed appeal partly by giving relief to the appellant against certain additions. An order under s. 154, dt. 21st Feb., 1998, was also passed by him against the order of AO dt. 9th July, 1997. Another order dt. 28th Dec., 1998, was also passed under s. 154. (iv) Thereafter, the proceedings were initiated under s. 263 of the Act. The learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also repetitive, we do not consider it proper to burden this order by reproducing the same. However, we consider it proper to frame following issues to cover up the grounds of appeal: A. Whether assumption of jurisdiction by CIT while passing the order under s. 263 without examination of record, was invalid and illegal as alleged by the assessee. (Ground Nos. 1, 3 24). B. Whether assessment order dt. 27th March, 1997 was not liable to be set aside under s. 263 as it was neither erroneous nor prejudicial to the interests of the Revenue. (Ground Nos. 2 5 to 13). C. Whether no order under s. 263 could be legally passed against the assessment order which had merged with the order of CIT(A) (Ground No. 4). D. Whether the manner in which the CIT exercised jurisdiction under s. 263 was erroneous. If so, its effect? (Ground Nos. 14 15). E. Whether the order under s. 263 was not justified for setting aside the issue relating to liability on account of interest on deposits (Ground Nos. 17 to 23). The above issues have been framed for the sake of brevity and convenience. While deciding various issues involved in the ground of appeal, we shall take up the pleadings of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final, as miscellaneous application has been filed against that order, the issue should be independently decided by this Bench on merits. It was further submitted by him that, since the assessee has not taken specific grounds to challenge the initiation of proceedings under s. 263 in this appeal also, it should not be allowed to argue a ground which has not been taken in the appeal. It may be pointed out that the above pleas were taken by the learned counsel vide application dt. 1st Nov., 2001, during the course of hearing of this appeal. In the written application, it has been averred that ground Nos. 1 24 taken in this appeal should not be decided after following the decision of Tribunal Allahabad Bench on issue No. 1 in ITA No. 509/Alld/1999, because these grounds do not, in terms, raise the question of validity of initiation of proceedings under s. 263 by the CIT (Central), Kanpur. On this application, the Bench had passed the order to the effect that the arguments and the information contained in this application shall be considered along with the other material at the time of writing of the order. With this direction, the application has been kept on record. The learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the learned CIT(A), documents filed before him and order of learned CIT(A), dt. 22nd March, 1999, as well as subsequent orders passed by him. According to him, while issuing first notice, the CIT has merely considered the proposal of Asstt. CIT and at the most assessment order and nothing more and while issuing the second notice, there was nothing before him except the proposal. The learned counsel also submitted that without examination of the record, the CIT cannot reach to the satisfaction that the assessment order is erroneous and prejudicial to the interests of the Revenue and if the material itself is not found to be available, the question of examination and application of mind for consideration of the same, does not arise. The learned counsel vehemently reiterated that various entries on order sheets go to show that the CIT did not call for the record nor considered the same before issuing the notices and, therefore, the assumption of jurisdiction by him cannot be legally justified. In support of this argument, the learned counsel placed reliance on several authorities. 4.5 On the other hand, the contention of the learned special counsel for the Department was tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice was issued. It was contended by the learned special counsel that since CIT has already assumed jurisdiction under s. 263 on or about 27th Jan., 1999, he was not required to assume jurisdiction again on 22nd Feb., 1999 and all that was required at this stage was to provide an opportunity to the assessee which was done by issuing the notice dt. 22nd Feb., 1999. 5. We have carefully considered the facts and circumstances relating to this matter and entire material on record. The assessee has, in fact, challenged the order dt. 22nd March, 1999 passed under s. 263 of the Act on facts and in law. It is clear on perusal of ground Nos. 1, 3 24, which are as under: 1. The CIT (Central), Kanpur has erred against law and facts on record in framing the order dt. 20th March, 1999 under s. 263 of the IT Act contrary to law and facts on record. 3. The CIT while framing the order under s. 263 has failed to take cognisance of the record available at the time of its examination by the learned CIT (Central) in accordance with s. 263, Explanation, cl. (b), of the IT Act, 1961. 24. The CIT order under s. 263 of the IT Act does not fulfil the jurisdictional conditions necessary for fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of the power under s. 263 on the basis of materials available on record. 