9911796707
TMI Blog2003 (7) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 143(1)(a) of IT Act, 1961, on 16th 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 initiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this appeal, are argumentative 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be treated to be 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by the parties 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso show-cause 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 necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions 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 ..... he 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 provisions c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "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 mentioned th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, partners for investment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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 because the AO did not ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 directed him to make a fresh assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein 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 of the IT Act, 1961. Sec. 68 uses the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. On these facts, the order of the ITO was treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deposits before the learned CIT(A) by taking specific g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 applied to the present case. (a) CIT vs. Arbuda Mills (b) CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 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. (xi) Para 5.13 Directions for special audit under s. 142(2A) issued. (xii) Para 5.16 AO observes that deposits are not open to verification. (xiii) Para 5.19 On 4.2.1997 assessee submitted that he is filing a list of depositors showing deposits-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 30,41,43,847 45,61,71,577 30 % of collection made during the year, i.e., Rs. 1,69,76,38,010 50,92,91,403 96,54,62,980 Inasmuch as he has brought to tax even a part of the receipts collected in earlier years and accepted by the Department as capital receipts. 5. The Asstt. CIT has erred in law and on facts on records in treating a part of the deposits as a revenue receipt whereas, in fact the same is a capital receipt as claimed by the appellant. 6. The Asstt. CIT has erred in law and on facts on record in making various allegations and observations in bringing to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 considered justifiable by the AO nor by the learned CIT(A). Thus, the matter or subject in issue before the AO as well as before the learned first appellate authority was as to whether any part of the deposits can be assessed as income of the assessee or not. This matter was duly considered and finally decided by the learned CIT(A) who even deleted the addition of Rs. 96,54,62,980 60. Since the subject relating to genuineness or otherwise of the deposits under various schemes amounting to Rs. 2,89,85,79,103 mobilised during the assessment year under consideration and feasibility of addition under s. 68 in the hands of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee's contention in this regard. However, it was noticed by the CIT that the AO while calculating the deduction under s. 80HHC has not excluded 90 per cent of the foreign exchange gain of Rs. 48,38,274 and interest income of Rs. 1,52,807 from the profits of the business as defined in Expln. (baa) below s. 80HHC(4B); it was noted that this amount received as foreign exchange difference during the present assessment year related to export sales made in the earlier years and, therefore, could not be treated like foreign exchange difference relating to exports made during the current year. It was further noted by him that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 letting value of the property was determined on the basis of its municipal value at Rs. 3,57,257 for all the assessment years, i.e., asst. yrs. 1985-86 to 1987-88, it was found that the assessee had received following amounts from its members: (1) 1985-86 9,70,642 (2) 1986-87 7,96,023 (3) 1987-88 3,85,573 On the basis of the above, the CIT took the view that the assessments in question were erroneous and prejudicial to the interests of the Revenue. One of the objections of the assessee before the CIT was that the order of the AO had merged with the order of CIT(A). This objection was rejected. The Tribunal, on appeal agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 powers by CIT under s. 263 of the Act was entirely without jurisdiction as he could not have exercised the revisional power under s. 263 of the Act, when the order of the ITO had merged in the order passed by the AAC. The Hon'ble Court accepted this plea by observing as under: "A plain reading of s. 263(1) of the Act established that the CIT could exercise revisional powers only in cases where any order passed by the ITO is found to be erroneous and prejudicial to the interests of the Revenue. Shri Pandit is right in his submission that the order of the ITO in respect of the three assessment years was carried in appeal before the AAC and the appellate authority granted relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 appellate powers of AAC laid down under s. 251 of IT Act, 1961, it was held by the Hon'ble Supreme Court of India that the appellate power of AAC was not confined to matter, which was considered by the ITO and the AAC had jurisdiction to consider the new entries, which were not considered at all by the ITO. In this regard, the hon'ble Court made reference to the earlier decisions in the cases of Jute Corporation of India Ltd. vs. CIT and observed as under: "3. Having regard to the decision in Jute Corpn. of India Ltd., it must be held that the High Court was in error in holding that the appellate power conferred on the AAC under s. 251 was confined to the matter which had been consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 revise the order of the AO on this issue. 65. The other plea of the assessee that this issue stands covered by the order of Tribunal in the case of sister concern rendered in ITA No. 509/All/1999 is also not acceptable because in that case facts were distinguishable. It may be pointed out that in the case of Sahara India Mutual Benefit Co. Ltd. vs. Asstt. CIT in ITA No. 509/All/1999 for the asst. yr. 1994-95, the issue before the AO was about the allowability of deduction of expenditure on account of interest payable on deposits received under the two schemes. The assessee, in the P&L a/c for the asst. yr. 1994-95, had claimed deduction of expenses worth Rs. 16,87,88,857 payable on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 that the decision of Tribunal, Allahabad Bench is not binding on this issue and that question of merger of the order of AO on this point does not arise. 67. The argument of the learned counsel for the assessee that in the present case even the CIT considered the issue of allowability of interest under s. 36(1)(iii) and therefore, it should be taken that all aspects and all matters relating to interest were considered by the learned CIT(A), cannot be accepted. In the case of CIT vs. Arbuda Mills Ltd., it was held that the AO had accepted the claim of the assessee with regard to the deductibility of the following items from the total income: (a) deduction of a sum of Rs. 23,82,621 by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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 deduction in respect of the aforesaid three items. The legislature has, however, by incorporating Expln. (c) to s. 263 of the Act conferred powers on the revisional authority which are co-extensive with the powers of the appellate authority. It is only with a view to empower the revisional authority to exercise the powers of the appellate authority in respect of such matters which have escaped the attention of the appellate authority that Expln. (c) to s. 263 has been added to protect the interests of the Revenue. The Supreme Court decision in the case of Shri Arbuda Mills Ltd. (1998) 147 CTR (SC) 474 : (1998) 231 ITR 50 (SC) squarely covers the question referred to us and it is, therefore, answered in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son 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 reasons for its conclusion is vitiated in law. The order passed by the CIT clearly suffers from this infirmity. Bhagat Raja vs. Union of India AIR 1967 (SC) 1606 followed." 77. In the case of CIT vs. R.K. Metal Works it was found that the CIT did not consider the written statement of the assessee raising objections against proposal for initiating action under s. 263 and also failed to indicate the material or the nature of evidence before him on the basis of which he came to the conclusion that the order of ITO was erroneous and prejudicial to the interests of the Revenue. On these facts, the Tribunal held that the CIT has not given any reasons to justify his satisfaction that the order passed by the ITO was prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and then only it is known as to how much interest is payable. That being so it cannot be said that the liability of interest is determinate and not contingent." The learned counsel for the assessee submitted that the observations of the learned CIT(A) on the issue of interest are not correct. According to him, since the assessee made a lesser claim, how it can be against the interests of the Revenue. The learned counsel also made reference to the observations of the Tribunal in the case of Mutual on this issue and after making reference to para Nos. 19.1, 19.2, 21.1 and 22.2 of that order, it was argued that on similar facts the order of CIT in that case was quashed and therefore, following the order of Tribunal in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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