TMI Blog1994 (3) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, the assessee-firm collected Excise Duty amounting to Rs. 26,31,243 and credited the same under an account called "Majoori Excise Account". The learned ITO held that the collection of Excise Duty was in the nature of trading receipts and accordingly assessed the same in the hands of the assessee under section 41(1) of the Income-tax Act, 1961 observing as under : "On scrutiny of the balance sheet, it is found that the assessee has shown as reserves and surplus of Majoori Excise of Rs. 26,31,243 and the assessee was asked that why this should be treated as business income under section 43B of the Act. The assessee has also given a written submission in reply. However, after careful consideration, it is observed that it is taxable in the hands of the assessee under section 41(1) of the Income-tax Act, 1961, as the same pertains to his trading receipts. Every year the assessee has taken the amount of excise duty received from the customers as trading receipt and has been shown in the Profit Loss Account. Thus, the same is treated as trading receipts and the said amount of Rs. 26,31,243 is added to the total income of the assessee." 3. The assessee preferred an appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 43B are also not applicable in the present case. The ITO's action for making addition of Rs. 26,31,243 under section 41(1)/43B is found to be not proper in the present case, and hence it is deleted." It is the above finding of the CIT(A) which the Revenue has challenged in the grounds of appeal reproduced supra. 5. Shri P. N. Dixit, learned DR submitted that the CIT(A) has erred in giving a finding that the provisions of section 43B are not applicable to the facts and circumstances of the case when the ITO had made the addition specifically under section 41(1) of the Act. The learned DR further submitted that the ITO obviously had made the addition by invoking the wrong section, i.e., section 41(1) and since the department had initiated proceedings under section 263 the assessee argued before the CIT(A) regarding applicability of section 43B and it was a deliberate attempt to pre-empt the department to proceed under section 263 and further that the CIT(A) adjudicated upon a non-issue. The learned DR therefore prayed that the aforesaid observation of the CIT(A) regarding the non-applicability of section 43B should be deleted. 6. Shri Rasesh B. Shah, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charged from the customer and the value of the processing work done by the petitioner, on the condition that petitioner shall furnish the bank guarantee to the full extent in regard to aforesaid difference to the satisfaction of the respondent. The bank guarantee shall be furnished by the petitioner within four weeks of the clearance of demands as the case may be." The learned counsel for the assessee further submitted that the assessee-firm therefore furnished bank guarantee from time to time for the full amount of disputed duty to the satisfaction of the Excise Authorities. The learned counsel further submitted that the Supreme Court ultimately gave a judgment in favour of the Excise Department vide its order dated 4-11-1988. The main judgment was delivered in the case of Ujagar Prints v. Union of India [1989] 179 ITR 317 (SC). The said order was made applicable in the case of other process houses also including the assessee-firm. The learned counsel for the assessee therefore submitted that under the circumstances, it cannot be said that the Excise Duty collected from the customers was in the nature of trading receipts and neither the provisions of section 41(1) nor those of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and we do agree that while disposing of an appeal, the First Appellate Authority has a wide power; but the power has to be wide and not wild as the Appellate Authority cannot transgress his jurisdiction and give a finding on a non-issue before him and that too in favour of the assessee to pre-empt the department to initiate proceedings under section 263 of the Act. In the case of V. C. Rangaduri v. D. Gopalan AIR 1979 (SC) 281 it has been held by the Supreme Court that "wide means wide as the power may be the order must be germane of the Act and its purposes and latitude cannot transcend those limits". We accordingly hold that the CIT(A) was not justified to adjudicate upon a non-issue before him and accordingly his observations with regard to the non-applicability of section 43B as reproduced in para 4 above are deleted. 9. The appeal filed by the revenue is accordingly allowed. 10. The appeal filed by the assessee is directed against the order of the CIT, Surat under section 263 of the Act. Since the ITO had disallowed the sum of Rs. 26,31,243 under section 41(1) without making proper enquiries, the CIT invoked revisionary jurisdiction under section 263 of the Act and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. Hence, the CIT was not justified in invoking the provisions of section 263. The assessee's counsel further submitted that the powers of the CIT under section 263 cannot extend to the matters as had been considered and decided in appeal and since the CIT(A) had adjudicated upon the applicability or otherwise of section 43B, the order of the ITO merged with that of the CIT(A) and hence the CIT was not justified in invoking his jurisdiction under section 263 of the Act. 13. On merits of the case the assessee's counsel submitted that the Excise Duty collected from the customers was not payment receivable by the assessee in the course of trading and the same was received purely under fiscal transaction and there was no business relation of any kind between the assessee and the Excise Department. He further submitted that on delivery of the goods, excise duty is immediately collected and the bill for the job charges is raised afterwards for which the payment is received within one month on normal condition of the trade. According to the learned counsel for the assessee it is the real income which can be taxed and not the notional income as held by the Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the appellate or revisional jurisdiction." After referring to the Madurai Mills Co. Ltd.'s case and following Karsandas Bhagwandas Patel v. G.V. Shah [1975] 98 ITR 255 (Guj.) it was held by the Division Bench of the Bombay High Court in CIT v. Sakseria Cotton Mills Ltd. [1980] 124 ITR 570, that if the AAC has not been called upon or has not actually dealt with any part of the assessment order by the ITO, there is no question of that part of the order merging or being superseded by the order of the AAC and that the effect of section 31(3) of the old Act is that only that part of the order of the ITO merges or stands superseded by the order of the AAC in respect of which the AAC has exercised his appellate jurisdiction, and so far as the remaining part of the order of assessment is concerned, that continues to be unaffected by the decision of the AAC and thus the doctrine of merger, is not wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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