Commissioner of Income Tax vs Shankar Trading Co. P. Ltd.

In respect of the assessment year 1975-76, the Income Tax Appellate Tribunal has stated the case and referred the following two questions to this court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in setting aside the order passed u/s 263 by the Commissioner of Income Tax ?

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the order of the Income Tax Officer had got merged with the order of the Commissioner (Appeals) and, Therefore, the Commissioner has no jurisdiction to revise the said assessment order?"

Briefly stated, the facts are as follows :

The Commissioner of Income Tax noted on going through the records of assessment that the assessed had introduced cash credits in the names of Bansidhar Ram Gopal and Kishan Lal Prehlad Rai Saraf who had been doing hawala business. The Income Tax Officer had made the assessment without making detailed investigations into the genuineness of these loans. The assessed filed affidavits before the Commissioner confirming these loans. The Commissioner, in a very short order, observed that in spite of the Explanation offered by the assessed''s counsel and the affidavits filed before him, he was of the opinion that the genuineness of the loans needed to be established through detailed enquiries and investigations. The order of the Income Tax Officer was, in the opinion of the Commissioner of Income Tax, erroneous and prejudicial to the interests of the Revenue. He, accordingly, cancelled the order with the direction that the Income Tax Officer should reframe the assessment after making detailed enquiries in respect of these cash credits and other matters.

This order was challenged before the Tribunal. The Tribunal noted that the assessment order had been the subject-matter of appeal before the Commissioner of Income Tax and the Tribunal, though on a different point. However, the Tribunal followed the Allahabad High Court ruling in the case of J.K. Synthetics Ltd. Vs. Additional Commissioner of Income Tax and Another, and held that the order of the Income Tax Officer had got merged in the order of the Commissioner (Appeals) and, Therefore, could not be made the subject-matter of revision u/s 263.

At the instance of the Department, the aforesaid two questions of law had been referred.

It is not necessary for us to decide the said questions because the same have really become academic. Mr. Aggarwal, learned counsel for the assessed, has informed us that after the decision of the Income Tax Appellate Tribunal, the Income Tax Officer initiated proceedings u/s 147 of the Act and the assessment of the assessed was reopened and the Income Tax Officer, vide his assessment order dated March 27, 1986, accepted the Explanation of the assessed relating to the cash credit of Bansidhar Ram Gopal. Thereafter, the assessed filed an appeal before the Commissioner of Income Tax (Appeals ) with regard to the loan alleged to have been taken from M/s Kishan Lal Prehlad Rai amounting to Rs. 1,05,000. The Commissioner of Income Tax (Appeals), vide his order dated March 11, 1987, accepted the assessed''s appeal and has deleted the addition of Rs. 1,05,000 and the interest thereon.

Mr. Aggarwal, learned counsel for the assessed, informs us at the Bar that the said order of the Commissioner of Income Tax (Appeals) has been accepted by the Department and the result is that the two items which were sought to be added to the income of the assessed which was the subject-matter of the order u/s 263, from which this reference arose, now stands deleted.

This being so, the present reference has become academic and is returned unanswered.