Shri S.K.Jain L/H late Smt. Nemshri Jain, Mainpuri V. CIT, Aligarh

ITA 199/AGR/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6942 (ITAT-AGRA)
• Duration Of Justice: 4 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-04-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 04-05-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SAHU
• Assessee Lawyers: R C TOMAR I T P
• Keywords: Depreciation; Difference of opinion; Revenue expenditure; Capital Gains
• Section: 143(3); 133A; 251; 131; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.199/AGR/2005 ASST. YEAR: 2000-01 SHRI S.K. JAIN, VS. C.I.T., ALIGARH. L/H. OF LATE SMT. NEMSHRI JAIN, VISHAL GARMENTS, SADAR BAZAR, MAINPURI. (PAN : ADPPJ 1737 M). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. TOMAR, I.T.P. RESPONDENT BY : SHRI S.R. SAHU, JR. D.R. ORDER PER P.K. BANSAL, A.M.: IN THIS CASE THE DIFFERENCE AROSE BETWEEN THE MEMBE RS OF THE DIVISION BENCH HEARING THIS APPEAL. THEREFORE, THE MATTER WAS REFERRED TO THE OPINION OF THE LD. THIRD MEMBER. THE LD. THIRD MEMBER HAS AGREED WITH THE VIEW OF THE LD. JUDICIAL MEMBER. THEREFORE, IN VIEW OF THE MAJORITY DECISION, THE ASSESSEE SUCCEEDS IN ITS APPEAL. 2. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 13.04.2010) . SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 13 TH APRIL, 2010. 2 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY 3 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER (AS THIRD MEMBER) ITA NO.199/AGR/2005 ASST. YEAR: 2000-01 SHRI S.K. JAIN, VS. C.I.T., ALIGARH. L/H. OF LATE SMT. NEMSHRI JAIN, VISHAL GARMENTS, SADAR BAZAR, MAINPURI. (PAN : ADPPJ 1737 M). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. TOMAR, I.T.P. RESPONDENT BY : SHRI S.K. MISHRA, SR. D.R. ORDER HONBLE PRESIDENT UNDER SECTION 255(4) OF THE INCOM E-TAX ACT, 1961 (THE ACT HEREINAFTER) HAS NOMINATED ME TO DECIDE THE POINTS OF DIFFERENCE ON THE FOLLOWING GROUNDS ARISING DUE TO THE DIFFERENCE IN OPINION BETWEEN THE LD. JU DICIAL MEMBER AND THE LD. ACCOUNTANT MEMBER AS REFERRED TO BY THEM VIDE LETTER DT.15 TH JANUARY, 2009 :- (1) THAT THE ORDER OF THE LEARNED CIT, ALIGARH IS BAD IN LAW AND ON FACTS OF THE CASE. (2) THAT THE LEARNED CIT HAS ERRED IN THE EYE OF LA W BY NOT ACCEPTING THE PLEA OF THE APPELLANT THAT THE ASSESSMENT ORDER PASSED B Y THE ASSESSING OFFICER HAS MERGED WITH THE ORDER OF LEARNED CIT(A)S ORDER AND BOTH HAD CONSIDERED THE WILL OF THE MOTHER OF THE APPELLANT, HENCE THE PROVISION S OF SECTION 263(1)(C) OF THE INCOME TAX ACT, 1961 WERE APPLICABLE IN THE MATTER. (3) THAT THE LEARNED CIT HAS ERRED IN THE EYE OF LA W BY NOT ACCEPTING THE OBSERVATIONS OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. SHRI ARBUDA MILLS LIMITED (231 ITR 50) THAT THE POWERS OF COMMISSIONE R OF INCOME TAX SHALL EXTEND AND SHALL BE DEEMED TO HAVE EXTENDED TO MATTERS NOT CONSIDERED AND DECIDED IN APPEAL FILED BY THE ASSESSEE TO CIT (APPEALS). 4 IN THE CASE OF THE APPELLANT THE ASSESSING OFFICER HAD DULY CONSIDERED THE WILL OF SMT. MARO DEVI, MOTHER OF SMT NEMSHRI JAIN AND THE SAME WAS CONSIDERED BY THE EARNED CIT (APPEALS) IN HER APPEAL ORDER. THE ADDI TION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE AMOUNT OF RS.50,00 0-00 BETWEEN THE AMOUNT SHOWN IN WILL AND THE CAPITAL STATEMENT SUBMITTED B Y THE APPELLANT WAS DELETED BY THE LEARNED CIT(APPEALS). (4) THAT THE LEARNED CIT HAS ERRED IN THE EYE OF LA W BY NOT ACCEPTING THE PLEA OF THE APPELLANT THAT AS PER LAW IT IS NOT COMPULSO RY TO OBTAIN PROBATE OF WILL IN THE STATE OF UTTAR PRADESH. IN THIS REGARD THE APP ELLANT HAD MENTIONED DECISIONS OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF A TMA PRAKASH VS. THE 3 RD ALL. D.J. SAHARANPUR & OTHER (ALLAHABAD RENT CASE 1983 P AGE 415) AND BHAIYAJI VS. JAGESHWAR DAYAL BAJPAI (AIR 1978 ALLAHABAD 268). THE OBSERVATIONS OF THE LEARNED CIT IN HIS ORDER THAT THESE CASE LAWS ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT BECAUSE THE PROBATE IS NOT REQUIRED IF THE WILL MADE BY THE HINDU IS RELATING TO IMMOVABLE PROPERTY SITUATED IN U.P., WHEREAS THE WILL OF MARO DEVI IS RELATED WITH CASH AND JEWELLERY I.E. THE MOVABLE PROPERTY ARE NOT CORRECT AND BAD IN THE EYE OF LAW . (5) THAT THE LEARNED CIT HAS ERRED ON FACTS OF THE CASE BY MAKING THE OBSERVATION THAT THE APPELLANT HAS NOT FURNISHED AN Y EVIDENCE TO PROVE THAT THE CASH AND JEWELLERY WAS ACTUALLY OWNED BY SMT. MARO DEVI AND SHE WAS CAPABLE ENOUGH TO DISPOSE OFF LEGALLY. THAT THE APPELLANT HAD SUBMITTED AFFIDAVIT OF SMT N EELAM PRABHA JAIN SISTER OF SMT. NEMSHRI JAIN BEFORE THE LEARNED CIT. SHE HAD STATED ON OATH THAT HIS FATHER HAD DIED IN THE YEAR 