10. In the case of CIT vs. Electro House, the assessee claimed to have been constituted as a firm under a deed of partnership dt. 2nd Jan., 1958. Earlier, the business was done by one Vaidyanath Gorni as sole proprietor. The partnership included his mother-in-law and son-in-law, whose shares were 40 per cent and 30 per cent respectively. The ITO granted registration for asst. yr. 1959-60 and renewal of registration for asst. yr. 1960-61. The CIT on examination of the records found that the order of ITO granting such registration and renewal were erroneous and prejudicial to the interests of the Revenue. He, therefore, proceeded under s. 33-B of the old Act. Before doing so, he issued a notice to the firm. The validity of the notice was challenged before the Tribunal which came to the conclusion that the notice issued was not one required to be issued by the Act and hence its validity or invalidity did not affect the jurisdiction of the CIT. But the High Court differing from the conclusion reached by the Tribunal opined that the notice was not valid and, therefore, the CIT had no jurisdiction to proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of s. 263 are similar to the old provision contained under s. 33B of old Act and, therefore, the ratio of the decision of Hon ble Supreme Court of India in this case is applicable to the provisions of s. 263 of IT Act, 1961, as the language of the main provision remains the same. This decision of the Hon ble Supreme Court has been followed in the case of Renu Sagar Power Corpn. by the Hon ble Allahabad High Court. 12. In the case of Renu Sagar Power Co. Ltd. vs. CIT, the Hon ble Allahabad High Court has held that for assuming jurisdiction under s. 263, it was necessary for the CIT to give an opportunity of being heard to the assessee. The Hon ble Court has observed as under: "From a reading of s. 263 of the Act, it is manifest that the CIT may make inquiry to find out whether an order passed by the assessing authority is erroneous and prejudicial to the interests of the Revenue without giving any notice to the assessee. Having assumed jurisdiction under s. 263 for which no condition precedent is prescribed, the CIT before making an order under s. 263 should give an opportunity of being heard to the assessee. It means no enforceable order could be made by the CIT without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), the Hon ble High Court of Calcutta after referring to the decision in the case of Electro House vs. CIT (1968) 70 ITR 421 (Cal), observed as under: "The second question deals with the vagueness of the notice. It is true that the second aspect of the matter is on the question whether the notice was proper in this case. It has to be borne in mind that s. 263 of the IT Act, 1961 or s. 33B of the previous Indian IT Act, 1922, it does not require that any specific notices is to be given. All that is required is that reasonable opportunity should be given. In this case, it was emphasised on behalf of the assessee that the opportunity to be reasonable must be an effective and real opportunity." 15. There is another aspect of the matter. As pointed out by the learned special standing counsel for the Department, the provisions contained under s. 263 do not require issuance of mandatory notice before passing of order under s. 263. As also pointed out by the learned special standing counsel, the learned CIT is not required to record reasons before issuing notice for providing opportunity of being heard to the assessee. Thus, the provisions contained in 263 are different from the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on emerges: "a. Notice dt. 29th Jan., 1999 The Asstt. CIT, CC-I, Lucknow, Shri R. Das Gupta submitted a proposal under s. 263 vide his letter dt. 14th Jan., 1999 to the CIT, Central, Kanpur. This letter was sent through Addl. CIT (Central), Lucknow, and as noted below this letter, a copy of assessment order was to be annexed. The letter is available on pp. 1 to 4 of the paper book of the Department. On perusal of various endorsements made by the authorities on this letter, it is found that the letter did not accompany enclosure, i.e., the assessment order which must have been sent later on. On p. 40 of the paper book of the Department, there is a copy of the letter dt. 21st Jan., 1999, from the office of CIT, (Central), Kanpur, for calling the assessment order which shows that the exercise by the CIT was not mechanical as he wanted to see the assessment order. In the note of Addl. CIT given on the same letter, it is pointed out to the CIT that the issue has been discussed with senior standing counsel of the Department on 9th Jan., 1999. A perusal of notice dt. 29th Jan., 1999, also reveals that the learned CIT had perused the record. As in this notice dt. 29th Jan., 1999, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n both the points, i.e., on the points relating to verifiability of the deposit and the point relating to provision of interest. The learned CIT has also made reference to the order of CIT(A), which shows that even the order of first appellate authority was considered by him before passing the order. Thus, it cannot be said that the CIT did not assume jurisdiction properly for framing the order under s. 263. Thus, we are not convinced with the arguments of the learned counsel that order under s. 263 has been passed by the CIT without examination of the records. The cases on which the reliance has been placed by the learned counsel for the assessee are not applicable to the facts of the present case. 26. In the case of CIT vs. R.K. Metal Works (1978) 112 ITR 445 (P H), on which reliance has been placed by the learned counsel for the assessee, the CIT concluded that for asst. yr. 1968-69, the order of the AO was erroneous and