Commissioner of Income Tax vs Emery Stone Mfg. Co.

Balia, J.

This reference has been made by the Tribunal in the proceedings arising out of assessment orders passed by the Inspecting Assistant Commissioner in pursuance of orders made by the Commissioner (Administration) u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ''the Act'').

The question that has been referred to this court for the assessment years 1982-83 and 1983-84 arising out of IT Appeal Nos. 268 and 269 (Jp.) of 1989 is as under :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal erred in law in upholding the setting aside of the fresh assessment order dated 12-3-1987 of the IAC (Asstt.) for the assessment years 1982-83 and 1983-84 ?"

The facts of this case are that the respondent-assessee, Emery Stone Mfg. Co., is a registered firm. Originally assessments were completed for the assessment years in question on 24-1-1985 by allowing depreciation on the assets by taking the cost of acquisition as the valuation at which the same has been allotted to the partners of the firm on dissolution of the firm to which they were partners. However, the original assessment orders dated 24-1-1985 were set aside by the learned Commissioner vide his consolidated order dated 16-2-1987 u/s 263 as he found that depreciation on assets had been allowed on an enhanced value without invoking the provisions of Explanation 3 to section 43(1) of the Act and directed the assessing officer to hold an enquiry into the requirement of section 43(1) and then to pass fresh orders. Consequent to the aforesaid order of the Commissioner (Appeals), the learned IAC reframed assessments on 12-3-1987. Against the said assessment orders, the assessee preferred appeals before the learned Commissioner (Appeals), Jodhpur. In the meanwhile, the assessee approached the Appellate Tribunal against the orders passed by the Commissioner (Administration) u/s 263 which were set aside by the Tribunal by consolidated order dated 24-11-1988 in IT Appeal Nos. 330 and 331 (Jp.) of 1987 and the order of the Commissioner (Administration) u/s 263 was set aside. Following the aforesaid decision of the Tribunal, the Commissioner (Admn.) has allowed the appeal against the order of the assessing officer inasmuch as the foundation for appeal ceased and that the order of the Commissioner (Appeals) has been confirmed by the Tribunal, out of which the present reference has arisen.

It has been pointed out by the learned counsel for the revenue that the order u/s 263 of the Commissioner has been restored in pursuance of opinion expressed by this court on an reference having been made about the validity of & Tribunal''s order setting aside the order of the Commissioner and remanding the case back to the assessing officer for deciding the issue afresh by keeping in view the provisions of section 43(1). In view thereof, now the only foundation on which the order under reference has been made has ceased to exist. The judgment of the High Court in the aforesaid reference No. 1 of 1992 is in COMMISSIONER OF Income Tax Vs. EMERY STONE MFG. CO., as the sole ground on which the appeal of the revenue has been rejected by the Tribunal has been stated to be thus :

"When the Commissioner (Appeals) order was in conformity with the order of the Tribunal in ITA Nos. 330 and 331 (Jp.) 87 (supra), in our view, there is no justification to interfere with the view taken by the Commissioner (Appeals)."

In this view of the matter, the merit of the finding reached by the assessing officer on anvil of section 43(1), Explanation 3 has not been examined either by the Commissioner (Appeals) or the Tribunal. In view of the fact that the order of the Tribunal in IT Appeal Nos. 330 and 331 (Jp.) of 1987 no more holds the field, the question referred to this court has to be answered in the negative and it will be for the Tribunal to re-hear the appeal on merits in accordance with law as envisaged u/s 260 and pass fresh orders.

No orders as to costs.