TMI Blog2010 (4) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... her Stridhan or self-acquired property which she could legally bequeath or was it part of HUF and did the said cash and jewellery factually exist? The learned JM was of the view that the order of the AO had merged with the order of the CIT(A) and, therefore, the CIT was not having any jurisdiction to pass the impugned order u/s 263. Learned AM, on the other hand, took the view that the order of the CIT(A) has not merged with the order of the AO and it is the case where there had not been proper enquiry by the AO and, therefore, the order passed u/s 263 was valid one. HELD THAT:- The word matter is wider than the word point . Once a particular matter has been considered and decided in appeal and if any point relating to that remains unconsidered, it cannot be said that the subject-matter of appeal had not been considered and decided in such appeal. The subject-matter in appeal before the CIT(A) relates to the addition of ₹ 50,000 on the basis of the will of the mother of the assessee. A subject-matter may consist of number of arguments and number of points. If any point, in my opinion, has not been referred to by the CIT(A) in his order, it cannot be said that the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THIRD MEMBER) HARI OM MARATHA, JUDICIAL MEMBER AND SANJAY ARORA, ACCOUNTANT MEMBER For the Petitioner : R.C. Tomar For the Respondent : S.R. Sahu and S.K. Mishra ORDER PER HARI OM MARATHA, JUDICIAL MEMBER. This appeal of the assessee has been filed against the order of learned CIT passed under section 263 of the Income-tax Act, 1961 ( the Act ) pertaining to assessment year 2000-01. 2. Briefly stated, the facts of the case are that the assessee, an individual, filed his return by showing tuition as his main source of income and declared income at ₹ 55,000. A survey under section 133A of the Act was conducted on 3-3-2000 in the case of the assessee in his residential premises. Smt. Nemshri Jain, wife of the assessee, had purchased an old residential house in two parts which was renovated during the financial years 1996-97 to 1999-2000. The year-wise break-up of investment made in the construction/renovation of the house was duly shown in the capital account for each assessment year for which returns of income were filed along with the capital accounts. The case was referred to the DVO for ascertaining the cost of construction of the residential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has further added that sum on the ground that the appellant-assessee was not having technical knowledge or was not an engineer. Obviously, for supervision of the building, technical expertise of being a civil engineer is not needed and the property being used by the appellant for his business purposes on the first floor of which construction was done, it cannot be said that the appellant-assessee was not available for self-supervision. Considering the differences reconciled by the Government approved valuer, there remains a difference of only 3 per cent which is also liable to be ignored as the report is based on estimation and, as has been held in several judgments, a difference upto a reasonable percentage of about 10 to 15 per cent needs to be ignored if no specific discrepancy has been noted in the books of the appellant. Last but not the least is that the Assessing Officer has added the entire difference in the value of the property in the year under consideration while admittedly the property was constructed in a span of 4 years starting from 1996 to 2000. The Departmental Valuer s report placed in the Assessing Officer s record also points out the construction done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of CIT v. Shri Arbuda Mills Ltd. [1998] 147 CTR (SC) 474 /[1998] 231 ITR 50 (SC) that the powers of CIT shall extend and shall be deemed to have extended to matters not considered and decided in appeal filed by the assessee to CIT(A). In the case of the appellant the Assessing Officer had duly considered the Will of Smt. Maro Devi mother of Smt. Nemshri Jain and the same was considered by the learned CIT(A) in her appeal order. The addition made by the Assessing Officer on account of difference amount of ₹ 50,000 between the amount shown in Will and the capital statement submitted by the appellant was deleted by the learned CIT(A). (4) That the learned CIT has erred in the eye of law by not accepting the plea of the appellant that as per law it is not compulsory to obtain probate of Will in the State of Uttar Pradesh. In this regard the appellant had mentioned decisions of Hon ble Allahabad High Court in the case of Atma Prakash v. D.J. Saharanpur (Allahabad Rent Cases 1983 p. 415) and Bhaiyaji v. Jageshwar Dayal Bajpai AIR 1978 All. 268. The observations of the learned CIT in his order that these case laws are not applicable in the case of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts were not controverted by the learned Departmental Representative, as these could not be done so being the factual facts available on record. It was found for certain that all the points which are taken in the notice issued under section 263, a copy of which is enclosed at paper book 19, and the decision of CIT(A) mentioned above and whose relevant portion has been extracted for ready reference, it becomes evidently clear that the same issue which is the