prejudicial to the interests of the Revenue inasmuch as he did not disallow the interest attributable to that part of the capital borrowed by the firm, which was not utilised for the purposes of the firm s business and was advanced indirectly to the two, partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. It was further submitted that provision under s. 263(1) cannot be invoked to correct each and every type of mistake. The learned counsel thereafter submitted that in the instant case, the AO had considered all aspects of the matter and had also taken into account the assessment orders passed earlier. It was also pointed out that even the verification made in the case of the firm was taken into account and after conducting detailed enquiry about the deposits etc., the AO after following the assessment orders in asst. yrs. 1982-83 and 1983-84 made addition by taking 15 per cent of the opening balance of the deposits and 30 per cent of the collections made during the year which shows that he had duly considered the entire relevant material for deciding the issue. The learned counsel further contended that to show the order is erroneous, there must be something in the order itself that the AO has not applied his mind properly. According to him, on perusal of the assessment order it cannot be said that the conclusion drawn by him was improper or perverse and, therefore, the order of the AO cannot be treated to be erroneous. The learned counsel also pointed out that merely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of power was challenged and it was alleged that the CIT had not applied his mind inasmuch as he had relied solely on the order of the AAC for passing the order. The Hon ble Court after considering the provisions of s. 33B held that CIT s revisional jurisdiction being quasi judicial, he must give reasons for his satisfaction. 34. In the case of CIT vs. Gabriel India Ltd., it was held that the CIT can revise the order only when conclusion arrived by the ITO is erroneous and he cannot revise his order because he disagrees with the ITO. In this case the ITO made enquiries in regard to the nature of expenditure incurred by the assessee and allowed the claim of the assessee after being satisfied with its explanation. The CIT was of the view that ITO committed error in allowing the deduction to the assessee. He observed that the order of the ITO did not contain discussion in regard to the allowability of the claim for deduction, which indicated non-application of his mind. According to him, the claim of the assessee required examination as to whether the expenditure in question was revenue or capital nature. In that view of the matter, he cancelled the order of the ITO and dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Calcutta High Court, wherein it was held that if the matter was considered by the ITO and CIT(A), then CIT cannot exercise revisional jurisdiction. 37. In the case of J.P. Sethi vs. ITO, the issue related to the applicability of provisions of s. 68. The assessee had shown some cash credit in his books from his father. The ITO did not make any addition and directed that in case the assessee failed to produce the evidence within the stipulated time, the assessments for the relevant years would be reopened. The CIT observed that the ITO was not satisfied about the explanation of the assessee and in terms of s. 68 the amount of cash credit should have been assessed to tax as income of the assessee. According to him, the provisions of s. 68 were mandatory in nature. He, therefore, issued a show-cause notice to the assessee and after considering the matter set aside the assessments with the directions to complete the same de novo. The order of the CIT(A) was challenged. The Pune Bench of Tribunal set aside the revisional order of the CIT and restored the matter to the ITO by observing as under: "13. In our view, the CIT is not correct in his interpretation given to s. 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT under s. 263 cannot be upheld. 38. The learned special counsel for the Department on the other hand supported the order of the CIT and submitted that since the AO had not utilised the material collected by him and left the issue undecided relating to genuineness of the deposits, etc., the order was erroneous as well as prejudicial to the interests of the Revenue. He also advanced similar arguments on the other issue relating to interest liability and submitted that the AO failed to consider this aspect as well and, therefore, the learned CIT was justified in treating the order erroneous and prejudicial to the interests of the Revenue. In support, the learned counsel also made reference to the following decisions: (i) Swarup Vegetable Products Industries Ltd. vs. CIT (1990) 90 CTR (All) 113 : (1991) 187 ITR 412 (All) (ii) Biru Mal Pyarelal vs. Asstt. CIT (iii) Malabar Industrial Co. Ltd. vs. CIT. 39. We have gone through these decisions. In our view on facts these decisions are not applicable. In the case of Malabar Industrial Co. Ltd., on facts it was found that the ITO without making enquiry accepted the entry in the statement of account filed by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the learned CIT(A). According to him, even after introduction of cl. (c) to Explanation to s. 263, the CIT cannot invoke jurisdiction under s. 263 to revise the order of AO on the issues which were subject of appeal before the learned CIT(A) and which were considered and decided by him because if the CIT is allowed to revise such issue which has been considered and decided by the CIT(A), then the order of revision shall adversely affect the appellate order and shall alter/modify or disturb the findings of learned CIT(A). 