Commissioner of Income Tax vs L.H. Sugar Factories Ltd.

The Tribunal referred the following question for the opinion of this Court u/s 256(1) of the income tax Act, 1961 (''the Act''): Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the Commissioner of income tax had no jurisdiction u/s 263 of the income tax Act, 1961 to revise the order of the income tax Officer in this case?

The case relates to the assessment years 1975-76 and 1976-77.

The Tribunal relying on an order passed by the Delhi Bench ''E'', Delhi in the case of Dhampur Sugar Mills Ltd. [IT Appeal No. 5059 (Delhi) 1977- 78, dated 30-10-1979] held that the Commissioner had no jurisdiction to pass the impugned order u/s 263(1) of the Act.

Before us, the learned standing counsel adverting to clause (c) of the Explanation to section 263(1) submitted that the part of the assessment order which was not appealed against, could not have merged in the order of the appellate authority and, therefore, in view of clause (c), the Commissioner would have jurisdiction to pass the impugned order u/s 263(1). Admittedly, the appeal was filed only against part of the assessment order and, therefore, the question is whether the part of the order which was not appealed against, would stand merged in the order of the appellate authority. The contention of the standing counsel is that part of the order which was not appealed against, would not merge in the appeal order in view of clause (c) of the Explanation to section 263(1), which is retrospective in nature.

On the other hand, the submission of the learned counsel for the assessee is that appeal for the years in question had been decided by the appellate authority much before the Explanation was inserted in section 263(1), and, therefore, the Explanation to section 263(1) would have no application to the case at hand.

Since the contention of the standing counsel is that clause (c) of the Explanation to section 263(1) is retrospective in nature and, hence, is applicable to the case at hand, it is nothing but necessary to consider this contention. It is important to note that a Division Bench of this Court remitted the case of Dhampur Sugar Mills Ltd. (supra) to the Tribunal which decision is the sole basis of the order of the Tribunal - see Commissioner of Income Tax Vs. Dhampur Sugar Mills Ltd., and, therefore, it is nothing but appropriate to direct the Tribunal in this case also to consider the question whether, on the facts and in the circumstances of this case, clause (c) of the Explanation to section 263(1) is applicable and if so, what is the effect of the newly inserted clause (c) of the Explanation to section 263(1). We, accordingly, direct the Tribunal to decide the aforementioned question afresh giving opportunity of being heard to the parties after considering the rival submissions of the parties relating to clause (c) of the Explanation to section 263(1).