M/s Deepak International Ltd., Ludhiana V. JCIT, Ludhiana

ITA 400/CHANDI/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0059 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Retrospective amendment; Assessment record
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.400/CHD/2013 ( ASSESSMENT YEAR : 2008-09) M/S DEEPAK INTERNATIONAL LTD., VS. THE J.C.I.T. DEEPAK ROAD, INDUSTRIAL AREA-B, CIRCLE V, LUDHIANA. LUDHIANA. PAN: AAACD7980K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI MANOJ MISHRA, CIT DR DATE OF HEARING : 29.03.2016 DATE OF PRONOUNCEMENT : 25.04.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX- II, LUDHIANA DATED 21.3.2013 FOR ASSESSMENT YEAR 20 08- 09, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMP LETED VIDE ORDER OF THE ASSESSING OFFICER DATED 29.12.200 8 AT AN INCOME OF RS.1,86,30,144/-. THEREAFTER, ON EXAMINA TION OF THE ASSESSMENT RECORD, THE LEARNED COMMISSIONER OF 2 INCOME TAX, LUDHIANA FOUND THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS IN AS MUCH AS PREJUD ICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, A NOTICE U NDER SECTION 263 OF THE ACT DATED 27.8.2012 WAS ISSUED T O THE ASSESSEE. THREE ISSUES WERE RAISED IN THIS NOTICE REGARDING THE INVESTMENT MADE NOT FOR BUSINESS PURPOSE, ADVAN CES GIVEN FOR CAPITAL ASSETS NOT PUT TO USE AND INCOMES NOT DECLARED. SINCE IN THE RESULTANT ORDER BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT, NO ADVERSE INFERENCE WITH REGARD TO INCOMES NOT DEC LARED, HAS BEEN TAKEN, WE WILL NOT BE REFERRING TO THE SAM E. 3. WITH REGARD TO THE INVESTMENTS MADE NOT FOR BUSINESS PURPOSE, THE LEARNED COMMISSIONER OF INCOM E TAX WAS OF THE OPINION THAT THE ASSESSEE IS A PARTNER I N M/S FRIENDS COLONIZERS, THE INCOME EARNED IN THE FORM O F SHARE PROFIT WOULD BE EXEMPT FROM TAXATION UNDER SECTION 14A OF THE ACT. THEREFORE, THE INTEREST AND OTHER EXPENSE S IN RELATION TO CAPITAL INVESTED IN THE FIRM HAVE BEEN INCURRED BY THE ASSESSEE FOR EARNING TAX FREE INCOME FROM TH E FIRM. THE ASSESSING OFFICER COMPLETELY FAILED TO EXAMINE THE CASE OF DISALLOWANCE UNDER SECTION 14A OF THE ACT FROM T HIS ANGLE AS NO ENQUIRY OR VERIFICATION IN THIS REGARD WAS MADE BY HIM. WITH REGARD TO ADVANCE GIVEN FOR CAPITAL A SSETS NOT PUT TO USE, THE LEARNED COMMISSIONER OF INCOME TAX WAS OF THE OPINION THAT AN AMOUNT OF RS.110.20 LACS WAS GIVEN TO M/S JMD LTD. AS ADVANCE FOR BOOKING OF OFF ICE, WHICH WAS NOT PUT TO USE DURING THE RELEVANT ASSESS MENT 3 YEAR. AS PER THE PRINCIPLES LAID DOWN IN THE JUDGM ENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD., 286 ITR 1, A SUITABLE AMOUNT WAS LIABLE TO BE CAPITALIZED AND DISALLOWED OUT OF INTEREST PAID UNDER SECTION 36(1)(III) OF THE ACT. HOWEVER, THIS ASPECT OF THE CASE WAS ALSO NOT LOOKED INTO BY THE ASSESSING OFFICER. 