45. Coming to the facts of the present matter, the learned counsel submitted that the AO had considered the issue relating to the genuineness of deposits, etc. in paras 5 to 5.12, 5.22, 5.29, 5.34 and after duly considering each aspect including the assessment in the case of firm and the order of Tribunal, he had decided not to apply the provisions of s. 68 of the Act, but at the same time he made an addition of Rs. 96,54,62,980 by taking 15 per cent of the opening balance of the deposits and 30 per cent of the total deposits collected during the year. The learned counsel further submitted that the assessee challenged this addition made on account of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, the argument of the assessee that order of AO had merged in the order of learned CIT(A) as he has considered the question of allowability of interest under s. 36(1)(iii) and when he considered one aspect, it should be presumed that he considered all aspects of it, wholly without merit. 49. The learned special counsel further argued that cl. (c) to Explanation to s. 263(1) came to be on the statute by Finance Act, 1988, w.e.f. 1st June, 1988, and according to it, the jurisdiction of the CIT under s. 263 "shall extend and shall be deemed always to have extended to such matters as has not been considered and decided in such appeal". According to him, the said clause was considered by Hon ble Supreme Court of India in the case of CIT vs. Arbuda Mills Ltd. (1998) 147 CTR (SC) 474 : (1998) 231 ITR 50 (SC), and this judgment was followed by the Hon ble Gujarat High Court in the case of CIT vs. Panna Knitting Industries (2002) 173 CTR (Guj) 327 : (2002) 253 ITR 656 (Guj). According to the learned counsel, these decisions squarely cover the present matter. The learned counsel placed reliance on the following decisions in support of his contention that the doctrine of merger cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order on the issue relating to deposits. On perusal of the assessment order, it is found that the AO has considered the issue of deposits in the following paras: (i) Para 1.2 Total deposits under various schemes in asst. yr. 1994-95 Rs. 2,89,85,69,013 (ii) Para 2.9, 2.10, 2.11 Enquiry of the AO regarding the application forms for deposits. (iii) Para 2.16 Notices issued to the assessee. (iv) Para 4 Details of the schemes and total collections made. (v) Para 5.5 Books of accounts produced and reports of ADIT about deposits at Branches. (vi) Para 5.7 Assessee furnished the list of deposits in 20 volumes in 1.1.1997. (vii) Para 5.8 Verification of 50 depositors of Gomti Nagar Branch. (viii) Para 5.10 Assessee furnished confirmatory letters of 26 persons. The AO issued summons under s. 131 to these depositors. Assessee was also asked to produce 63 persons. (ix) Para 5.11 Statements of depositors recorded. (x) Para 5.12 Findings of AO about non-traceability of other depositors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r course for making addition of Rs. 96,54,62,980 by taking clue and by following the formula adopted by the CIT(A) also in order for asst. yr. 1991-92 which has been referred by the AO in para 5.33. Thus, it is not the case where the issue of deposits and taxability of income under s. 68 of the Act on account of such deposits was not considered but it is a case where the AO after considering the entire matter and after making enquiries took a decision to make addition of part of the deposits on estimated basis as any other mode was not found feasible and legally possible by him. 56. The assessee challenged the above addition before the learned CIT(A) by taking following grounds before him. These grounds which have been reproduced in para 15 of the order of learned CIT(A) dt. 15th Feb., 1990 are as under: "3. The Asstt. CIT has erred in law and on facts on records in making an addition, penalty on arbitrary basis of Rs. 96,54,62,950 out of the deposits collected by the appellant. 4. The Asstt. CIT has erred in law and on facts on record in making the addition of Rs. 96,54,62,980 which has been worked out as under: 15 % of opening balance of deposit, i.e., Rs. 30,41,43, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed in favour of the appellant company and against the Department. We do so and order accordingly. Viz., whether it can be brought to tax as revenue receipt is decided in favour of the appellant because of the ratio laid down by the apex Court of the land in the Peerless case......" "We hold that deposits under all the schemes of this assessee retain their characteristic of capital receipt and they cannot be taxed as revenue or trading receipts by the Department." 58. On perusal of order of the learned CIT(A), therefore, it is clear that after discussing all the facts, the order of AO, the arguments of the Department, the arguments of the assessee, the earlier orders on the points of deposits, he did not consider it proper to apply s. 68. He, in fact, decided that nothing can be added out of deposits. 