TMI Blog1978 (8) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of the assessee as estimated value of subsidies, in fact, had not been received by the assessee but was wrongly added back. The AAC found that relevant documents and records in respect of the said hundi loans had not at all been examined by the ITO and that statements obtained from the alleged creditors had also not been made available to the assessee. He found further that the assessee's claim in respect of the estimated subsidies credited in the latter's account had not been examined by the ITO. He directed the ITO, inter alia, to give reasonable opportunity to the assessee to produce all evidence in support of the genuineness of the loans and also to rebut the adverse inference drawn by the ITO. The ITO was also directed to look into the claim relating to the estimated subsidies. The AAC's order was as follows : " In these circumstances, I am of the opinion that all the three assess. ments should be set aside for being redone in the manner indicated above ......... In making the reassessments, the ITO would also look into the various other contentions raised in these appeals. " At the reassessments, pursuant to the aforesaid, the ITO came to note that though the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was bound to be disallowed. Following a decision of the Allahabad High Court in J. K. Colton Spinning and Weaving Mills Co. Ltd. v. CIT [1963] 47 ITR 906 (All), the Tribunal held that when the ITO made the fresh assessment the original assessment did not exist and it could not be said that development rebate had been allowed as on that date and there was no question of withdrawal of a rebate which had not been allowed. The judicial Member of the Tribunal, however, held that as the Ministry of Transport and Communication had permitted the assessee to scrap the ships it could not be said that the ships had been sold or otherwise transferred before the expiry of the prescribed period. Actual scrapping done by a third party would not amount to a sale or transfer of the ships and accordingly, the rebate could not have been lawfully withdrawn. The Accountant Member dissented from the view taken by the judicial Member and held that if the ships were sold for scrapping it was still a sale or transfer of the assets within the meaning of s. 33 and that the development rebate was rightly withdrawn. By reason of the difference between the two members, the matter was referred to the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentitle the assessee from retaining the development rebate already allowed. Learned counsel for the revenue contended on the other hand that once an assessment was set aside on appeal the matter was at large and in making the reassessment the ITO could consider de novo all aspects of the assessment. He submitted further that the transfer of the said ships being admitted the purpose of such transfer was immaterial and the development rebate was rightly disallowed. To appreciate the controversy involved we may refer to the relevant sections of the statutes. Section 31 of the Indian I.T. Act, 1922, provides, inter alia, as follows : " Hearing of Appeal.--...... (2) The Appellate Assistant Commissioner may, before disposing of any appeal, make such further enquiry as he thinks fit, or cause further inquiry to be made by the Income-tax Officer. (2A) The Appellate Assistant Commissioner may, at the hearing of an appeal, allow an appellant to go into any ground of appeal not specified in the grounds of appeal, if the Appellate Assistant Commissioner is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable. (3) In disposing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by the assessee to any person other than the Government or... the development rebate originally allowed shall be deemed to have been wrongly allowed, and the Income-tax Officer may, notwithstanding anything contained in this Act, proceed to recompute the total income of the assessee for the relevant year as if the recomputation is a rectification of a mistake apparent from the record within the meaning of this section, and the provisions of sub-section (1) shall apply accordingly, the period of four years specified therein being reckoned from the end of the year in which the transfer takes place or the money is so utilised. " The relevant provisions of the I.T. Act, 1961, are as follows : Section 251 " Powers of the Appellate Assistant Commissioner.--(1) In disposing of an appeal, the Appellate Assistant Commissioner shall have the following powers-- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment ; or he may set aside the assessment and refer the case back to the Income-tax Officer for making a fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner and after makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of that previous year." Section 155(5) Where an allowance by way of development rebate has been made wholly or partly to an assessee in respect of a ship...... after the 31st day of December, 1957, in any assessment year under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922) and subsequently-- (i) at any time before the expiry of eight years from the end of the Pevious year in which the ship was acquired.......... the ship........... is sold or otherwise transferred by the assessee to any person other than the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (I of 1956), or in connection with any amalgamation or succession referred to in sub-section (3) or sub-section (4) of section 33 ; or ......... the development rebate originally allowed shall be deemed to have been wrongly allowed, and the Income-tax Officer may, notwithstanding anything contained in this Act, recompute the total income of the assessee for the relevant previous year and make the necessary amendment; and the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 40 ITR 377 (Mad). This decision cited was for the following observations (p. 393) : " It is an equally well settled principle that, where the whole or part of