1959. SHE WERE FIVE SISTERS A ND HAVING NO BROTHER, HENCE HER MOTHER HAD NO TRUST ON ANYBODY. TWO SISTERS HAD EX PIRED DURING LIFETIME OF SMT. MARO DEVI. THE WILL WAS WRITTEN BY HER AND HAD ALS O WITNESSED BY HER. A STATEMENT OF SMT NEELAM PRABHA JAIN WAS ALSO RECO RDED U/S. 131 OF THE INCOME TAX ACT, 1961 AND SHE CONFIRMED THAT SHE HAD WRITTE N AND WITNESSED THE WILL. SHE FURTHER CONFIRMED THAT AFTER DEATH OF HER MOTHER CA SH AND JEWELLERY WAS HANDED OVER TO THE APPELLANT. THE LEARNED CIT HAS MADE OBSERVATIONS THAT THE APPE LLANT HAS NOT FURNISHED ANY PROOF AS REGARD THE FACTUAL EXISTENCE OF CASH OF RS .4,00,000-00 AND 20 TOLAS OF GOLD. THESE OBSERVATIONS ARE BASED ON CONJECTURES, SUSPICIONS OR SURMISES OR ON A FAILURE TO CONSIDER THE RELEVANT EVIDENCE ON RECO RD. THE LEARNED CIT HAS MADE EXTRANEOUS REFERENCES WITH OUT CONSIDERING THE FACTS AND LAW HENCE ORDER OF THE LEARNED CIT SHOULD BE CA NCELLED. 5 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, AS AN INDIVIDUAL, SUBMITTED HIS RETURN DECLARING AN INCOME OF RS.55,000/-. A SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON 03.03.2000 IN THE RESIDENTIAL PREMISES OF THE ASSES SEE. THE WIFE OF THE ASSESSEE, SMT. NEMSHRI JAIN HAD PURCHASED AN OLD RESIDENTIAL HOUSE IN TWO PARTS WHICH WAS RENOVATED DURING THE FINANCIAL YEAR (F.Y.) 1996-97 TO 1999-2000. THE YE AR-WISE BREAK-UP OF THE INVESTMENT MADE IN THE CONSTRUCTION/RENOVATION OF THE HOUSE WAS DULY S HOWN IN THE CAPITAL ACCOUNT OF THE ASSESSEE. THE A.O. REFERRED THE MATTER TO THE D.V.O. FOR ASCE RTAINING THE COST OF THE CONSTRUCTION OF THE RESIDENTIAL HOUSE. THE VALUATION OFFICER ESTIMATED THE COST OF CONSTRUCTION AT RS.8,31,800. THE ASSESSEE HAS SHOWN THE INVESTMENT AT RS.4,50,000/- DURING THE FOUR ASSESSMENT YEARS (A.Y.). THE A.O. MADE THE ADDITION OF RS.4,48,577/- IN AN O RDER PASSED UNDER SECTION 143(3). WHILE ENQUIRING THE SOURCE OF THE INVESTMENT, THE ASSESSE E CLAIMED TO HAVE RECEIVED THE ASSETS THROUGH A WILL OF HIS MOTHER SMT. MARO DEVI. HE CLAIMED THAT HE RECEIVED 20 TOLAS OF GOLD AND CASH OF RS.4,50,000/- AS PER THE WILL. THE A.O. ACCEPTED T HE WILL AS GENUINE BUT RESTRICTED THE CASH RECEIVED BY THE ASSESSEE AT RS.4,00,000/- THROUGH T HE WILL AS AGAINST RS.4,50,000/- CLAIMED BY THE ASSESSEE AND MADE THE ADDITION OF RS.50,000/-. THE ASSESSEE, AGAINST THE ORDER PASSED UNDER SECTION 143(3), WENT IN APPEAL BEFORE THE CIT(A) AN D THE CIT(A) DELETED THE ADDITION OF RS.50,000/- AND RS.4,48,577/- AS PER PARA NOS.3.2 & 4.3 OF HIS ORDER DATED 08.07.2003. AT THE COST OF REPETITION, THE RELEVANT OBSERVATION OF THE CIT(A) IN PARA NOS.3.2 & 4.3 ARE REPRODUCED AS UNDER :- (3.2) I HAVE CONSIDERED THE GROUNDS TAKEN BY THE A .O. ON THE BASIS OF WHICH THE ADDITION HAS BEEN MADE VIS--VIS THE GROUNDS TAKEN BY THE APPELLANT BEFORE THE A.O. AND DURING THE COURSE OF APPEAL PROCEEDINGS. THE APPELLANT HAS ADMITTEDLY RECEIVED THE AMOUNT AS PER THE WILL OF HIS MOTHER, SMT. MARO DEVI WHO DIED IN THE YEAR 1989-90 AND, THEREFORE, THE DIFFERENCE, IF ANY , IN THE ACTUAL AMOUNT STATED TO HAVE BEEN RECEIVED BY THE APPELLANT AS AGAINST THE SAME RECEIVABLE AS PER WILL WAS LIABLE TO BE ADDED IN THE INCOME OF THE YEAR IN WHICH THE SAME WAS ACTUALLY RECEIVED. NOT ONLY THIS, THE APPELLANT HAD ADMITTE DLY INVESTED THOSE PROCEEDS IN PURCHASE OF PROPERTY PRIOR TO THE YEAR 1982 AND HEN CE THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITION ON ACCOUNT OF THE DIFFERENCE NOTED BY HIM IN THE YEAR UNDER 6 CONSIDERATION WHICH IS A.Y. 2000-01. THEREFORE, TH E ADDITION MADE BY THE A.O. OF RS.50,000/- IS HEREBY DELETED. (RELIEF: RS.50,000/ -). (4.3) I HAVE CONSIDERED THE GROUNDS TAKEN BY THE A .O. ON THE BASIS OF WHICH THE ADDITION HAS BEEN MADE VIS-A-VIS THE GROUNDS TAKEN BY THE APPELLANT BEFORE THE A.O. AND DURING THE COURSE OF APPEAL PROCEEDINGS. THE APPELLANT ASSESSEE BEFORE THE A.O. HAS DULY RECONCILED THE DIFFERENCES IN THE VALUATION OF PROPERTY, AS DONE BY THE DEPARTMENTAL VALUATION OFFICER VIS-A- VIS TH E VALUE SHOWN IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. HE FURNISHED THE REPORT S FROM TWO GOVERNMENT APPROVED VALUERS WHO HAVE POINTED OUT EACH AND EVER Y ITEM WHEREBY THE DVO HAS TAKEN THE VALUE DIFFERENT FROM THAT BY THE APPE LLANT WHOSE TWO REPORTS ALSO SHOW THE REASONS FOR THE DIFFERENCE WHICH ARE MAINL Y ON ACCOUNT OF THE MALBA USED OR WHICH COULD BE USED BY THE APPELLANT IN FUR THER CONSTRUCTION AND RENOVATION AS IT WAS THE BUILT PROPERTY AND NOT PLO T OF LAND. FURTHER, THE DIFFERENCE IN THE DVOS REPORT WAS ON ACCOUNT OF IG NORING THE REVISED RATES OF PWD IN 1997 AND ESTIMATING THE COST OF SEVERAL ITEM S ON HIGHER SIDE AS AGAINST THE