59. A perusal of the two orders referred to above, thus, goes to establish that the subject-matter before the two authorities related to the genuineness and verifiability of the deposits and also the nature of these deposits and the learned CIT(A) had finally decided that no addition can be made out of deposits. This shows that applicability of s. 68 was neither consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and held that the order of the AO was erroneous insofar as it was prejudicial to the interests of Revenue. On appeal by the assessee against order under s. 263, the order under s. 263 was upheld but Hon ble High Court held that once the appeal has been preferred before AAC on any aspect of quantum of depreciation, the CIT cannot assume jurisdiction, otherwise anomalous position could arise. (II) The decision of Hon ble Calcutta High Court in the case of Oil India Ltd. was followed by the Delhi Bench of Tribunal in the case of Sujata Grover vs. Dy. CIT. In that case, the AO had varied the amount of deduction under s. 80HHC, while passing the assessment order on two counts, firstly, he reduced 90 per cent of interest income from the profits of the business and secondly, he included a sum of Rs. 48,38,274 being the amount received on account of exchange fluctuation in relation to sales effect in earlier years in total turnover and not forming part of export turnover. The assessee challenged the second item before the learned CIT(A) contending that such foreign exchange fluctuation ought to have been included in the export turnover as well. The learned CIT(A) concurred with the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd. vs. CIT Anr. (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC) and CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC). There is also no dispute about the fact that the CIT(A) has also got the power of enhancement. A survey of the aforecited legal position reveals that the CIT(A) is competent to consider all the aspects of the matter which is agitated before him. It is not only the right but the duty of the CIT(A) to examine various aspects of the issue which is the subject-matter of controversy before him. When a particular matter is disputed by the assessee before the first appellate authority and he gives his findings on some aspects of the matter, it is implied that he has examined all aspects of that matter before adjudicating upon the matter and is satisfied as regards the correctness of the findings of the AO on all other aspects of that matter. This is obvious from his power of enhancement, which has the effect of increasing the income by setting right the lacunas left over by the AO while framing the assessment." (III) Hill Properties Ltd. vs. Asstt. CIT, ITAT B Bench, Bombay, asst. yrs. 1985-86 to 1987-88, dt. 23rd Nov., 1993: In this case, annual letti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. The AO estimated gross profit at 12.5 per cent for the first two assessment years and retained the gross profit shown by the petitioner for the last assessment year. On appeal, the learned CIT deleted the addition of Rs. 8,486 and Rs. 16,558 for asst. yr. 1972-73 in respect of electrical and construction business. For asst. yr. 1973-74, the relief of Rs. 9,463 in respect of electrical business and Rs. 56,323 in respect of construction business was granted. Likewise, in asst. yr. 1974-75 also relief was allowed on both the counts by the learned CIT(A). The order of CIT(A) was challenged by the petitioner before Tribunal also. The CIT, Bombay, exercising powers under s. 263 issued notice to the assessee and thereafter set aside the assessment orders for the relevant years and directed the ITO to redo the assessment. The CIT was of the view that the payment made to M/s Architect Combine and P.L. Kampani were for the purpose of supervision work and the said payment related to trading account and could not have been debited to the P L a/c. This order of the CIT passed under s. 263 was also challenged before the Tribunal. It was submitted by the assessee that the exercise of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) heard the appeal and upheld the order of the ITO. In this order under s. 263, the CIT held that order of ITO was erroneous. According to him, the point regarding applicability of s. 44AC was the only point agitated in appeal and the point whether the head office expenses for the entire year had been taken into account was not agitated by the assessee. The CIT, thus, set aside the assessment order and directed the ITO to redo the assessment. In appeal against the order of CIT, it was argued that CIT had no jurisdiction to act under s. 263 as the issue was decided by the ITO and the CIT(A). After hearing both the parties, the Tribunal held that there was no discussion in the order of the learned CIT(A) about the ground relating to head office expenses. The matter was, therefore, remanded to the CIT(A). The Hon ble High Court has held as under: "Order of ITO regarding application of s. 44C having been taken in appeal to CIT(A), same merged with appellate order and CIT cannot exercise revisional jurisdiction in respect thereof on the ground that quantification of allowance under s. 44C was not agitated." 62. In the case of CIT vs. Nirbheram Daluram, while explaining the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 263(1), because this clause is not applicable and the power of CIT shall not be extended to a matter which has been considered and decided in appeal. 