an order has not been appealed against, it would be final; and the appellate authority, in case there is an appeal against a part of an order, would have no jurisdiction in the absence of statutory provision to interfere with the other part which does not form the subject of the appeal. " (c) J. K. Cotton Spinning and Weaving Mills Co. Ltd. v. CIT [1963] 47 ITR 906 (All). The facts in this case were that the assessee held certain shares in a private limited company. Pursuant to orders made under s. 23A of the Indian I.T. Act, 1922, against the said private limited company it was deemed in the relevant assessment year that certain amounts had been received by the assessee as dividend. The original assessments had been completed earlier and appeals had been preferred therefrom on certain other grounds. The appeals were allowed by the AAC, who remanded the matter for fresh assessment. While reassessing the ITO assessed the income on the basis of the deemed dividend. One of the questions referred to the Allahabad High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on the basis of the larger income. It may be mentioned here that the assessee submitted itself to the direction of the Appellate Assistant Commissioner by not preferring an appeal from his order containing it. Section 23A orders for the next two assessment years were passed by the Income-tax Officer after the Appellate Assistant Commissioner had ordered reassessment and, therefore, the Appellate Assistant Commissioner's orders did not contain any reference to them.. There was an express direction in one order of the Appellate Assistant Commissioner for reassessment on the basis of the assumed larger dividend income, but, even in respect of the other two reassessments, there does not arise any further question of limitation for reassessment on the assumed larger dividend income. If the Income-tax Officer could reassess the assessee on the basis of the income shown in the return even after the expiry of four years, he could also reassess it on the basis of the deemed larger dividend income. " (d) Kooka Sidhwa and Co. v. CIT [1964] 54 ITR 54 (Cal). This decision was cited for the following observations of this court : " The Income-tax Officer's duty to assess the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement called for by him from the assessee added a large amount of income from other sources. On further appeals both the AAC and the Tribunal held that the ITO had no jurisdiction to enquire into a fresh source of income. On a reference, the Madras High Court, however, accepted the contentions of the revenue and following, inter alia, J . K. Cotton Spinning Weaving Mills Co. Ltd. [1963] 47 ITR 906 (All), held that once the order of assessment was set aside and the matter came up for fresh consideration the power of the ITO would be governed by s. 143(3) and not with reference either to the observation of the AAC or to the appeal before the AAC. (g) Ram Kanai Jamini Ranjan Pal Pvt. Ltd. v. Member, Board of Revenue [1976] 38 STC 1 (SC). The facts in this case were that the appellant company, a dealer registered under the Bengal Finance (Sales Tax) Act, 1961, was assessed to sales tax for the relevant period. The CTO rejected the appellant's books of account, enhanced the gross turnover and imposed a penalty. On an appeal the Assistant Commissioner reduced both the enhancement of turnover and the quantum of penalty. The appellant thereafter moved the CCT in revision. In the meanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of certain speculative transactions and disallowance of certain expenses and at the hearing of the appeal only the claim as to the loss was pressed. The AAC found that the ITO had not examined the vouchers and contract papers relating to this claim. He set aside the assessment with a direction to the ITO to go through the contract papers and other vouchers and do the assessment afresh. At the reassessment, on the basis of a subsequent decision of the Supreme Court holding that proceeds from sale of loom hours was of a capital nature, the assessee filed a revised return and claimed that the sum representing the sale proceeds of the loom hours was not taxable. The ITO held that as the assessee had not preferred any appeal against the inclusion of the said sum in its income in the reassessment, the enquiry must necessarily be confined to the question of speculative loss only as directed by the AAC. The assessee's new claim was rejected. The assessee, on appeal, succeeded before the AAC but on further appeal by the revenue, the Tribunal held that the ITO had no power to travel outside the scope of the remand order and sustained the decision of the ITO. On a reference to thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides specific remedies and procedures for bringing to tax items of income which have escaped assessment and it is not necessary to extend the scope of reassessment under s. 31 of the Act of 1922, or s. 251 of the Act of 1961, in order to bring to tax escaped income, if any. The principle laid down by the Supreme Court in Ram Kanai Jamini Ranjan Pal Pvt. Ltd. [1976] 38 STC 1, is that where the statute does not contain provisions for bringing to tax escaped taxable items there, the authority, even in an appeal preferred by an aggrieved party, would be competent to decide on other points against the appellant. With respect, we agree with the principle laid down in Pulipati Subbarao Co. [1959] 35 ITR 673 (AP), viz., that where the order of the AAC is specific, it is not open to the ITO to conduct a fresh enquiry beyond the said directions and to proceed to make a fresh assessment without any reference to the earlier assessment. Following our decision in Income-tax Reference No. 176 of 1970 (Katihar Jute Mills (P.) Ltd. v. CIT [1979] 12O ITR 861(Cal)),we hold that in the instant case also there was no dispute regarding the allowability of the development rebate at any stage of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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