TMI Blog1979 (7) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the profits for one or the other respective years of assessment. The ITO rejected the claims on the ground that since the assessee follows the mercantile system of accounting, the deductions claimed did not fall for consideration during the year in which they had been claimed. We will presently give the details of the expenses which have been claimed and for the years for which they have been allowed. The assessee being aggrieved by the disallowances appealed to the AAC for all these years. The AAC took up all the appeals for hearing together and found that although some of the expenses were not allowable for the year for which they had been claimed, they were duly admissible against the profits of another year, of which he was in seisin in appeal. The AAC, accordingly, while upholding the disallowance of the expenses claimed against the profits of a particular year, allowed it against the profits of another year which also was in appeal before him. The department, being aggrieved by such a decision of the AAC, appealed to the Income-tax Appellate Tribunal. The Tribunal found that all the assessments were before the AAC and the assessee had claimed before him that as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures P. Ltd. [1978] 111 ITR 1 (SC). Mr. Rajgarhia's argument is that the AAC was not competent to give any finding with regard to any item of expenditure, while considering the appeal for one year, so as to affect the assessment of another year. These decisions, according to Mr. Rajgarhia, supported such an argument. According to learned counsel, it was immaterial that the AAC at the time when he made the observations, was in seisin of the appeals pertaining to all the years which were affected by such findings or consideration ; his findings or observations must remain confined to the single assessment year, with which he was dealing at that time. Relying upon another decision of the Supreme Court in the case of Sir Kikabhai Premchand v. CIT [1953] 24 ITR 506 (SC), he submitted that each year of assessment was a unit by itself and all findings or consideration or observations made in connection with the assessment year must remain confined to it. He, therefore, submitted that the question must be answered in the negative and in favour of the department. Mr. Jain, appearing for the opposite party-assessee, submitted that the powers of the AAC were conterminous with that of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n item of expenditure or income processed by the ITO but not for a particular assessment year, could be reprocessed or could be considered by the AAC for being allowed against the profits of another assessment year. In the context of this question, the decisions cited by the learned standing counsel for the department lose relevance. The decision in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) was in connection with an action taken under s. 34 of the Indian I.T. Act, 1922, on the basis of a finding that a particular item of income was assessable not in the year in which it had been assessed but for an earlier assessment. In consequence of that, the assessment had been made by recourse to s. 34 of the said Act. Their Lordships held that the action under s. 34 was not valid, because the finding must be confined to the year concerned. It could not go beyond. " The expressions ' finding ' and ' direction ' in the second proviso to s. 34(3) ", their Lordships observed, " meant, respectively, a finding necessary for giving relief in respect of the assessment for the year in question, and a direction which the appellate or revisional authority, as the case may be, was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also placed reliance on the decision of the Supreme Court in the case of Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1 (SC). Once again I must say that this decision also has no hearing on the question in issue in the instant case. Here what had happened was that the assessee had made no claim for exemption allowable under s. 84 of the I.T. Act, 1961. The ITO, therefore, did not pass any orders in that regard. In appeal it was contended before the AAC that the ITO had erred in not granting the relief admissible to the assessee under s. 84 of the Act. The AAC rejected the contention, holding that since a claim had not been raised before the ITO, he could not be said to have erred in not allowing that relief. The matter then came the Tribunal which held that having regard to the wide powers of the AAC, he should have considered the said claim of the assessee. The Tribunal then allowed the appeal. The reference made at the instance of the department to the High Court was answered in favour of the assessee. The matter then came before the Supreme Court and the question was : " Whether, on the facts and in the circumstances of the case, it was competent for the Tribunal to hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 31 of the Indian I.T. Act, 1922, which would be equivalent to s. 251 of the present Act. In that case the ITO had failed to apply his mind as to whether the proviso to s. 13 of the I.T. Act, 1922, would be applicable to the assessee's case and had made the computation of the assessee's income without applying his mind to that provision of the Act. When the matter came up in appeal, the AAC applied his mind to the assessment and then modified the assessment by applying the proviso to s. 13 of the said Act to the case. A question arose as to whether the AAC was justified in making such modification to the said assessment order. In that context their Lordships have observed : " It is not disputed that in an appeal from an assessment under section 23, the Appellate Assistant Commissioner can interfere with the determination or judgment of the Income-tax Officer, and in such an appeal the Appellate Assistant Commissioner can make his own assessment and exercise the power which the Income-tax Officer could exercise. " Their Lordships further observed : " Before disposing of the appeal, the Appellate Assistant Commissioner may, if he thinks fit, make a further enquiry himse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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