4. THE ASSESSEE RAISED PRELIMINARY OBJECTION BEFOR E THE LEARNED COMMISSIONER OF INCOME TAX STATING THA T THE ASSESSING OFFICER HAD MADE DISALLOWANCES UNDER BOTH SECTIONS 14A AND 36(1)(III) OF THE ACT AND THE APPE AL OF THE ASSESSEE AGAINST THE SAME WAS DISMISSED BY THE CIT (APPEALS). IT WAS ALSO STATED THAT THE ORDER OF TH E ASSESSING OFFICER MERGED WITH THE ORDER OF THE CIT (APPEALS). THEREFORE, NO JURISDICTION UNDER SECTIO N 263 LIES WITH THE COMMISSIONER OF INCOME TAX. APART FR OM THIS, WITH REGARD TO DISALLOWANCE UNDER SECTION 14A OF THE ACT, IT WAS STATED THAT THE ASSESSEE HAD SUBSTANTIA L AMOUNT AGGREGATING TO RS.24.19 CRORES AVAILABLE BY WAY OF OWNED FUNDS I.E. SHARE CAPITAL, RESERVES AND SURPLU S ON WHICH NO INTEREST WAS PAID. SINCE NO INVESTMENT IN THE PARTNERSHIP FIRM WAS MADE OUT OF THE BORROWED FUNDS , NO DISALLOWANCE UNDER SECTION 14A CAN BE MADE. WITH R EGARD TO DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT , IT WAS STATED THAT THE ADVANCE HAD BEEN MADE OUT OF LOANS RAISED AGAINST SECURITY OF FDRS AND THE DISALLOWANCE OF IN TEREST, IF ANY, WOULD BE ONLY NOTIONAL SINCE THE SAME WOULD BE SET 4 OFF AGAINST THE CORRESPONDING INTEREST INCOME FROM THE FDR. 5. THE LEARNED COMMISSIONER OF INCOME TAX AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REJECT ED THE SAME AND HELD THAT THE ORDER OF THE ASSESSING OFFIC ER DATED 29.12.2008 SUFFERS FROM ERRORS, WHICH RENDERS IT PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDIN GLY, SET ASIDE THE SAME AND DIRECTED THE ASSESSING OFFICER T O FRAME A FRESH ASSESSMENT KEEPING IN VIEW THE DISCUSSION M ADE IN ORDER UNDER SECTION 263 OF THE ACT, AFTER ALLOWING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. AGGRIEVED BY THIS THE ASSESSEE HAS COME UP IN APPEAL BEFORE US, RAISING FOLLOWING GROUNDS OF APPE AL : 1. THAT THE ORDER PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 PASSED BY THE LD. COMMISSIONER OF INCOME TAX-LL , LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NO JUSTIFIED TO HOLD THAT ORDER DATE D 29.12.2008 SUFFERS FROM ERRORS AND THUS, RENDERING THE SAME TO BE PREJUDICIAL TO THE INTEREST OF THE REVEN UE. 2. THAT HE WAS NOT JUSTIFIED TO SET ASIDE THE ORDER WITHOUT FULFILLING THE TWIN CONDITION AS LAID DOWN IN SECTION 263 . 3. THAT HE FAILED TO APPRECIATE THAT THE ASSESSMENT ORDER HAD ALREADY MERGED INTO THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-LL, LUDHIANA IN WHICH BOTH THE ISSUES I.E. RELATING TO SECTION 36(1)(I II) AND 14A WERE A SUBJECT MATTER OF DISPUTE. 5 7. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET STATED THAT THE LEARNED COMMISSIONER OF INCO ME TAX DID NOT HAVE JURISDICTION UNDER SECTION 263 OF THE ACT AS THE ISSUES RAISED BY HIM HAVE ALREADY BEEN DEALT WITH BY THE CIT (APPEALS) AND THE ORDER OF THE ASSESSING OFFICER HAVING BEEN MERGED WITH THE ORDER OF THE CIT (APPEA LS), THE LEARNED COMMISSIONER OF INCOME TAX CANNOT INVO KE HIS JURISDICTION UNDER SECTION 263 OF THE ACT. WIT H REGARD TO ISSUES ON MERIT, THE SUBMISSIONS MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX WERE REITERATED . 