ACTUAL COST AS PER THE INVOICE OF PURCHASES OF THOSE ITEMS WHICH WERE DULY AND ADMITTEDLY PRODUCED BY THE APPELLANT ASSESSEE TO TH E DEPARTMENTAL VALUATION OFFICER AND THE DETAILS OF WHICH ALREADY FORM PART OF THE DVOS REPORT. THE DVO OR THE A.O. HAS NOT POINTED OUT ANYTHING AS TO WHY THOSE INVOICES GIVING THE ACTUAL PURCHASE PRICE OF THE ITEMS HAVE NOT BEEN RE LIED UPON INSTEAD A HIGHER VALUE HAS BEEN TAKEN. FURTHER, THOUGH THE DVO HAS GIVEN MARGIN FOR SELF- SUPERVISION BUT THE A.O. HAS FURTHER ADDED THAT SUM ON THE GROUND THAT THE APPELLANT ASSESSEE WAS NOT HAVING TECHNICAL KNOWLED GE OR WAS NOT AN ENGINEER. OBVIOUSLY, FOR SUPERVISION OF THE BUILDING, TECHNIC AL EXPERTISE OF BEING A CIVIL ENGINEERS IS NOT NEEDED AND THE PROPERTY BEING USED BY THE APPELLANT FOR HIS BUSINESS PURPOSES ON THE FIRST FLOOR OF WHICH CONST RUCTION WAS DONE, IT CANNOT BE SAID THAT THE APPELLANT ASSESSEE WAS NOT AVAILABLE FOR SELF-SUPERVISION. CONSIDERING THE DIFFERENCES RECONCILED BY THE GOVER NMENT APPROVED VALUER, THERE REMAINS A DIFFERENCE OF ONLY 3% WHICH IS ALSO LIABLE TO BE IGNORED AS THE REPORT IS BASED ON ESTIMATION AND, AS HAS BEEN HELD IN SEVERAL JUDGMENTS, A DIFFERENCE UP TO A REASONABLE PERCENTAGE OF ABOUT 1 0 TO 15% NEEDS TO BE IGNORED IF NO SPECIFIC DISCREPANCY HAS BEEN NOTED IN THE BO OKS OF THE APPELLANT. LAST BUT NOT THE LEAST IS THAT THE A.O. HAS ADDED THE ENTIRE DIFFERENCE IN THE VALUE OF THE PROPERTY IN THE YEAR UNDER CONSIDERATION WHILE ADMI TTEDLY THE PROPERTY WAS CONSTRUCTED IN A SPAN OF 4 YEARS STARTING FROM 1996 TO 2000. THE DEPARTMENTAL VALUERS REPORT PLACED IN THE AOS RECORD ALSO POIN TS OUT THE CONSTRUCTION DONE IN THESE 4 YEARS AS HAS BEEN QUOTED ABOVE IN THIS O RDER AND AS PER WHICH EVEN THE DIFFERENCE NOTED BY THE DVO IN THE YEAR UNDER CONSI DERATION IS THAT OF ONLY RS.80,900/- AS AGAINST WHICH THE A.O. HAS ADDED THE ENTIRE DIFFERENCE RELATING TO ALL THE 4 YEARS. THE ENTIRE ADDITION IS, HOWEVER, DELETED ON THE BASIS OF DISCUSSION MADE AS ABOVE. THE APPELLANT WOULD THUS GET A RELI EF OF RS.4,48,577/-. (RELIEF: RS.4,48,577/-) 7 3. THE REVENUE WENT IN APPEAL BEFORE THE TRIBUNAL I N ITA NO.456/AGR/2003 CHALLENGING THE ORDER OF THE CIT(A) BY TAKING VARIOUS OTHER GRO UNDS. ONE OF THE GROUNDS BEING GROUND NO.3 READ AS UNDER :- THAT THE COMMISSIONER OF INCOME-TAX (A) HAS ERRED IN ACCEPTING THE BALANCE OF RS.50,000/- AS RECEIVED BY WILL WHEN THE RE WAS NO EVIDENCE THAT THE WILL WAS LEGAL, PROBATED NOR INDEED DID SUCH AN A MOUNT FIND MENTION IN THE WILL 4. WHEN THE APPEAL WAS PENDING BEFORE THE TRIBUNAL THE CIT ISSUED NOTICE DATED 22.04.2004 ASKING THE ASSESSEE WHY THE ORDER PASSED UNDER SECT ION 143(3) DATED 28.03.2003 MAY NOT BE REVISED UNDER SECTION 263 OF THE ACT. ULTIMATELY, THE CIT VIDE ORDER DATED 23.02.2005 CANCELLED THE ASSESSMENT ORDER PASSED BY THE A.O. BEING ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND DIRECTED THE A.O. TO EXAMINE THE ISSUE AS POINTED OUT IN THE ORDER AND PASS A FRESH ASSESSMENT ORDER AS PER THE LAW AFTER AFFORDING OPP ORTUNITY TO THE ASSESSEE. IN THE SAID ORDER, THE CIT OBSERVED THAT THE ASSESSEE VIDE HIS REPLY DATED 20.07.2004 SUBMITTED THAT THE A.O. HAD DULY CONSIDERED THE WILL OF SMT. MARO DEVI, MOTHER OF SM T. NEMSHRI JAIN AND THE SAME WAS ALSO CONSIDERED BY THE CIT(A) IN HER ORDER ON WHICH THE CIT HAS OBSERVED THAT ON GOING THROUGH THE ORDER OF CIT(A), IN PARA 3.2 OF HER ORDER, HAS GIVE N A FINDING ON DIFFERENCE OF RS.50,000/- ADDED BY THE A.O. AS THE A.O. NOTED THAT IN THE SAID WILL OF SMT. MARO DEVI CASH WAS SHOWN AT RS.4,00,000/- ONLY WHEREAS THE ASSESSEE CLAIMED TO HAVE RECEIVED RS.4,50,000/- THROUGH WILL. SINCE THE AMOUNT OF RS.4,00,000/- BEQUEATHED AS A R ESULT OF WILL WAS NOT IN DISPUTE BECAUSE THE A.O. ACCEPTED THE WILL. THEREFORE, IT CANNOT BE CO NCLUDED THAT ON THE ISSUE OF WILL, THE ORDER OF THE CIT(A) GOT MERGED WITH THE ORDER OF THE A.O. T HE CIT WAS OF THE VIEW THAT THE A.O. FAILED TO EXAMINE WHETHER THE WILL HAS BEEN PROBATED OR NO T, WHETHER THE BEQUEST OF CASH AND JEWELLERY WAS AS PER HINDU SUCCESSION ACT AND WHETHER THE SAI D CASH AND JEWELLERY WERE PART OF HER STRI- DHAN OR SELF ACQUIRED PROPERTY WHICH SHE COULD LEGALLY BEQUEATHED OR WAS IT PART OF HUF AND 8 DID THE SAID CASH AND JEWELLERY FACTUALLY EXIST. T HE HONBLE TRIBUNAL VIDE ORDER DATED 06.09.2007 HAD DISMISSED THE APPEAL OF THE REVENUE. THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT PASSED UNDER SECTION 263 OF THE ACT. BOTH THE LD. JUDICIAL MEMBER (J.M.) AS WELL AS LD. ACCOUNTANT MEMBER (A.M .) PASSED THEIR SEPARATE ORDERS. 