TMI Blog1985 (1) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... 139 stands exhibited as 'salaries, wages and bonus'. Thereafter details were furnished by the assessee in the course of the assessment proceedings of this amount. Two of the components thereon were bonus of Rs. 20,16,925 and productivity bonus of Rs. 11,77,658. In an order sheet entry dated 23-10-1980, the ITO had referred to the handing over to the authorised representative of the assessee, the usual questionnaire and of his having further request for particulars, in particular, apart from other items, regarding 'productivity bonus'. A letter was filed by the assessee dated 29-10-1980, in which the following appeared : "6. To say why productivity bonus of Rs. 11,77,658 and terminal payments of Rs. 28,216 were paid: The productivity bonus of Rs. 11,77,658 was paid by my clients under the terms of an agreement entered into by them with the employees. The details for the payment of Rs. 28,216 referred to as terminal payments are not readily available, but these represent only other payments made to the employees." After this, there were other hearings and further details were called for. Another letter was filed on 12-3-1981 and the following appeared regarding productivity bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since the issue of allowance of bonus in full or disallowance of a portion thereof was not the subject-matter of reference to the IAC under section 144B, the Commissioner's jurisdiction was not shut out to rectify any error regarding such item. The Commissioner on merits did not agree with the assessee that productivity bonus was not hit by the ceiling prescribed under section 36(1)(ii). Eventually, therefore, in exercise of his powers under section 263, the Commissioner directed the ITO to withdraw excess allowance of bonus amounting to Rs. 8,21,738, which was allowed in the assessment. 3. Before us, the learned counsel for the assessee put forth three propositions in support of the contention that the Commissioner had no jurisdiction to exercise powers under section 263. 4. The first contention was that since the assessment was made after obtaining instructions of the IAC under section 144B, the Commissioner could not revise the assessment order as passed by the ITO. For this, the learned counsel sought to rely on the decision of the Special Bench of the Tribunal in East Coast Marine Products (P.) Ltd. v. ITO [1983] 4 ITD 73 (Hyd.). The learned departmental representative o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the Punjab and Haryana High Court in CIT v. Damyanti Mehta and Yash Raj Mehta [1972] 83 ITR 502. That was a case in which proceedings under section 34(1)(a) of the Indian Income-tax Act, 1922 ('the 1922 Act') were initiated but the ITO dropped the proceedings by his order 'proceedings filed'. The Commissioner thereafter acting under section 33B of the 1922 Act, cancelled the order of the ITO filing the proceedings and directed him to continue proceedings under section 34(1)(a). The High Court had held that on the facts, the Commissioner was precluded from revising the aforesaid order by reason of section 33B(2)(a), viz., that provision precluded the Commissioner from revising an order of reassessment made under the provisions of section 34. In the aforesaid decision, their Lordships had stated that in every case it had to be determined, on the facts and circumstances thereof, as to what the expression used by the ITO, i.e., 'proceedings filed' or 'proceedings disposed of or filed' connotes or means. Their Lordships observed that in one set of circumstances it may not amount to an order of assessment or reassessment whereas in another set of circumstances it may so amount. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the action initiated under section 148 being equated by 'making of an order of reassessment under section 147'. The order dropping proceedings is not synonymous, on the facts of the present case, with an order of reassessment made under section 147. Therefore, the bar prescribed by the provisions of section 263(2)(a) does not operate and the Commissioner was not precluded from exercising his powers under section 263. 7. The next contention of the learned counsel was that since there was an appeal to the Commissioner (Appeals), in view of the ratio of the decision of the Special Bench of the Tribunal in the case of Dwarkadas Co. (P.) Ltd. v. ITO [1982] 1 ITD 303 (Bom.) the jurisdiction under section 263 stood ousted. The learned departmental representative, on the other hand, submitted that the question of admissibility of bonus paid as a deduction did not figure in the grounds of appeal before the Commissioner (Appeals) and was, hence, not a matter considered by him. In view of the ratio of the judgments of the Madras High Court in the cases of CIT v. City Palayacot Co. [1980] 122 ITR 430, Puthuthotam Estates (1943) Ltd. v. State of Tamil Nadu [1980] 125 ITR 41 and CIT v. Eimc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be direct and not merely incidental or collateral. In the present case, we have set out the facts elaborately to show that the payments described as bonus of Rs. 20.16 lakhs as well as productivity bonus of Rs. 11.77 lakhs had been claimed as expenditure in the profit and loss account. The ITO had asked for details about the productivity bonus and the assessee had made clarifications regarding this item on two occasions. It is, therefore, clear that the ITO had considered the taxability of the payment in question expressly by calling for specific details and it was not a mere incidental or collateral examination of a matter in the process of assessment. What the ITO did was to directly consider the admissibility of the bonus claim as a deduction. It was the case where the ITO had applied his mind to the subject-matter and because he took the view that the entire amount was admissible, no specific further discussion appeared in the assessment order. This is, therefore, a matter on which the first appellate authority could have exercised the powers of enhancement if it was considered called for. Therefore, according to the ratio of the decision of the Special Bench of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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