subject-matter of revision by the learned CIT had already been decided by the CIT(A) and the same had merged with the order of learned CIT(A), in view of the settled proposition of law that an order of assessment cannot be revised to the extent it has been the subject-matter of appeal and has merged with the order of the appellate authority. There being no dispute with regard to the above fact that the revision carried out by the CIT is on the same issue which is the subject-matter of CIT(A) s order which was passed prior to issuance of notice under section 263 of the Act. When the same and similar issue has been examined by learned CIT(A) while dealing with the appeal, it is treated as merged and the same issue cannot be a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) under section 250, into which the impugned order merges its revision stands prescribed by section 263 of the Act. Further, the charge of the relevant Will being not subject to probate, as made by the learned CIT, was met by him by stating that that the same not required, being a Hindu in respect of property situate other than in the territories of Bengal, Bombay and Madras. 2.2 The learned CIT, vide his show-cause notice dated 22-4-2004, sought to impugn the assessment as framed on the following grounds, each of which I find subsists in his subsequent impugned order as well, being essentially, the absence of examination along the following lines : (a)if the Will had been probated or not; (b)whether the transmission per the Will was in terms of the Hindu Succession Act; (c)whether the cash and jewellery formed part of the mother s Stridhan or was self-acquired, so that it could be legally bequeathed by her or was a part of the HUF; (d)whether the cash and jewellery did in fact exist. 3. Before us, like contentions stood raised. 4.1 I shall take up each of the objections raised by the assessee; the first and the principal being that the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be ascribed thereto, that is given that the same (will) stated it to be at ₹ 4 lakhs. The dispute before the learned CIT(A) and, thus, resolved by him, was only in relation to the difference; the assessee s capital account reflecting a credit in the sum of ₹ 4.50 lakhs, and which stood explained only as the cash left by the mother, so that whether the balance ₹ 50,000 could be said to be explained with reference to the will or not. 4.2 In view of the foregoing, I consider that the assessee s objection as having been squarely met and not maintainable; there being no bar or impediment in law to the invocation of section 263 by the revisional authority under such circumstances. Apart from the plain language of section 263(1)(c) itself, which is express and patently clear on the point, the matter stands elucidated by the Apex Court in the case of Shri Arbuda Mills Ltd. (supra) being relied upon by the revenue; it, again, relying on the language of section 263(1)(c) itself for the purpose, stating it to be sufficient in itself, so as to dissolve any vestige of doubt, if any, in the matter, that may have survived. 4.3 The legal ground or bar as raised by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at she was an assessee under the Wealth-tax Act, 1957, and liable to tax thereunder; in other words, there is no contemporaneous, corroborative or circumstantial evidence of her ownership or even the actual existence of both the assets with her; (b)even though the safe (Tijori) was opened on 20-7-1989 so that the factual existence of the assets came to light on that date, i.e., a few days after the death, the assessee accounted for the cash only per his return for assessment year 1997-98, filed much after (on 29-3-2000) its due date, and soon after the survey proceedings under section 133A of the Act at his residential premises on 3-3-2000; (c)though the assessee became the owner of the cash and jewellery on the death of the mother, i.e., in 1989, yet did not return the same per at least his wealth-tax return, which he stood obliged to file as per the existing law, i.e., apart from the regular returns under the Act; (d)the cash, explained with reference to the Will, is at ₹ 4.50 lakhs, i.e., the exact amount which the assessee claims, several years later, to have been invested by him on the construction of the house property during the period relevant to assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and that the Assessing Officer shall adjudicate the same afresh on merits in accordance with the law, and after allowing proper opportunity of hearing to the assessee. 5. In the result, the assessee s appeal is dismissed. THIRD MEMBER ORDER PER P.K. BANSAL, ACCOUNTANT MEMBER (AS A THIRD MEMBER). Hon ble President under section 255(4) of the Income-tax Act, 1961 ( the Act hereinafter) has nominated me to decide the points of difference on the following grounds arising due to the difference in opinion between the learned JM and the learned AM as referred to by them vide letter dated 15-1-2009 : (1)That the order of the learned CIT, Aligarh is bad in law and on facts of the case. (2)That the learned CIT has erred in the eye of law by not accepting the plea of the appellant that the assessment order passed by the Assessing Officer has merged with the order of learned CIT(A) and both had considered the Will of the mother of the appellant, hence the provisions of section 263(1)(c) of the Income-tax Act, 1961 were applicable in the matter. (3)That the learned CIT has erred in the eye of law by not accepting the observations of Hon ble Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The learned CIT has made observations that the appellant has not furnished any proof as regards the factual existence of cash of ₹ 4,00,000 and 20 Tolas of gold. These observations are based on conjectures, suspicions or surmises or on a failure to consider the relevant evidence on record. The learned CIT has made extraneous references without considering the facts and law hence order of the learned CIT should be cancelled. 