5. THE LD. J.M. WAS OF THE VIEW THAT THE ORDER OF T HE A.O. HAD MERGED WITH THE ORDER OF THE CIT(A) AND, THEREFORE, THE CIT WAS NOT HAVING ANY J URISDICTION TO PASS THE IMPUGNED ORDER UNDER SECTION 263 OF THE ACT. 6. LD. A.M., ON THE OTHER HAND, TOOK THE VIEW THAT THE ORDER OF THE CIT(A) HAS NOT MERGED WITH THE ORDER OF THE A.O. AND IT IS THE CASE WHERE THERE HAD NOT BEEN PROPER ENQUIRY BY THE A.O. AND, THEREFORE, THE ORDER PASSED UNDER SECTION 263 OF THE ACT WAS VALID ONE. 7. BEFORE ME, THE LD. A.R. SUPPORTED THE ORDER OF T HE LD. J.M. AND POINTED OUT THAT THE MATTER BEFORE THE A.O. RELATES TO THE RECEIPT OF GOLD ORNA MENTS AND CASH BY THE ASSESSEE THROUGH THE WILL. THE ASSESSEE HAS CLAIMED THAT HE HAS RECEI VED A SUM OF RS.4,50,000/- WHILE THE A.O. ACCEPTED ONLY A SUM OF RS.4,00,000/- AND MADE THE A DDITION OF RS.50,000/-. THE A.O. ACCEPTED THE VALIDITY OF THE WILL. SUBSEQUENTLY, THE ASSESS EE WENT IN APPEAL BEFORE THE CIT(A) AND THE CIT(A) DELETED THE ADDITION OF RS.50,000/- AND HAS ALSO ACCEPTED THE VALIDITY OF THE APPEAL. AGAINST THE ORDER OF THE CIT(A), THE REVENUE WENT I N APPEAL BEFORE THE TRIBUNAL. ONCE THE CIT(A) HAS PASSED AN ORDER IN THE SAME VERY MATTER, I.E., THE MATTER RELATING TO THE SOURCE OF THE INVESTMENT IN THE PROPERTY, THE ORDER OF THE A.O. G OT MERGED WITH THE ORDER OF THE CIT(A). IN VIEW OF THE SPECIFIC PROVISION OF SECTION 263(1)(C) , THE CIT DOES NOT HAVE THE JURISDICTION TO REVISE HIS ASSESSMENT PASSED UNDER SECTION 143(3). ONCE THE VALIDITY OF THE WILL HAS BEEN 9 ACCEPTED BY THE A.O., AFTER EXAMINING THE SAME, THE CIT CANNOT DIRECT THE A.O. TO TAKE A DIFFERENT VIEW. RELIANCE WAS PLACED ON THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHRI ARBUDA MILLS LIMITED, 231 ITR 50 (SC). REFERRING TO THE DECISION OF GEE VEE ENTERPRISES VS. ADDL. CIT, 99 ITR 375 (DEL.) AS REL IED BY THE LD. A.M., IT WAS POINTED OUT THAT THE DECISION IS NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. IN THAT CASE, THE FACTS WERE ENTIRELY DIFFERENT. THE ASSESSEE HAS, WITHOUT FILI NG APPEAL AGAINST THE ORDER PASSED UNDER SECTION 263 BEFORE THE TRIBUNAL, CHALLENGED THE ACTION OF T HE CIT BY FILING WRIT UNDER ARTICLE 226/227 OF THE CONSTITUTION OF INDIA. UNDER THESE FACTS, T HE HIGH COURT HAS OBSERVED THAT WHEN ALTERNATIVE REMEDY WAS AVAILABLE TO THE ASSESSEE, T HE ASSESSEE SHOULD NOT HAVE COME BEFORE THE HIGH COURT UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA. IN THAT CASE, THERE WAS NO MERGER OF THE ORDER OF THE CIT WITH THE ORDER OF THE A.O. BUT THAT IS THE CASE WHERE THERE WAS FAILURE OF THE ENQUIRY BY THE A.O. IN THE IMPUGNED CASE, THE ASSE SSEE HAS DULY SUBMITTED COPY OF THE WILL. WILL WAS DULY EXAMINED BY THE A.O. AND EVEN HAD ACC EPTED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.4,00,000/- THROUGH WILL. THUS HE CONTENDED TH AT THE ORDER OF THE CIT PASSED U/S 263 IS ILLEGAL AND VOID AND MUST BE ANNULLED. 8. LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF THE LD. A.M. AND CONTENDED THAT THERE HAD NOT BEEN MERGER OF THE ORDER OF CIT(A) IN THE O RDER OF THE A.O. ON THE ISSUES ON THE BASIS OF WHICH THE CIT INVOKED PROVISION OF SECTION 263 OF T HE ACT. 9. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD. THE ASSESSMENT FOR THE A.Y. 2000-01 WAS COMPLETED BY TH E A.O. UNDER SECTION 143(3) VIDE ORDER DATED 28.03.2003 MAKING THE ADDITION OF RS.50,000/- ON THE BASIS OF THE WILL WHICH WAS 10 PRODUCED BY THE ASSESSEE BEFORE THE A.O. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER :- (3.2) I HAVE CONSIDERED THE GROUNDS TAKEN BY THE A .O. ON THE BASIS OF WHICH THE ADDITION HAS BEEN MADE VIS--VIS THE GROUNDS TAKEN BY THE APPELLANT BEFORE THE A.O. AND DURING THE COURSE OF APPEAL PROCEEDINGS. THE APPELLANT HAS ADMITTEDLY RECEIVED THE AMOUNT AS PER THE WILL OF HIS MOTHER, SMT. MARO DEVI WHO DIED IN THE YEAR 1989-90 AND, THEREFORE, THE DIFFERENCE, IF ANY , IN THE ACTUAL AMOUNT STATED TO HAVE BEEN RECEIVED BY THE APPELLANT AS AGAINST THE SAME RECEIVABLE AS PER WILL WAS LIABLE TO BE ADDED IN THE INCOME OF THE YEAR IN WHICH THE SAME WAS ACTUALLY RECEIVED. NOT ONLY THIS, THE APPELLANT HAD ADMITTE DLY INVESTED THOSE PROCEEDS IN PURCHASE OF PROPERTY PRIOR TO THE YEAR 1982 AND HEN CE THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITION ON ACCOUNT OF THE DIFFERENCE NOTED BY HIM IN THE YEAR UNDER CONSIDERATION WHICH IS A.Y. 2000-01. THEREFORE, TH E ADDITION MADE BY THE A.O. OF RS.50,000/- IS HEREBY DELETED. (RELIEF: RS.50,000/ -). 10. SUBSEQUENTLY THE CIT INVOKED THE JURISDICTION U NDER SECTION 263 OF THE ACT. NOW THE QUESTION BEFORE ME IS WHETHER THE ORDER OF THE A.O. GOT MERGED WITH THE ORDER OF THE CIT(A) ON THE MATTER RELATING TO THE ADDITION OF RS.50,000/-. THE MAIN REASONS FOR REVISING THE ORDER BY THE CIT WERE THAT THE A.O. FAILED TO EXAMINE (A) WHETHE R, THE WILL HAS BEEN PROBATED OR NOT ?, (B) WHETHER, THE PERSON WHO BEQUEATHED THE SAID AMOUNT AND JEWELLERY DID SO IN TERMS OF HINDU SUCCESSION ACT ? AND (C) WHETHER, THE SAID CASH AND JEWELLERY WERE PART OF HER STRI-DHAN OR SELF ACQUIRED PROPERTY WHICH SHE COULD LEGALLY BEQUEATHE D OR WAS IT PART OF HUF AND DID THE SAID CASH AND JEWELLERY FACTUALLY EXIST ? THE ASSESSEE IN REPLY TOOK PLEA THAT THE ORDER OF THE A.O. GOT MERGED WITH THE ORDER OF CIT(A) AND NO PROCEEDINGS, THEREFORE, BE INITIATED OR TAKEN UNDER SECTION 263. THIS WAS NEGATED BY THE CIT. THE ASS ESSEE WENT IN APPEAL BEFORE THE TRIBUNAL. LD. JUDICIAL MEMBER (J.M.) WAS OF THE VIEW THAT THE ORD ER OF THE A.O. GOT MERGED WITH THE ORDER OF THE CIT(A) WHILE THE LD. ACCOUNTANT MEMBER (A.M.) W AS OF THE VIEW THAT THE ORDER OF THE A.O. HAD NOT BEEN MERGED WITH THE ORDER OF THE CIT(A) ON THE ISSUES ON WHICH THE PROCEEDINGS UNDER SECTION 263 WERE TAKEN. THE AMENDMENT TO SECTION 2 63 OF THE INCOME-TAX ACT, 1989 HAS BEEN 11 MADE BY THE FINANCE ACT, 1989 WITH RETROSPECTIVE EF FECT FROM 1 ST JUNE, 1988. THE RELEVANT PART OF THE AMENDMENT READS AS UNDER :- EXPLANATION : FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION, - (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE AO HAD BEEN THE SUBJECT-MATTER OF ANY APPEAL FILED ON OR B EFORE OR AFTER 1 ST JUNE, 1988, THE POWERS OF THE CIT UNDER THIS SUB-SECTION SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. 11. IN THE CASE OF CIT VS. SHRI ARBUDA MILLS LTD. ( 1998) 147 CTR (SC) 474 : (1998) 231 ITR 50 (SC); THE APEX COURT ALSO HAD AN OCCASION TO CON SIDER THE SAID AMENDMENT. THE RELEVANT FACTS REVEAL THAT THE ASSESSMENT YEAR IN THAT CASE WAS 19 75-76 ENDING ON 31 ST DEC., 1974. THE ASSESSMENT WAS COMPLETED UNDER S.143(3) R/W S.144B, ON 31 ST MARCH, 1978, IN WHICH NET BUSINESS LOSS WAS COMPUTED AT RS.3,61,086 AND THE I NCOME UNDER THE HEAD CAPITAL GAINS AT RS.38,874. THE ITO HAD MADE CERTAIN ADDITIONS AND DISALLOWANCES WHILE COMPUTING THE LOSS AND INCOME AS ABOVE AND HAD ALSO ACCEPTED, INTER ALIA, THE FOLLOWING THREE CLAIMS : (I) DEDUCTION OF A SUM OF RS.23,82,621 BY WAY OF PR OVISION FOR GRATUITY. (II) DEPRECIATION ON RS.4,21,000 WHICH WAS PAID BY THE ASSESSEE TO UNITED TEXTILE INDUSTRIES AS CONSIDERATION FOR TRANSFER OF INSTALLED PROPERTY OF 17,480 SPINDLES AND 400 LOOMS OF OLD MANEK CHOWK MILLS. (III) LOSS ON ACCOUNT OF DIFFERENCE IN EXCHANGE RAT E WHICH WAS REFERABLE TO THE PURCHASE OF MACHINERY, ETC., AS REVENUE EXPENDITURE. FOR THE P URPOSES OF THE PRESENT MATTER, IT IS ONLY THESE THREE ITEMS OF CLAIM WHICH ARE RELEVANT. IN THE APPEALS FILED BY THE ASSESSEE, THE ITEMS IN RESPECT OF WHICH THE DECISION WAS IN ITS FAVOUR WERE NOT THE SUBJECT-MATTER OF APPEALS. IN RESPECT OF ABOVE THREE ITEMS, THE COMMISSIONER EXERCISED ITS POWER UNDER S.263 OF THE IT ACT. 12 THE MAIN CONTENTION OF THE ASSESSEE CONSIDERED BY T HE TRIBUNAL WAS WHETHER OR NOT THE ORDER OF THE ITO REGARDING THE SAID THREE ITEMS IN RESPECT O F WHICH THE ASSESSEE HAD NO OCCASION TO PREFER AN APPEAL HAD MERGED IN THAT OF THE CIT(A) SO AS TO EXCLUDE THE JURISDICTION OF THE CIT UNDER S.263 OF THE ACT. THE APEX COURT ON REFERENCE UNDE R S.257 OF THE IT ACT, 1961, WAS REQUIRED TO DEAL WITH THE FOLLOWING QUESTION REFERRED TO IT : WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF ASSESSMENT PASSED BY THE ITO UNDER S.143(3) R/W S.1 44B ON 31AST JULY, 1978, HAD MERGED WITH THAT OF THE CIT(A) DT. 15 TH DEC., 1979, IN RESPECT OF THE THREE ITEMS IN DISPU TE SO AS TO EXCLUDE THE JURISDICTION OF THE CIT UNDER S.263 ? THE APEX COURT WHILE DEALING WITH THE ABOVE QUESTIO N APPLIED THE AMENDED PROVISION OF S.263(1) OF THE ACT TO THE AFORESAID THREE ITEMS WHICH WERE NOT THE SUBJECT-MATTER OF APPEAL AND HELD AS UNDER : THE CONSEQUENCE OF THE SAID AMENDMENT MADE WITH RE TROSPECTIVE EFFECT IS THAT THE POWERS UNDER S.263 OF THE CIT SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN AN APPEAL. ACCORDINGLY, EVEN IN RESPECT OF THE AFORESAID THREE ITEMS, THE POWERS OF THE CIT UNDER S.263 SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HA VE EXTENDED TO THEM BECAUSE THE SAME HAD NOT BEEN CONSIDERED AND DECIDED IN THE APP EAL FILED BY THE ASSESSEE. 12. IN VIEW OF THE AFORESAID DECISION OF THE SUPREM E COURT AND THE PROVISO TO SECTION 263(1)(C), IT IS APPARENT THAT THE POWERS, UNDER SE CTION 263, OF THE CIT SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS H AS NOT BEEN CONSIDERED AND DECIDED IN THE ORDER PASSED IN APPEAL ON OR BEFORE OR AFTER 01.06. 