64. So far as the second issue relating to interest is concerned, we are not convinced with the argument of the assessee that on this point also the order of AO stood merged with the order of the learned CIT(A). On perusal of assessment order it is found that the AO has observed in para 2.xiii that interest provision for the year 1994-95 was at Rs. 26.42 crores and as per balance sheet as on 31st March, 1994 it was less by Rs. 11.72 crores. He has discussed the issue relating to notional interest on floating funds and also issue relating to interest paid on borrowed capital in para 7.1 but he has not made any disallowance on account of interest provided. In any case, the issue was not agitated before the learned CIT(A). It is true that the learned CIT(A) had discussed other issues relating to interest but the specific issue relating to provision of interest for this assessment year was neither referred before him, nor considered by him, nor decided. Hence, in view of cl. (c) to Explanation to s. 263 he was within his power to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above discussions, we are of the opinion that so far as the assessee s claim of deduction of liability on account of interest payable on deposits under the two schemes was concerned, it was, as a whole including all aspects, such as accrual of the liability, quantum of claim etc, subject-matter of appeal before the CIT(A) and since the CIT(A) also has dealt with those aspects, the assessment order, so far as this issue is concerned, had merged in the order of the CIT(A) passed on 1st Jan., 1999. That being the position, the CIT, Kanpur, on 22nd Feb., 1999 had no jurisdiction to revise the impugned assessment order by exercising the powers available under the provisions of s. 263 of the Act and consequently, the order under s. 263 of the Act passed on 22nd March, 1999 was bad-in-law and void ab initio for want of lawful jurisdiction." Thus, although similar notices were issued in the two cases on the same point and on the same issue but on facts, the two cases are not identical because in the present case the CIT(A) has not considered the issue relating to provision of interest on account of liability at all. Thus, we accept the contention of the learned counsel for the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The learned CIT(A), however, confirmed the order of the AO disallowing the assessee s claim of weighted deduction under s. 35B of the Act in relation to item No. 1, i.e., export freight. The CIT initiated revisional proceedings under s. 263 as, according to him weighted deduction under s. 35B of the Act was wrongly allowed by the ITO in respect of item Nos. 2, 3 and 4 namely, foreign travelling, export service charges and export commission. The CIT passed an order under s. 263 directing the ITO to withdraw the weighted deduction allowed in respect of item Nos. 2 to 4. The challenge of the assessee against the order of CIT was that the issue relating to allowability of weighted deduction was considered by the learned CIT(A) and he could have in exercise of his powers under s. 251 which are co-extensive with the powers of AO, withdrawn the weighed deduction allowed for the remaining three items. The Hon ble Supreme Court rejected this contention and observed as under: "It is true that the powers of the appellate authority under s. 251 are co-extensive with the powers of the assessing authority and the former authority had power to even withdraw the allowance of weighted deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve carefully considered the entire material on record including the notice issued by the learned CIT and order passed by him under s. 263. In our view, the direction of learned CIT is not advisory in nature. He has set aside the order of AO on the two issues and restored these two issues to the file of AO and directed the AO to decide the issues afresh after giving reasonable opportunity to the assessee. 76. The issue in the case of CIT vs. Late Sunder Lal (through Bankey Bihari Lal) was different as in that case the CIT had not assigned reasons for being satisfied that the order passed by the ITO was prejudicial to the interest of Revenue. The Hon ble Allahabad High Court made following observation: "No reason at all have been given by the CIT for coming to the conclusion that the order in question was prejudicial to the interests of the Revenue. It is also not possible to accept the argument on behalf of the Revenue that the CIT must be deemed to have adopted the reasoning of the AAC, inasmuch as he had authorised the ITO to file an appeal to the Tribunal against the order of the AAC. It is settled law that an order passed by a quasi-judicial authority without giving any reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crues or arises only on the date of maturity. The assessee, however, has provided interest on the current deposits as well as on the old balances without actually crediting to the accounts of individual account holders. Interest which is not payable on the defaulted/lapsed accounts or on unclaimed matured accounts has also been claimed and so allowed by the AO. The AO did not look into as to whether the claim of interest was excessive and whether it was ascertained or contingent in nature. The details of regular and irregular accounts and the amount of interest not payable on irregular accounts is not known. If the provision of interest has been made at 4 or 5 per cent only while the terms and conditions stipulate to a higher rate of interest the excess interest on maturity will thus be payable at a later period which will distort the accounts of the various years. In the 84 months scheme, if 12 instalments are not paid, then it becomes the lapsed account and no interest is payable at all but a minimum interest as admitted by the assessee s representative has been provided even in such case. The status of the depositors accounts is known only at the end of the tenure of the scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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