2. The brief facts of the case are that the assessee, as an indi- vidual, submitted his return declaring an income of ₹ 55,000. A survey under section 133A of the Act was conducted on 3-3-2000 in the residential premises of the assessee. The wife of the assessee, Smt. Nemshri Jain had purchased an old residential house in two parts which was renovated during the financial years 1996-97 to 1999-2000. The year-wise break-up of the investment made in the construction/renovation of the house was duly shown in the capital account of the assessee. The Assessing Officer referred the matter to the DVO for ascertaining the cost of the construction of the residential house. The Valuation Officer estimated the cost of construction at ₹ 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is-a-vis the value shown in the books of account of the appellant. He furnished the reports from two Government approved valuers who have pointed out each and every item whereby the DVO has taken the value different from that by the appellant whose two reports also show the reasons for the difference which are mainly on account of the Malba used or which could be used by the appellant in further construction and renovation as it was the built property and not plot of land. Further, the difference in the DVO s report was on account of ignoring the revised rates of PWD in 1997 and estimating the cost of several items on higher side as against the actual cost as per the invoice of purchases of those items which were duly and admittedly produced by the appellant-assessee to the DVO and the details of which already form part of the DVO s report. The DVO or the Assessing Officer has not pointed out anything as to why those invoices giving the actual purchase price of the items have not been relied upon instead a higher value has been taken. Further, though the DVO has given margin for self-supervision but the Assessing Officer has further added that sum on the ground that the appellant-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer to examine the issue as pointed out in the order and pass a fresh assessment order as per the law after affording opportunity to the assessee. In the said order, the CIT observed that the assessee vide his reply dated 20-7-2004 submitted that the Assessing Officer had duly considered the Will of Smt. Maro Devi, mother of Smt. Nemshri Jain and the same was also considered by the CIT(A) in her order on which the CIT has observed that on going through the order of CIT(A), in para 3.2 of her order, has given a finding on difference of ₹ 50,000 added by the Assessing Officer as the Assessing Officer noted that in the said Will of Smt. Maro Devi cash was shown at ₹ 4,00,000 only whereas the assessee claimed to have received ₹ 4,50,000 through Will. Since the amount of ₹ 4,00,000 bequeathed as a result of Will was not in dispute because the Assessing Officer accepted the Will therefore, it cannot be concluded that on the issue of Will, the order of the CIT(A) got merged with the order of the Assessing Officer. The CIT was of the view that the Assessing Officer failed to examine whether the Will has been probated or not, whether the bequest of cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (supra). Referring to the decision of Gee Vee Enterprises s case (supra) as relied by the learned AM, it was pointed out that the decision is not applicable to the facts of the case of the assessee. In that case, the facts were entirely different. The assessee has, without filing appeal against the order passed under section 263 before the Tribunal, challenged the action of the CIT by filing writ under Article 226/227 of the Constitution of India. Under these facts, the High Court has observed that when alternative remedy was available to the assessee, the assessee should not have come before the High Court under Article 227 of the Constitution of India. In that case, there was no merger of the order of the CIT(A) with the order of the Assessing Officer but that is the case where there was failure of the enquiry by the Assessing Officer. In the impugned case, the assessee has duly submitted copy of the Will. Will was duly examined by the Assessing Officer and even had accepted that the assessee had received a sum of ₹ 4,00,000 through Will. Thus he contended that the order of the CIT passed under section 263 is illegal and void and must be annulled. 