1988. NOW THE QUESTION ARISES THAT WHAT IS THE SUBJECT MATTER OF THE APPEAL WHICH HAS BEEN CONSIDE RED BY THE CIT(A). THE A.O HAS MADE THE ADDITION ON THE BASIS OF THE WILL FOR A SUM OF RS.5 0,000/- AS THE AMOUNT OF THE CASH MENTIONED IN THE WILL WAS RS.4,00,000/- WHILE THE ASSESSEE CLAIM ED THAT THE MOTHER OF THE ASSESSEE SMT. MARO DEVI LEFT RS.4,50,000/-. AGAINST THIS ADDITION, TH E ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). 13 THUS, THE SUBJECT MATTER BEFORE THE CIT(A) RELATES TO THE AMOUNT RECEIVED BY THE ASSESSEE THROUGH THE WILL. WHEN THE ASSESSEE CAME IN APPEAL BEFORE THE CIT(A), THE CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE AND DELETED THE ADDITION OF RS.50,000/-. THE SUBJECT MATTER OF DISPUTE, IT IS NOT DEPENDENT UPON WHETHER THE PARTICULAR ARGUMENT HAS BEEN CONSIDERED THEREIN OR NOT. THE WORD MATTER IS WIDER THAN THE WORD POINT. ONCE A PARTICULAR MATTER HAS BEEN CONSIDERED AND DECIDED IN APPEAL AND IF ANY POINT RELATING TO THAT REMAINS UNCONSIDERED, IT CANNOT BE SAID THAT THE SUBJECT MATTER OF APPEAL HAD NOT BEEN CONSIDERED AN D DECIDED IN SUCH APPEAL. THE SUBJECT MATTER IN APPEAL BEFORE THE CIT(A) RELATES TO THE ADDITION OF RS.50,000/- ON THE BASIS OF THE WILL OF THE MOTHER OF THE ASSESSEE. A SUBJECT MATTER MAY CONSI ST OF NUMBER OF ARGUMENTS AND NUMBER OF POINTS. IF ANY POINT, IN MY OPINION, HAS NOT BEEN REFERRED TO BY THE CIT(A) IN HIS ORDER, IT CANNOT BE SAID THAT THE MATTER RELATING TO THE ADDITION ON THE BASIS OF THE WILL HAS NOT BEEN CONSIDERED. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF J.K. SY NTHETICS VS. ADDL. CIT & ANR., 105 ITR 344 POINTED OUT THAT THE APPELLATE JURISDICTION CONFERR ED UPON THE AAC UNDER SECTION 251 OF THE I.T. ACT, EXTENDS TO CONFIRMATION, REDUCTION, ENHANCEMEN T OR ANNULMENT OF THE ASSESSMENT. HONBLE HIGH COURT, WHILE DELIVERING THE DECISION, HAS CONS IDERED TWO DECISIONS OF THE HONBLE SUPREME COURT IN THE CASES OF STATE OF MADRAS VS. MADURAI M ILLS CO. LTD., AIR 1967 SC 681 AND THAT OF CIT VS. AMRITLAL BHOGILAL & CO., 34 ITR 130 (SC) AN D HELD AS UNDER- IT WAS ACCORDINGLY HELD THAT IN VIEW OF THE SCOPE AND NATURE OF THE APPELLATE POWERS, THE ENTIRE SUBJECT-MATTER OF THE ASSESSMENT ORDER WAS WITHIN THE JURISDICTION OF THE AAC AND THAT BEING SO, THE ENTI RE ASSESSMENT ORDER WOULD MERGE IN THE APPELLATE ORDER IRRESPECTIVE OF THE PO INTS URGED BY THE PARTIES OR DECIDED BY THE APPELLATE AUTHORITY. FURTHER, THAT FROM THE POINT OF VIEW OF THE APPLICABILITY OF THE DOCTRINE OF MERGER, THE FACT T HAT SOME POINTS DECIDED BY THE INFERIOR AUTHORITY, WERE, OR WERE NOT CANVASSED BEF ORE THE SUPERIOR AUTHORITY WAS NOT MATERIAL. IT FOLLOWS, THEREFORE, THAT ONCE AN APPEAL IS TAKEN AND DECIDED, THE ORIGINAL ORDER MERGES IN THE APPELLATE ORDER AND TH EREAFTER, IT IS THE APPELLATE OR WHICH IS OPERATIVE AND ENFORCEABLE AND THE CIT THER EAFTER LOSES HIS JURISDICTION UNDER S.263 OF THE ACT. 14 13. SIMILAR VIEW HAS BEEN TAKEN BY HONBLE MUMBAI H IGH COURT IN THE CASE OF CIT VS. P. MUNCHERJI & CO., 167 ITR 671 (MUMBAI). SIMILAR TYP E OF QUESTION HAS ARISEN BEFORE THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. N IRMA CHEMICALS PVT. LTD. [INCOME TAX REFERENCE NO.94 OF 1996]. IN THIS CASE, THE ASSES SEE CLAIMED DEDUCTION UNDER SECTION 80I OF THE ACT. THE A.O. PARTLY ALLOWED THE CLAIM OF THE ASSE SSEE BY COMPUTING THE DEDUCTION UNDER SECTION 80I. WHEN THE MATTER WENT BEFORE THE CIT(A ), THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT IT WAS DISALLOWED BY THE A.O . SUBSEQUENTLY, THE CIT ISSUED NOTICE UNDER SECTION 263 PROPOSING TO DISALLOW THE CLAIM UNDER S ECTION 80I ON THE GROUND THAT THE ASSETS USED BY THE ASSESSEE IN THE INDUSTRIAL UNDERTAKING WERE FORMED PART OF THE OLD PLANT & MACHINERY AND THE NEW INDUSTRIAL UNDERTAKING OF THE ASSESSEE WAS FORMED BY RECONSTRUCTION OR RESTRUCTURING OR SPLITTING UP OF ALL THE BUSINESS. THE ASSESSEE CON TENDED THAT THE ASSESSMENT ORDER GOT MERGED WITH THE ORDER OF THE CIT(A) AND, THEREFORE, THE CI T DOES NOT HAVE JURISDICTION TO UNDERTAKE REVISION IN VIEW OF EXPLANATION (C) TO SECTION 263( 1). WHEN THE MATTER TRAVELLED TO THE HIGH COURT, THE HONBLE HIGH COURT HAS HELD AS UNDER :- THUS THE CIT IS ENTITLED TO REVISE AN ASSESSMENT O RDER IN SO FAR AS THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E, BUT EXPLANATION (C) PLACES EMBARGO ON CIT IN CASE OF SUBJECT MATTER OF ANY APPEAL WHIC H HAS BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. IN OTHER WORDS, BEFORE CIT EXERCISES T HE JURISDICTION U/S 263 OF THE ACT, THE CIT IS REQUIRED TO ASCERTAIN WHETHER THE ORDER REFE RRED TO IN SUB-SECTION (1) OF SECTION 263 OF THE ACT HAD BEEN THE SUBJECT MATTER OF ANY A PPEAL, AND IF YES, THE REVISIONAL POWERS SHALL BE AVAILABLE ONLY IF SUCH SUBJECT MATT ER HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. 