TMI Blog1977 (11) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... w produced. I have examined the account books also. I find that these are genuine business transactions and losses. However, since the Income-tax Officer has not examined the vouchers and the contract papers, I set aside the assessment with a direction to the Income-tax Officer to make the assessment again after going through the contract papers and other vouchers. The next contention in the appeal regarding certain disallowances was not pressed. There is no merit in this contention and the claim is rejected. In the result, the assessment is set aside with a direction to the Income-tax Officer to go through the contract papers again and do the assessment afresh. " Thus the assessment went back to the ITO to be made afresh, which was not made by the ITO till 27th September, 1965. It appears, that in the meantime on the 25th April, 1965, the Supreme Court delivered its judgment in CIT v. Maheshwari Devi Jute Mills Ltd. [1965] 57 ITR 36 holding that the proceeds from sale of loom hours were of a capital nature, not assessable as income. The assessee, therefore, filed a revised return on 7th September, 1965, claiming that the sum of Rs. 5,22,450 representing the sale proceeds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the direction by the Appellate Assistant Commissioner, the Appellate Assistant Commissioner was precluded from entertaining a plea based on the latest decision of the Supreme Court in the subsequent appeal? " Mr. J. C. Paul, learned counsel for the assessee, inter alia, urged that the assessee did not know at the time when the original assessment was made by the ITO, that the receipt from sale proceeds of loom hours was a capital receipt and not a revenue receipt and as such was not taxable. He urged that the order dated 17th October, 1960, of the AAC (hereinafter for the sake of brevity referred to as " the first order ") set aside the assessment and, therefore, the whole assessment was at large and it was open to the assessee to urge any question or make any claim before the ITO in the fresh assessment proceedings. The Supreme Court had laid down that receipt from sale proceeds from loom hours is not a revenue receipt, but a capital receipt, and, therefore, not taxable. The ITO, therefore, could not and had no jurisdiction to include it in the taxable income of the assessee and his action in assessing the sale proceeds of the loom hours, was, therefore, wholly illegal and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions given in the Appellate Assistant Commissioner's order, he has to proceed as if he were making an assessment under section 23 at the time when he proceeds to reassess. He is not bound or restricted by anything that bad happened either when he made the original assessment or when the appeal was heard by the Appellate Assistant Commissioner; he is governed only by the findings of the Appellate Assistant Commissioner. He is not bound by his own findings arrived at in the original assessment; they do not operate as res judicata and undoubtedly have not the force of an order. The findings arrived at by the Appellate Assistant Commissioner and the directions given by him are binding on him, not as res judicata, but as orders to which he is subject. He is free to take into consideration any relevant material that came into existence for the first time after the original assessment order was made by him. Consequently, the Income-tax Officer in the instant case was competent, when reassessing the income of the aseessee, to consider the orders passed by him under section 23A and to treat the assessee as having derived larger income from the dividends than that shown by it in its returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prosecute the reference before the High Court and the same was returned by the High Court unanswered. Within one year of the High Court's order the petitioner filed a second revision petition before the Commissioner purporting to be in pursuance of the observations of the Commissioner in the earlier order. The Commissioner dismissed the said petition on the ground that as a final order has been made under s. 33A(2) another order in revision on a point which had already been covered by the earlier order in revision, could not be passed. The petitioner thereupon filed a writ petition in the High Court to quash the orders of the ITO and the Commissioner as also the recovery proceedings. On the above facts, the Allahabad High Court held, inter alia, that (pp. 651, 652) : " ......... the order of the Commissioner rejecting the previous applications on the mere ground that the petitioner had shown the income in his return is erroneous. The Commissioner was bound to apply his mind to the question whether the petitioner was taxable on that income...... An assessee is liable to tax, only, upon such receipt as can be included in his total income and is assessable under the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AC and that also with specific directions to the ITO to reconsider the matter on that part only. We entirely agree with the above contention of Mr. Sen Gupta. We have already quoted the first order in extenso which will clearly show that the order of the AAC did not mean or import that the entire assessment was being set aside ; it set aside only that part of the assessment which related to the specific question as to the treatment of loss in speculative transactions. The other question in the appeal not being pressed by the assessee itself was rejected by the AAC as unmeritorious. Mr. Sen Gupta in support of his above contention relied on a decision of the Bombay High Court in the case of CIT v. Indo-Aden Salt Works Co. [1959] 36 ITR 429. The main question, however, in that case was as to the grant of relief asked for by the assessee in respect of super-tax. In the assessment, the ITO declined to grant any relief in respect of super- tax. There was an appeal to the AAC by the assessee and the only point which was raised and urged by the assessee before him, was that relief in respect of super-tax had wrongly been denied to it. The AAC did not go into the merits of the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, in referring to the earlier order of the AAC, had used the expression " vacated " and, therefore, the Tribunal had vacated the entire order made in the earlier appeal. According to him, it was open to him to go into the entire appeal. The matter went before the Tribunal and ultimately came before the Bombay High Court in reference. Their Lordships of the Bombay High Court observed as follows : " It appears from that order that it was a common ground before the Tribunal at the hearing of that appeal that it was a case of succession within the meaning of section 25(4). It is also clear that the only question which the Tribunal was asked to consider and which the Tribunal had jurisdiction to consider was whether the Appellate Assistant Commissioner was right in deciding the appeal on the sole legal contention that there was no right in the assessee to claim relief in respect of super-tax. The Tribunal having reached the conclusion that the Appellate Assistant Commissioner had taken a technical and narrow view of the matter would have proceeded to go into the merits of the claim for relief in respect of super-tax. It was at that stage that counsel for the assessee stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific grounds or questions and send it back to the ITO for fresh assessment on those points as has been done in the present case. Mr. Sen Gupta relied on the following observations of their Lordships of the Andhra Pradesh High Court in Pulipati Subbarao Co.'s case [1959] 35 ITR 673 which may be quoted as under : " Pursuant to the order passed by the Appellate Assistant Commissioner it is open to the Income-tax Officer to consider the one and the only question referred to him, viz., whether the firm's application for registration should be allowed. There is no other question before the Income-tax Officer and he would certainly be transgressing the limits set down by law if he were to embark upon a fresh enquiry as to the quantum of the income or the loss incurred by the petitioner. " Mr. J. C. Paul further submitted that it was a fundamental question and a fundamental right of the assessee as to the taxability or non-taxability of an amount and that cannot be taken away by the order of the AAC which set aside the assessment order. In the case before us, if the entire assessment order had been set aside, the contention of Mr. J. C. Paul would have been unassailable but un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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