8. Learned Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of HUF and did the said cash and jewellery factually exist? The assessee in reply took plea that the order of the Assessing Officer got merged with the order of CIT(A) and no proceedings, therefore, be initiated or taken under section 263. This was negated by the CIT. The assessee went in appeal before the Tribunal. Learned JM was of the view that the order of the Assessing Officer got merged with the order of the CIT(A) while the learned AM was of the view that the order of the Assessing Officer had not been merged with the order of the CIT(A) on the issues on which the proceedings under section 263 were taken. The amendment to section 263 of the Income-tax Act, 1961 has been made by the Finance Act, 1961, with retrospective effect from 1-6-1988. The relevant part of the amendment reads as under : Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (c )where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after 1st June, 1988, the powers of the CIT under this sub-section shall extend and shall be deemed always to have exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject-matter of appeal and held as under : The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the CIT shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the CIT under section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. 12. In view of the aforesaid decision of the Supreme Court and the proviso to section 263(1)(c), it is apparent that the powers under section 263 of the CIT shall extend and shall be deemed always to have extended to such matters as have not been considered and decided in the order passed in appeal on or before or after 1-6-1988. Now the question arises that what is the subject-matter of the appeal which has been considered by the CIT(A). The Assessing Officer has made the addition on the basis of the Will for a sum of ₹ 50,000 as the amount of the cash mentioned in the Will was ₹ 4,00,000 while the assessee claimed that the mothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate order and thereafter, it is the appellate order which is operative and enforceable and the CIT thereafter loses his jurisdiction under section 263 of the Act. 13. Similar view has been taken by Hon ble Bombay High Court in the case of CIT v. P. Muncherji Co. [1987] 167 ITR 671 1. Similar type of question has arisen before the Hon ble Gujarat High Court in the case of CIT v. Nirma Chemicals Works (P.) Ltd. [2009] 182 Taxman 183. In this case, the assessee claimed deduction under section 80-I of the Act. The Assessing Officer partly allowed the claim of the assessee by computing the deduction under section 80-I. When the matter went before the CIT(A), the CIT(A) allowed the claim of the assessee to the extent it was disallowed by the Assessing Officer. Subsequently, the CIT issued notice under section 263 proposing to disallow the claim under section 80-I on the ground that the assets used by the assessee in the industrial undertaking formed part of the old plant and machinery and the new industrial undertaking of the assessee was formed by reconstruction or restructuring or splitting up of all the business. The assessee contended that the assessment order got me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made in accordance with and subject to the provisions of section 80-I of the Act. Therefore, to contend that sub-section (1) of section 80-I of the Act has to be independently considered, i.e., independent of other sub-sections of section 80-I of the Act is not a correct proposition, especially when the provision itself says that it has to be in accordance with and subject to the provisions of this section. The provision does not use the phraseology in accordance with and subject to the provisions of the sub-section but refers to the entire section, which includes sub-section (2). 15. Therefore, when the deduction under section 80-I of the Act was granted by the Assessing Officer after disallowing a part of the claim which was carried in appeal before CIT(A), the appellate authority was duty-bound to examine whether the claim made by the assessee was in accordance with and subject to the provisions of section 80-I of the Act. The requirement of fulfilment of conditions stipulated by sub-section (2) of section 80-I of the Act is therefore very much subject-matter of the appeal in relation to the income from warehousing which had been disallowed by the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order is an appealable order. An appeal lies, or would be filed, only against disallowances which an assessee feels aggrieved with. As far as absence of discussion in the assessment order is concerned, this is what has been laid down by this Court in the case of Rayon Silk Mills v. CIT [1996] 221 ITR 155 (Guj.). In the first instance it was contended by learned counsel for the assessee that the very premise on which order under section 263 was made against the assessee, namely, that the ITO has not at all examined the goodwill account is not existent. According to him, it is apparent from the record that the goodwill account was thoroughly examined by the ITO before making the assessment and after examining when he accepted the contention of the assessee its discussion did not find place in the assessment order, as no additions were going to be made or no modifications in the return filed by the assessee were required to be made in that regard. This contention of the assessee appears to be well-founded. It is true that the assessment order does not speak about the examination of goodwill account as such. However, as we have noticed above, the assessee in his reply to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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