TMI Blog1981 (9) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax was justified in setting aside the order of the Income-tax Officer on the issue of disallowance under section 40(a)(v) ? " In order to appreciate the questions, it would be necessary to refer to the order of the ITO for the relevant assessment year, being the assessment year 1970-71, which was passed on the 24th March, 1973. In that order, the ITO observed, on the question of depreciation, as follows: " 4. In all the past assessments depreciation on bungalows are being allowed @2 1/2% only while the assessee has been claiming WDV for bungalow for the assessment year Rs. Year 1969-70 1,93,89,649 Less : Rs. Dep. allowed @2 1/2% 4,78,955 W.D.V. for 1970-71 1,89,10,694 Dep. admissible @ 2 1/2% on above 4,72,766 Amount claimed @ 5% as per details furnished in statement under s. 40(a)(v) is Rs. 7,88,109; balance inadmissible is Rs. 3,15,343." As appearing from the order of the ITO, the assessee had claimed depreciation on the bungalows at 5 per cent. but was allowed depreciation at 21 per cent. But the ITO had noticed that, the amount claimed was 5 per cent. as per details. Therefore, the amount inadmissible under s. 40(a)(v) would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 24th March, 1973, appears to be erroneous in so far as it is prejudicial to the interest of Revenue. 4. I, therefore, propose to pass an order setting aside the Incometax Officer's order dated 24th March, 1973, in so far as it relates to the aforesaid sum of Rs. 1,44,540 and directing him to make a fresh assessment according to law." The Commissioner thereafter fixed the date for hearing and asked the assessee to show cause. Thereafter the Commissioner, on the 18th March, 1975, passed the order wherein he noted the contentions of the assessee as well as the Revenue. It was contended before him on behalf of the assessee that the allowance and disallowance of depreciation as well as the quantum thereof were the subject-matters of appeal before the AAC. Before the AAC, however, this aspect was not stressed either by the assessee or on behalf of the Revenue, nor did the AAC give any direction in respect of this aspect. But this order of the ITO having been merged in the order of the AAC on the question of allowability of depreciation, the Commissioner had no jurisdiction to pass any order of revision under s. 263 of the I.T. Act, 1961. It was secondly contended that the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner had jurisdiction to issue any notice under s. 263 of the Act. The Tribunal was of the view that this aspect, viz., whether 11 months' depreciation, or 12 months' depreciation should be allowed or not because of the fact that the employee was in occupation for one month was not the aspect of the appeal before the AAC. Therefore, according to the Tribunal, the Commissioner had jurisdiction to go into this question and the Tribunal found that the Commissioner had properly exercised his jurisdiction. On the second aspect of the matter, viz., that the notice was vague and misleading, the Tribunal was of the view that inasmuch as the notice was given and action was intended to be taken for certain aspects of calculation under s. 40(a)(v) on the second limb, a reference was made in the notice to the first limb of that clause, which did not make the notice imperfect or vague and the Commissioner had jurisdiction and the assessee had been given proper opportunity. In that view of the matter the Tribunal, upholding the order of the Commissioner, and also holding on the merits, proposed that this aspect required investigation by the ITO. The Tribunal referred to decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is superimposed by the Commissioner by rectification made by the ITO as a result of the order passed by the Commissioner under s. 263 then that would be in conflict with the direction given by the AAC in his appellate order. Therefore, where an appeal is preferred and the subject-matter of appeal, particularly raised, is the subject-matter before the AAC, then that order, in our opinion, cannot be the subject-matter of an order of revision by the Commissioner. This principle, however, comes where the appeal does not lie from the order of the ITO and before the AAC where different kinds of appeal are provided for in the scheme of the I.T. Act. This principle was enunciated by the Supreme Court in the case of CIT v. Amritlal Bhogilal Co. [1958] 34 ITR 130 (SC). This was also reiterated in the decision in the case of Jeewanlal (1929) Ltd. v. Addl. CIT [1977] 108 ITR 407 (Cal) and the decision in the case of Premchand Sitanath Roy v. Addl. CIT [1977] 109 ITR 751 (Cal). The Allahabad High Court reiterated the same principle in the case of J. K. Synthetics Ltd. v. Addl. CIT [1976] 105 ITR 344 (All). Therefore, it appears to us that as the quantum of depreciation was the subject-ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould have been ready to answer. But, in this case, only the first limb was indicated. Therefore, from one point of view the assessee contended that the notice was not only vague but it was also misleading when the Commissioner gave notice in respect of the first limb of cl. (a)(v) of s. 40 of the Act. Though we are inclined to think that there is a good deal of substance in the contention of the assessee, it appears to us, that in view of the fact that the assessee was heard and in view of the fact that the first aspect of the question, we have already held that the assumption of jurisdiction of the Commissioner in this proceeding was wrong, it is not necessary for us to answer this question. We, therefore, decline to answer this question. This will be of academic interest. If the Commissioner did not have jurisdiction then the order passed by the Commissioner is without jurisdiction and question No. 3 must, therefore, on this ground be answered in the negative and in favour of the assessee. Before we conclude we must note that the learned advocate for the defendant drew our attention to the decision of the Delhi High Court in Gee Vee Enterprises v. Addl. CIT[1975] 99 ITR 375 (D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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