8. THE LEARNED D.R. STATED THAT THE ASSESSING OFFICER MADE ENQUIRIES AND ADDITION WAS MADE UNDER SECTION 14A OF THE ACT ON A DIFFERENT ASPECT LIMITE D TO THE DIVIDEND INCOME ONLY. NO ISSUE OF PARTNERSHIP INCO ME WAS CONSIDERED BY HIM. THEREFORE, IT CANNOT BE SAID TH AT THE ISSUE UNDER SECTION 14A OF THE ACT RAISED BY THE LE ARNED COMMISSIONER OF INCOME TAX WAS ALREADY MERGED WITH THE ORDER OF THE CIT (APPEALS). WITH RESPECT TO DISALL OWANCE UNDER SECTION 36(1)(III) OF THE ACT, HE STATED THAT SPECIFIC ISSUE RELATING TO ADVANCE BOOKING WAS NOT CONSIDERE D BY THE ASSESSING OFFICER. SINCE THE ISSUES ARE DIFFE RENT, THE DOCTRINE OF MERGER IS NOT APPLICABLE IN THE PRESENT CASE. 9. IN THE REJOINDER, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE REPLY FILED BY T HE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX IN RESPONSE TO NOTICE UNDER SECTION 263 OF THE ACT, PL ACED AT PAPER BOOK PAGES 3 TO 21, WHEREBY AT PAGE 13, A SPE CIFIC 6 REPLY WITH REGARD TO DISALLOWANCE UNDER SECTION 14A OF THE ACT THAT THE ASSESSEE HAD SUFFICIENT OWNED FUNDS TO INVEST IN PARTNERSHIP FIRM, NO DISALLOWANCE UNDER SECTION 14A OF THE ACT IS CALLED FOR. IT WAS STATED THAT THIS ISS UE RAISED BY THE ASSESSEE HAS NOT BEEN DEALT WITH BY THE COMMISSIONER OF INCOME TAX WHILE FRAMING THE ORDER UNDER SECTION 263 OF THE ACT. A COPY OF THE JUDGME NT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DL F LTD. (2013) 31 TAXMANN.COM 158 (DEL) WAS PLACED ON RECOR D TO THE FACT THAT SINCE THE DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE ACT IS A DEBATABLE ISSUE, THE SA ME DID NOT RENDER ORDER OF THE ASSESSING OFFICER AS UNSUSTAINABLE, REVISIONARY POWERS UNDER SECTION 263 OF THE ACT CANNOT BE EXERCISED. WITH REGARD TO THE TH EORY OF MERGER, A COPY OF THE ORDER OF THE I.T.A.T., CHANDI GARH BENCH IN THE CASE OF M/S TRIDENT LIMITED VS. ACIT IN ITA NO.653/CHD/2011 DATED 27.12.2011 WAS PLACED ON RECO RD. 10. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS AND CHRONOLOGY OF EVENTS OF TH E PRESENT CASE ARE THAT THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS FRAMED BY THE ASSESSI NG OFFICER AS PER THE ORDER DATED 21.12.2010. THIS IS ALSO UNDISPUTED THAT THE ISSUE OF DISALLOWANCE UNDER SE CTION 14A OF THE ACT AS WELL AS UNDER SECTION 36(1)(III) OF THE ACT WERE MADE IN THIS ASSESSMENT ORDER WHICH WERE CHALL ENGED 7 BY THE ASSESSEE IN APPEAL BEFORE THE CIT (APPEALS). THEREAFTER, A NOTICE UNDER SECTION 263 OF THE ACT W AS ISSUED TO THE ASSESSEE WHICH IS UNDISPUTABLY DATED 27.8.2012. THE ORDER UNDER SECTION 263 OF THE ACT IS PASSED AS ON 21.3.2013. HOWEVER, IT IS ALSO TO BE NOTICED THAT THE ORDER OF THE