14. THE FACTS OF THE PRESENT CASE REVEAL THAT THE A SSESSEE CLAIMED RELIEF U/S 80I OF THE ACT. THE AO REWORKED SUCH CLAIM AFTER MAKING NECESS ARY INQUIRIES AND PARTIALLY REDUCED THE CLAIM MADE BY THE ASSESSEE. THE ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE COMMISSIONER (APPEALS) WHO ALLOWED THE APPEAL ON TH IS COUNT DIRECTING THE AO TO GRANT RELIEF U/S 80I OF THE ACT AS CLAIMED BY THE ASSESSE E WITHOUT ANY DISALLOWANCE. THE CONTENTION ON BEHALF OF THE REVENUE THAT UNDER PROV ISIONS OF SECTION 80I OF THE ACT AN ASSESSEE BECOMES ELIGIBLE ONLY IF THE ASSESSEE FULF ILLS ALL THE CONDITIONS STIPULATED BY SUB- SECTION (2) OF SECTION 80I OF THE ACT AND THAT COMP UTATION U/S 80I(1) OF THE ACT IS 15 INDEPENDENT OF ELIGIBILITY UNDER SUB-SECTION (2) OF THE SAID SECTION CANNOT BE ACCEPTED. SECTION 80I(1) OF THE ACT STIPULATES THAT AN ASSESS EE IS ENTITLED TO DEDUCTION FROM PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING AT THE STIPULATED PERCENTAGE WHERE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDES ANY PRO FITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING IN ACCORDANCE WITH AND SUBJE CT TO THE PROVISIONS OF THIS SECTION (EMPHASIS SUPPLIED). MEANING THEREBY, WHILE COMPUTI NG THE DEDUCTIBLE AMOUNT FROM THE TAXABLE INCOME THE ASSESSING AUTHORITY IS REQUIRED TO ENSURE THAT THE PROFITS AND GAINS ARE DERIVED FROM AN INDUSTRIAL UNDERTAKING; SUCH PROFIT S AND GAINS ARE INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE; AND THE ALLOWANCE HAS TO BE MADE IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SECTION 80I OF THE ACT . THEREFORE, TO CONTEND THAT SUB-SECTION (1) OF SECTION 80I OF THE ACT HAS TO BE INDEPENDENT LY CONSIDERED I.E. INDEPENDENT OF OTHER SUB-SECTIONS OF SECTION 80I OF THE ACT IS NOT A COR RECT PROPOSITION, ESPECIALLY WHEN THE PROVISION ITSELF SAYS THAT IT HAS TO BE IN ACCORDAN CE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION. THE PROVISION DOES NOT USE THE PHRASE OLOGY IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SUB-SECTION BUT REFERS TO THE ENTIRE SECTION, WHICH INCLUDES SUB- SECTION (2). 15 THEREFORE, WHEN THE DEDUCTION U/S 80I OF THE ACT WAS GRANTED BY THE AO AFTER DISALLOWING A PART OF THE CLAIM WHICH WAS CARRIED I N APPEAL BEFORE COMMISSIONER (APPEALS), THE APPELLATE AUTHORITY WAS DUTY BOUND T O EXAMINE WHETHER THE CLAIM MADE BY THE ASSESSEE WAS IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SECTION 80I OF THE ACT. THE REQUIREMENT OF FULFILLMENT OF CONDITIONS S TIPULATED BY SUB-SECTION (2) OF SECTION 80I OF THE ACT IS THEREFORE VERY MUCH SUBJECT MATTE R OF THE APPEAL IN RELATION TO THE INCOME FROM WAREHOUSING WHICH HAD BEEN DISALLOWED B Y THE AO. 16 THE STAND OF THE REVENUE THAT THE ASSESSMENT ORD ER WAS SILENT AS REGARDS ELIGIBILITY OR OTHERWISE OF SECTION 80I OF THE ACT CANNOT THUS BE ACCEPTED. AS NOTED HEREINBEFORE THE ENTIRE SECTION LAYS DOWN A COMPLET E CODIFIED SCHEME IN ITSELF FOR DECIDING NOT ONLY THE ELIGIBILITY BUT ALSO FOR THE COMPUTATION OF THE RELIEF TO WHICH THE ASSESSEE IS ENTITLED. WHEN THE SECTION TALKS OF PRO FITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING THE REQUIREMENT IS IN RELATION TO THE I NDUSTRIAL UNDERTAKING TO WHICH THE SECTION APPLIES AND WHICH FULFILLS ALL THE CONDITIO NS LAID DOWN IN SUB-SECTION (2) OF SECTION 80I OF THE ACT. IT IS NOT POSSIBLE TO READ THE PROV ISIONS IN ANY OTHER MANNER WHATSOEVER. HENCE, THE CONTENTION THAT THE ELIGIBILITY OR OTHER WISE U/S 80I OF THE ACT WAS NEVER THE SUBJECT MATTER OF APPEAL REQUIRES TO BE REJECTED. T HE TRIBUNAL THUS COMMITTED AN ERROR IN LAW IN COMING TO THE CONCLUSION THAT THE PROHIBITIO N IMPOSED BY EXPLANATION (C) TO SECTION 263 OF THE ACT WOULD NOT BE APPLICABLE. 17 IN FACT, THE TRIBUNALS ORDER ON THIS COUNT DOES NOT DISCUSS AS TO WHY AND HOW EXPLANATION (C) TO SECTION 263 OF THE ACT DOES NOT APPLY IN THE FACTS OF THE PRESENT CASE. THE ORDER ONLY RECORDS 9. CONSIDERING THE RIVAL SU BMISSIONS AND THE CASE LAW CITED BEFORE US WE ARE OF THE VIEW THAT THE DECISION RELI ED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE INSTANT CASE. TO SAY THAT THE DIR ECTION OF THE CIT(A) TO RECOMPUTE THE RELIEF UNDER THE HEAD 80I AMOUNTS TO CONSIDERATION OF THE FACT ON ELIGIBILITY IS NOR CORRECT. SO ASSESSEE PLEAS ON LACK OF JURISDICTION U/S 263 A RE REJECTED. ONE WOULD EXPECT THAT A PRELIMINARY ISSUE AS REGARDS JURISDICTION WOULD HAV E MERITED BETTER CONSIDERATION AT THE HANDS OF THE TRIBUNAL. 16 18 THE CONTENTION ON BEHALF OF THE REVENUE THAT THE ASSESSMENT ORDER DOES NOT REFLECT ANY APPLICATION OF MIND AS TO ELIGIBILITY OR OTHERW ISE U/S 80I OF THE ACT REQUIRES TO BE NOTED TO BE REJECTED. AN ASSESSMENT ORDER CANNOT IN CORPORATE REASONS FOR MAKING / GRANTING A CLAIM OF DEDUCTION. IF IT DOES SO, AN AS SESSMENT ORDER WOULD CEASE TO BE AN ORDER AND BECOME AN EPIC TOME. THE REASONS ARE NOT FAR TO SEEK. FIRSTLY, IT WOULD CAST AN ALMOST IMPOSSIBLE BURDEN ON THE AO, CONSIDERING THE WORKLOAD THAT HE CARRIES AND THE PERIODS OF LIMITATION WITHIN WHICH AN ORDER IS REQU IRED TO BE MADE; AND, SECONDLY, THE ORDER IS AN APPEALABLE ORDER. AN APPEAL LIES, WOULD BE FILED, ONLY AGAINST DISALLOWANCES WHICH AN ASSESSEE FEELS AGGRIEVED WITH. AS FAR AS ABSENCE OF DISCUSSION IN THE ASSESSMENT O RDER IS CONCERNED, THIS IS WHAT HAS BEEN LAID DOWN BY THIS COURT IN THE CASE OF RAYON S ILK MILLS VS CIT, REPORTED AT 221 ITR 155 (PAGE 158): IN THE FIRST INSTANCE IT WAS CONTENDED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THE VERY PREMISE ON WHICH ORDER U/S 263 WAS MA DE AGAINST THE ASSESSEE, NAMELY, THAT THE ITO HAS NOT AT ALL EXAMINED THE GO ODWILL ACCOUNT IS NOT EXISTENT. ACCORDING TO HIM, IT IS APPARENT FROM THE RECORD TH AT THE GOODWILL ACCOUNT WAS THOROUGHLY EXAMINED BY THE ITO BEFORE MAKING THE AS SESSMENT AND AFTER EXAMINING WHEN HE ACCEPTED THE CONTENTION OF THE AS SESSEE ITS DISCUSSION DID NOT FIND PLACE IN THE ASSESSMENT ORDER, AS NO ADDITIONS WERE GOING TO BE MADE OR NO MODIFICATIONS IN THE RETURN FILED BY THE ASSESSEE W ERE REQUIRED TO BE MADE IN THAT REGARD. THIS CONTENTION OF THE ASSESSEE APPEARS TO BE WELL- FOUNDED. IT IS TRUE THAT THE ASSESSMENT ORDER DOES NOT SPEAK ABOUT THE EXAMINATI ON OF GOODWILL ACCOUNT AS SUCH. HOWEVER, AS WE HAVE NOTICED ABOVE, THE ASSESS EE IN HIS REPLY TO THE SHOW CAUSE NOTICE U/S 263 HAD SPECIFICALLY MENTIONED THA T THE ENTIRE MATTER WAS SCRUTINIZED AND ACCEPTED WHILE PASSING THE ASSESSME NT ORDER. OUR ATTENTION WAS ALSO DRAWN TO ANNEXURE D. A SUBMISSION MADE BY TH E ASSESSEE TO THE ITO, SURAT DATED OCTOBER 18, 1976, REGARDING THE ASSESSM ENT YEAR 1974-75 GIVING DETAILED CHRONOLOGICAL DATE OF THE CONSTITUTION OF THE FIRM ON NOVEMBER 11, 1968, INDUCTION OF FOUR MORE PARTNERS ON NOVEMBER 7, 1972 , THE CREATION OF GOODWILL IN THE BOOKS OF ACCOUNT OF THE FIRM BY DEBITING THE GO ODWILL ACCOUNT AND CREDITING THE OLD PARTNERS CAPITAL ACCOUNTS IN THEIR PROFIT SHARING RATIO ON THAT DATE, FORMATION OF A PRIVATE LIMITED COMPANY IN THE NAME OF RAYON SILK MILLS PRIVATE LIMITED, AND ITS INDUCTION INTO THE FIRM AS PARTNER BY THE DEED OF PARTNERSHIP DATED OCTOBER 27, 1973, AND THE DISSOLUTION OF THE PARTNERSHIP FIRM ON FEBRUARY 23, 1974, LEAVING THE PRIVATE LIMITED COMPANY AS A SOLE PROPRIETOR THEREOF AND THE VALUATION OF THE BUSINESS AT THE BOOK VALUE AS ON T HAT DATE. AFTER GIVING THE CHRONOLOGICAL SEQUENCE OF EVENTS, THE ASSESSEE ALSO CONTENDED IN HIS SUBMISSION BEFORE THE ITO THAT THERE WAS NO ACTUAL TRANSFER OF ANY ASSET INASMUCH AS WHEN A PARTNER IS ADMITTED INTO THE FIRM NO TRANSFER TAKES PLACE. IT WAS ALSO CONTENDED THAT NO CASH TRANSFER TOOK PLACE FROM PERSON TO PER SON AND THE TRANSFER AND THE DISSOLUTION OF THE FIRM ALSO DID NOT RESULT IN ACCR UAL OF CAPITAL GAINS. IN THE FACE OF THIS MATERIAL ON RECORD, IT IS DIFFICULT TO EXPLAIN THAT THE ASSESSMENT ORDER WAS MADE WITHOUT MAKING ANY ENQUIRY INTO THE GOODWILL A CCOUNT OF RS.10,75,000. 17 14. IN VIEW OF THE AFORESAID DISCUSSIONS, I AM OF T HE VIEW THAT THE SUBJECT MATTER OF THE APPEAL SINCE RELATES TO THE ADDITION IN THE CASE OF THE AS SESSEE ON THE BASIS OF THE WILL AND SINCE THE ASSESSEE HAS GONE IN APPEAL BEFORE THE CIT(A) AGAIN ST THE ADDITION MADE BY THE A.O. ON THE BASIS OF THE WILL, THEREFORE, THE ORDER OF THE CIT(A) GOT MERGED WITH THE ORDER OF THE A.O. ON THE ADDITION MADE BY THE A.O. ON THE BASIS OF THE WILL AND IN VIEW OF EXPLANATION (C) TO SECTION 263(1). IN MY OPINION, THE CIT WILL NOT HAVE ANY J URISDICTION TO INVOKE THE PROVISIONS OF SECTION 263, HENCE THE ORDER PASSED BY THE A.O. GOT MERGED WITH THE ORDER OF CIT(A) ON SUBJECT MATTER OF ADDITION ON THE BASIS OF THE WILL. ACCORDINGLY, IN MY OPINION, THE ORDER OF CIT SHOULD BE CANCELLED. THUS, GROUNDS NO.1, 2 & 3 ARE DECIDED I N FAVOUR OF THE ASSESSEE. GROUNDS NO.4 & 5 AND OTHER ISSUES SINCE ARISE OUT OF GROUND NO.2, DO ES NOT REQUIRE ANY ADJUDICATION. 15. THE MATTER WILL NOW GO BEFORE THE REGULAR BENCH FOR DECIDING THE APPEAL IN ACCORDANCE WITH THE MAJORITY OPINION. SD/- (P.K. BANSAL) ACCOUNTANT MEMBER PLACE: AGRA DATE: 17 TH FEBRUARY, 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIS TANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY