Commissioner of Income Tax vs Amrit Banaspati Co. Ltd.

K.L. Manjunath, J.—The Income Tax Appellate Tribunal, New Delhi, has referred the following question of law u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for opinion to this court :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct to cancel the order passed by the Commissioner of Income Tax u/s 263 because when the Income Tax Appellate Tribunal passed the order the law stood amended and applied to all years before or after the amendment ?"

The reference relates to the assessment year 1982-83.

Briefly stated the facts are as under :

The respondent-assessee is a public limited company deriving income from manufacture and sale of vegetable ghee, refined oil, soap and paper. It had filed a return of income finally at Rs. 79,26,250. The assessment was completed u/s 143(3) of the Act by the Assessing Officer vide orders dated March 29, 1985, determining the income at Rs. 92,58,170.

Feeling aggrieved the respondent preferred an appeal before the Commissioner of Income Tax (Administration), who disposed of the same on January 23, 1987. The Commissioner of Income Tax (Administration) on examination of assessment records of the respondent was of the prima facie view that the assessment order passed by the assessing authority was erroneous and prejudicial to the interests of the Revenue. He accordingly issued a notice on March 6, 1987, inviting objections as to why action u/s 263 be not taken. The respondent filed its reply vide letter elated March 27, 1987. The Commissioner of Income Tax (Administration) was not satisfied with the reply filed by the respondent, he passed an order u/s 263 on March 30, 1987, wherein he issued directions to the Assessing Officer for making fresh inquiry and giving opportunity to the assessee. A fresh assessment order was passed by the assessing authority on December 20, 1988. Feeling aggrieved the respondent preferred an appeal before the Tribunal against the decision of the Commissioner of Income Tax (Administration), Meerut. The Tribunal allowed the appeal on the ground that the assessment order having been passed on March 29, 1985, the Commissioner of Income Tax (Administration) could have invoked the jurisdiction u/s 263 by the end of March 1987, if the order passed by the Assessing Officer was considered to be erroneous and prejudicial to the interests of the Revenue. The Tribunal was further of the view that the amended provision of Section 263 relates to partial merger were not applicable retrospectively. While holding so the Tribunal relied on the decision in the case of J.K. Synthetics Ltd. Vs. Additional Commissioner of Income Tax and Another, and has held that law has been amended with effect from June 1, 1988, when the jurisdiction, u/s 263, to be exercised by the Commissioner had expired on March 31, 1987.

Heard Sri A. N. Mahajan, learned standing counsel for the Revenue, and Sri Anshu Agarwal holding brief of Sri P. K. Jain, learned counsel for the assessee-respondent.

We find that the Supreme Court in the case of COMMISSIONER OF Income Tax Vs. SHRI ARBUDA MILLS LTD., , has held that the consequence of the amendment made with retrospective effect is that power u/s 263 shall extend and shall be deemed to be extended as if it has not been considered and decided in the appeal. Accordingly, in respect of the items which have not been considered, in appeal, the power of the Commissioner shall be extended to them.

Respectfully, following the aforementioned decision we are of the opinion that the order of the Tribunal cannot be justified. We accordingly answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee. However, there shall be no order as to costs.