CIT (APPEALS) WAS PASSED AS O N 21.12.2012. THE ISSUES BEFORE THE CIT (APPEALS) W ERE THAT OF SECTIONS 14A AND 36(1)(III) OF THE ACT. AT THE TIME OF ISSUE OF NOTICE UNDER SECTION 263 OF THE ACT, TH E ORDER OF THE CIT (APPEALS) WAS NOT AVAILABLE TO THE COMMI SSIONER OF INCOME TAX, AS THE SAME WAS PASSED ON A LATER DA TE. WE CANNOT SAY THAT AT THE TIME OF ISSUING NOTICE UN DER SECTION 263 OF THE ACT, THE ASSUMPTION OF JURISDICT ION UNDER SECTION 263 OF THE ACT DID NOT LIE WITH THE COMMISSIONER OF INCOME TAX. HOWEVER, IT IS SEEN THEREAFTER THAT BEFORE PASSING THE ORDER UNDER SECT ION 263 OF THE ACT, THE ORDER OF THE CIT (APPEALS) HAD ARRI VED AND WAS ALSO BROUGHT TO HIS NOTICE BY THE ASSESSEE IN H IS REPLY. FROM THIS CHRONOLOGY, WE INFER THAT THE LEA RNED COMMISSIONER OF INCOME TAX HAS CORRECTLY ASSUMED JURISDICTION UNDER SECTION 263 OF THE ACT AS ON 27. 8.2012. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF CIT VS. AMRIT LAL BHOGI LAL, 34 ITR 130 ESTABLISHED THAT IT WOULD BE OPEN TO THE COMMISSIONER OF INCOME TAX TO REVISE THE ASSESSMENT ORDER WHILE AN APPEAL AGAINST IT IS STILL PENDING BEFORE THE CIT (APPEALS), BECAUSE THE ASSESSING OFFICERS ORDER MUST BE REGARDED AS SUBSI STING AND EFFECTIVE IN LAW DESPITE THE PENDENCY OF THE AP PEAL. 8 11. THE APPELLATE ORDER HAVING BEEN DISPOSED OFF, IN THE PRESENT CASE, BEFORE THE COMMISSIONER OF INCOME TAX PASSED ORDER UNDER SECTION 263 OF THE ACT, THE QUES TION OF GROUND OF MERGER OF THE ORDER OF THE ASSESSING OFFI CER WITH THAT OF THE ORDER OF THE CIT (APPEALS), EMERGES. D ID HE HAVE THE JURISDICTION TO COMPLETE THE ORDER UNDER S ECTION 263 OF THE ACT AS ON 21.3.2013 BEFORE WHICH DATE UNDISPUTABLY THE ORDER OF THE CIT (APPEALS) HAD ARR IVED IS A MOOT QUESTION IN THE PRESENT CASE. 12. FOR THIS, WE HAVE TO READ THE PROVISIONS OF EXPLANATION-1 TO SECTION 263 OF THE ACT AS UNDER : (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTIO N AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF AN Y APPEAL [FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988], THE POW ERS OF THE [ PRINCIPAL COMMISSIONER OR ] COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND [ AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SUCH MA TTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL.] 13. THE ABOVE EXPLANATION WAS INSERTED BY THE FINANCE ACT, 1989, WITH RETROSPECTIVE EFFECT FROM 1 ST JUNE 1988. EARLIER TO THAT, TWO JUDICIAL VIEWS WERE PRE VAILING, ONE ENDORSING THE VIEW THAT THE ASSESSING OFFICERS ORDER ONCE BEING SUBJECTED TO APPEAL BEFORE THE CIT (APPE ALS), REVISION UNDER SECTION 263 OF THE ACT IS NOT TENABL E AS THE WHOLE ORDER GETS MERGED INTO THE APPELLATE ORDER. THE OTHER VIEW WAS THAT THE MERGER OF THE ASSESSMENT OR DER BE TREATED AS CONFINED TO THE ISSUES ACTUALLY CONSIDER ED AND DECIDED IN APPEAL ONLY. WITH THE EXPLANATION (C) H AVING 9 BEEN BROUGHT INTO THE STATUTE, THE FIRST VIEW GOT SUPERSEDED. 14. FROM THE PROVISIONS OF THE ABOVE EXPLANATION, IT IS VERY CLEAR THAT THE LEARNED COMMISSIONER OF INCO ME TAX HAS JURISDICTION TO INVOKE THE PROVISIONS OF SECTIO N 263 OF THE ACT TO THE EXTENT OF SUCH MATTERS ONLY WHICH HA D NOT BEEN CONSIDERED AND DECIDED IN APPEAL BY THE CIT (APPEALS). THEREFORE, THE INFERENCE OF LAW IN THIS REGARD COMES TO THE EFFECT THAT THE MATTERS WHICH HAVE BEE N DECIDED BY HE CIT (APPEALS) BEFORE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF TH E ACT CANNOT BE TINKERED WITH BY THE COMMISSIONER OF INCO ME TAX IN HIS JURISDICTION UNDER SECTION 263 OF THE AC T. IN THE PRESENT CASE, IT IS A FACT ON RECORD THAT THE I SSUES OF DISALLOWANCE UNDER SECTIONS 14A AND 36(1)(III) OF T HE ACT WERE RAISED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND DISALLOWANCES UNDER RESPECTIVE HEADS WERE MADE BY HIM. THESE DISALLOWA NCES WERE CHALLENGED BY THE ASSESSEE BEFORE THE CIT (APP EALS), WHICH GOT DISMISSED BY HIM. 15. THE TERM USED IN THE EXPLANATION TO SECTION 26 3 OF THE ACT IS MATTERS WHICH HAVE BEEN SUBJECT OF APPEAL. THEREFORE, THE MATTERS WHICH HAVE ALREADY BEEN DE ALT WITH BY THE CIT (APPEALS) CANNOT BE THE ISSUES TO B E TAKEN UP FOR REVISION UNDER SECTION 263 OF THE ACT. NOW THE QUESTION BEFORE US IS WHETHER THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT (APP EALS) 10 WITH RESPECT TO SECTIONS 14A AND 36(1)(III) OF THE ACT WERE MATTERS OR AS CONTENDED BY THE LEARNED D.R., THE SAME WERE CONSIDERED BY THEM TO AN EXTENT BUT NOT TO THE EXTENT AS STATED BY THE COMMISSIONER OF INCOME TAX IN HIS ORDER UNDER SECTION 263 OF THE ACT. THE DISALLOWANCE UN DER SECTION 14A OF THE ACT THOUGH HAS BEEN CONSIDERED B Y THE ASSESSING OFFICER AS WELL AS THE CIT (APPEALS), THE ISSUE OF TAX FREE INCOME IN THE FORM OF INCOME FROM PARTNERS HIP WAS NOT CONSIDERED BY THEM, IS WHAT THE LEARNED D.R . CONTENDED. SIMILARLY ISSUE OF DISALLOWANCE UNDER S ECTION 36(1)(III) OF THE ACT THOUGH WAS CONSIDERED BY THE ASSESSING OFFICER AS WELL AS THE CIT (APPEALS) TO A N EXTENT, HOWEVER, NOT TO THE EXTENT THE COMMISSIONER OF INCOME TAX WANTS IN HIS ORDER UNDER SECTION 263 OF THE ACT WITH RESPECT TO INVESTMENT MADE IN THE ADVANCE BOOKING OF OFFICE. 16. THE ISSUES OF SECTIONS 14A AND 36(1)(III) OF THE ACT WERE OPEN BEFORE THE ASSESSING OFFICER, WHO AF TER DUE VERIFICATION PREFERRED TO MAKE CERTAIN DISALLOWANCE S UNDER THESE SECTIONS. ONCE THE DISALLOWANCES UNDER RESPE CTIVE SECTIONS HAVE BEEN MADE, WE CAN SAFELY PRESUME THAT THE PROVISIONS OF THESE SECTIONS IN WHOLE WERE THERE BE FORE THE ASSESSING OFFICER I.E. HE WAS SEIZED OF ALL THE ISS UES INVOLVED IN THESE RESPECTIVE PROVISIONS. THE LEARN ED CIT (APPEALS) HAVE THE POWERS OF WIDE AMPLITUDE, CO-TER MINUS POWERS WITH THAT OF THE ASSESSING OFFICER AS WELL A S THE POWER OF ENHANCEMENT. SINCE THESE ISSUES WERE BEFO RE 11 HIM ALSO, WE CANNOT SAY THAT ONE OF THE ASPECTS REL ATED TO BOTH THESE ISSUES WERE NOT OPEN BEFORE HIM. WHAT H AS BEEN REFERRED IN THE EXPLANATION-1 TO SECTION 263(1 ) OF THE ACT IS THE TERM MATTER. THE ISSUES RELATING TO S ECTIONS 14A AND 36(1)(III) OF THE ACT IN ITS ENTIRETY CONSI STS OF MATTERS. HOWEVER, THERE MAY BE MANY ASPECTS OF A MATTER. WE CANNOT SAY THAT THE ISSUES OF SECTION S 14A AND 36(1)(III) OF THE ACT WERE NOT THE MATTERS BE FORE THE CIT (APPEALS). THOUGH WE CAN SAY THAT ONE OF THE A SPECTS RELATED TO THESE MATTERS WERE NOT THERE BEFORE TH E ASSESSING OFFICER OR THE CIT (APPEALS). IN THIS VI EW, WE DO NOT HESITATE TO HOLD THAT THE DISALLOWANCES UNDER S ECTIONS 14A AND 36(1)(III) OF THE ACT WERE THE MATTERS BE FORE THE CIT (APPEALS). THEREFORE, THE SAME DOES NOT COME U NDER THE JURISDICTION OF THE COMMISSIONER OF INCOME TAX IN PROVISIONS OF SECTION 263 OF THE ACT. 17. THE ISSUE OF INTERPRETATION OF HE TERM MATTER S DEALT WITH BY THE CIT (APPEALS) HAS BEEN DELIBERATE D UPON BY THE CALCUTTA HIGH COURT IN THE CASE OF OIL INDIA LTD. VS. CIT (1982) 138 ITR 836. THE HON'BLE HIGH COURT HELD AS UNDER : THE FIRST QUESTION IS DIRECTED TO THE ASPECT WHETH ER AFTER THE APPELLATE ORDER WAS PASSED BY THE AAC OR AN APPEAL HA D BEEN PREFERRED, THE COMMISSIONER HAD JURISDICTION I N THE FACTS AND CIRCUMSTANCES OF THIS CASE UNDER SECTION 263 OF THE ACT. NOW, IT IS WELL SETTLED THAT BEFORE AN APPEAL BEFORE TH E AAC CERTAIN ORDERS ARE APPEALABLE. IT IS ALSO WELL SETTLED THA T IN AN APPEAL PREFERRED BEFORE THE AAC THE WHOLE ASSESSMENT IS OPEN FOR REVIEW BY THE AAC. HE IS BOTH THE APPELLATE AS WELL 12 AS THE ADJUDICATING AUTHORITY. BUT HIS JURISDICTION I S LIMITED TO THE APPEAL PREFERRED BEFORE HIM. THERE ARE CERTAIN ORD ERS WHICH ARE NOT APPEALABLE BEFORE THE AAC BUT CERTAIN TYPES OF ALLEGATIONS CAN BE TAKEN UP IN AN APPEAL BY SEPARATE APPEALS. APART FROM THOSE TWO CASES IF AN ASSESSMENT IS THE SUBJECT- MATTER OF APPEAL THEN ANY GROUND WHICH WAS HELD IN FA VOUR OF THE ASSESSEE CAN ALSO BE HELD AGAINST HIM THOUGH THE A PPEAL WAS PREFERRED BY THE ASSESSEE. THIS JURISDICTION OF THE AAC IS INDISPUTABLE. IN THIS CASE THE QUESTION IS WHETHER THE QUANTUM OF ALLOWANCE OR DISALLOWANCE OR DEPRECIATION WA S THE SUBJECT-MATTER OF APPEAL OR NOT. IT IS TRUE THAT WHETHER DEPRECIATION SHOULD BE CALCULATED ON THE BASIS OF 12 MONTH S OR IT SHOULD BE CALCULATED ON THE BASIS OF 11 MONTHS WAS NOT A SPECIFIC ASPECT WHICH WAS AGITATED BEFORE THE AAC NO R DID HE GIVE ANY DIRECTION ON THIS ASPECT OF THE MATTER BUT HE HAD THIS ASPECT KEPT OPEN FOR ADJUDICATION BY HIM EVEN THOUGH NOT TAKEN BY THE ASSESSEE. THEN, ON THAT, HE COULD HAVE ALLOW ED 5% OR 21/2% DEPRECIATION AND SHOULD HAVE DIRECTED THE ITO TO COMPUTE THE SAME ON SUCH BASIS AS HE CONSIDERED FIT AND PROPER, NAMELY, 11 MONTHS OR 12 MONTHS ON THE VIEW TH AT THE EMPLOYEE OF THE ASSESSEE WAS ON LEAVE FOR ONE MONTH A ND AS SUCH COULD NOT BE SAID TO BE ENTITLED TO THIS ACCOMMOD ATION. IF THAT IS THE POSITION, THEN, IN OUR OPINION, ONCE THE APPEAL HAS BEEN PREFERRED BEFORE THE AAC ON ANY ASPECT OF THE QUANTUM OF DEPRECIATION, THE COMMISSIONER CANNOT ASSUME JUR ISDICTION, OTHERWISE AN ANOMALOUS POSITION WOULD ARISE. THE ITO H AS BEEN DIRECTED BY THE AAC TO FIX DEPRECIATION AT A C ERTAIN PERCENTAGE, INDICATED BY THE AAC, WITHOUT ANY FURTHER DIRECTION THAT IT SHOULD BE CONFINED TO 11 MONTHS OR 12 MONTHS. BUT, NOW, IF FURTHER CONSIDERATION IS SUPERIMPO SED BY THE COMMISSIONER BY RECTIFICATION MADE BY THE ITO A S A RESULT OF THE ORDER PASSED BY THE COMMISSIONER UNDER SECTI ON 263 THEN THAT WOULD BE IN CONFLICT WITH THE DIRECTION GIVEN BY THE AAC IN HIS APPELLATE ORDER. THEREFORE, WHERE AN APPEAL IS PREFERRED AND THE SUBJECT-MATTER OF APPEAL, PARTICULARLY R AISED, IS THE SUBJECT-MATTER BEFORE THE AAC, THEN THAT ORD ER, IN OUR OPINION, CANNOT BE THE SUBJECT-MATTER OF AN ORDER OF REVISION BY 13 THE COMMISSIONER. THIS PRINCIPLE, HOWEVER, COMES WHERE THE APPEAL DOES NOT LIE FROM THE ORDER OF THE ITO AND BE FORE THE AAC WHERE DIFFERENT KINDS OF APPEAL ARE PROVIDED FOR IN THE SCHEME OF THE I.T. ACT . THIS PRINCIPLE WAS ENUNCIATED BY THE SUPREME COURT IN THE CASE OF CIT V. AMRITLAL BHOGILAL & CO . . THIS WAS ALSO REITERATED IN THE DECISION IN THE CASE OF JEEWANLAL (1929) LTD. V. ADDL . CIT AND THE DECISION IN THE CASE OF PREMCHAND SITANATH ROY V. ADDL . CIT . THE ALLAHABAD HIGH COURT REITERATED THE SAME PRINCIPLE IN THE CASE OF J. K. SYNTHETICS LTD. V. ADDL . CIT . THEREFORE, IT APPEARS TO US THAT AS THE QUANTUM OF DEPRECIATION WAS THE SUBJECT-MATT ER OF APPEAL THE COMMISSIONER HAD NO JURISDICTION, IN THE FA CTS AND CIRCUMSTANCES OF THIS CASE, TO ISSUE THE NOTICE UNDE R SECTION 263 AND TO PASS ANY ORDER ON THIS ASPECT OF THE MATTER . QUESTION NO. 1 THEREFORE, IN OUR OPINION, MUST BE ANSW ERED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE DO NOT HESITATE TO HOLD T HAT THE MATTER RELATED TO SECTIONS 14A AND 36(1)(III) OF THE ACT HAVING BEEN DEALT BY THE CIT (APPEALS), THE ORD ER OF THE ASSESSING OFFICER, TO THAT EXTENT MERGES WITH T HE ORDER OF THE CIT (APPEALS). HENCE, THE COMMISSIONER OF I NCOME TAX DOES NOT HAVE JURISDICTION UNDER SECTION 263 OF THE ACT TO REVISE THE SAME ON THE PRETEXT OF VERIFYING ANOTHER ASPECT OF THE SAME SUBJECT MATTER. 18. THERE IS ANOTHER ASPECT TO THE PRESENT CASE. THE COMMISSIONER OF INCOME TAX IN HIS ORDER UNDER SECTI ON 263 OF THE ACT, AFTER HOLDING THE ORDER OF THE ASSE SSING OFFICER TO BE ERRONEOUS TO THE EXTENT PREJUDICIAL T O THE INTEREST OF REVENUE, RECORDED THE FOLLOWING FINDING IN LAST PARAGRAPH OF HIS ORDER : 14 4.0 IN VIEW OF THE ABOVE FACTS AND LEGAL POSITION, IT IS CLEAR THAT THE ASSESSMENT ORDER DATED 29.12.2008 SUFFERS FROM ERRORS, WHICH RENDERS IT PREJUDICIAL TO THE INTEREST OF REVENUE AND IS LIABLE TO BE SET ASIDE UNDER SECTION 263 OF T HE INCOME TAX ACT, 1961. THE SAME IS ACCORDINGLY SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO FRAME A FRESH ASSESS MENT KEEPING IN VIEW THE ABOVE DISCUSSION AND AFTER ALLOW ING DUE OPPORTUNITY TO THE ASSESSEE. FROM THE ABOVE, WE SEE THAT THE COMMISSIONER OF INCOME TAX HAS SET ASIDE THE ORDER OF THE ASSESSING OFFICER AND GIVEN HIM DIRECTIONS TO FRAME THE SAME DE- NOVO. HOWEVER, WE OBSERVE THAT THE COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN SETTING ASIDE THE E NTIRE ORDER OF ASSESSMENT IN EXERCISE OF HIS REVISIONARY POWERS UNDER SECTION 263 OF THE ACT, IN VIEW OF THE FACT T HAT THE ORDER OF THE ASSESSING OFFICER WAS SUBJECT MATTER O F AN APPEAL BEFORE THE CIT (APPEALS). THIS VIEW GETS STRENGTHENED BY THE FULL BENCH JUDGMENT OF THE MADH YA PRADESH HIGH COURT IN THE CASE OF CIT VS. K.L. RAJ PUT, REPORTED IN 164 ITR 197, WHEREBY IN THE SIMILAR SET OF FACTS, THE HON'BLE HIGH COURT HELD AS UNDER : WHENEVER A QUESTION ARISES AS TO WHETHER THE COMMI SSIONER IS OR IS NOT COMPETENT TO REVISE UNDER SECTION 263 OF THE ACT, THE ORDER OF ASSESSMENT FRAMED BY THE INCOME-TAX OF FICER WHICH HAS BEEN THE SUBJECT-MATTER OF APPEAL BEFORE THE APPELLATE ASSISTANT COMMISSIONER, IT HAS TO BE ASCERTA INED AS TO WHETHER THE COMMISSIONER HAS SET ASIDE THE ENTIR E ORDER OF ASSESSMENT OR ONLY THAT PART OF THE ORDER OF ASSESS MENT WHICH WAS NOT THE SUBJECT-MATTER OF AN APPEAL EITHER BECAU SE THE APPELLATE ASSISTANT COMMISSIONER HAD NO JURISDICTION TO CONSIDER THAT MATTER OR BECAUSE THE APPELLATE ASSIST ANT 15 COMMISSIONER, THOUGH HAVING JURISDICTION TO EXAMINE T HAT SUBJECT-MATTER, DID NOT DO SO. IF THE COMMISSIONER HA S SET ASIDE THE ENTIRE ORDER OF ASSESSMENT, THEN IT COULD N OT BE HELD THAT HE HAS EXERCISED POWER CONFERRED UPON HIM BECAU SE HE HAS NO POWER UNDER SECTION 263 OF THE ACT TO REVISE THE ORDER OF THE APPELLATE ASSISTANT COMMISSIONER. IN THIS VIEW OF THE MATTER, THE DECISION IN CIT V. R.S. BANWARILAL [1983] 140 ITR 3 (MP) DOES NOT LAY DOWN THE CORRECT LAW IN SO FAR AS IT IMPLIEDLY HOLDS THAT THE COMMISSIONER COULD, IN EXERCISE OF REVI SIONAL POWER, SET ASIDE THE ENTIRE ORDER OF ASSESSMENT PASS ED BY THE INCOME-TAX OFFICER THOUGH IT HAD BEEN THE SUBJECT-M ATTER OF AN APPEAL BEFORE THE APPELLATE ASSISTANT COMMISSIONER. IN VIEW OF THE ABOVE ALSO, THE ORDER OF THE COMMISSIONER OF INCOME TAX MADE UNDER SECTION 263 O F THE ACT IS LIABLE TO BE HELD AS ILLEGAL AND IS HERE BY QUASHED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF APRIL, 2016. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACOUNTANT MEMBER DATED : 25 TH APRIL, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH