Commissioner of Income Tax vs Simco Meters Limited

R. Jayasimha Babu, J.—The questions referred to us at the instance of the Revenue are as follows :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in entertaining a new ground not taken at any

stage of the proceedings u/s 263 of the Income Tax Act, 1961, to cancel an order under that section of the Commissioner of Income Tax ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the assessment order of the

Inspecting Assistant Commissioner (Assessment), which was the subject-matter of the revision order u/s 263 had merged in the order of the

appellate authority ?

The assessment year is 1977-78.

The assessee is a manufacturer of power supply meter equipment, who claimed investment allowance for installing new machinery. Though the

assessee had filed ah appeal against the assessment, investment allowance was not one of the grounds in respect of which the appeal had been

filed. The Commissioner exercised his revisional jurisdiction u/s 263 of the Act on the ground that the assessee was not entitled to the investment

allowance since the manufacture of meters does not amount to generation or distribution of electricity or any other form of power referred to in

Section 32A(2)(b) of the Act and that meters are also not covered by item No. 5 of the IXth Schedule which refers to thermal and hydro power

generation equipment. The Tribunal has set aside the order of the Commissioner on the ground that the Commissioner had no jurisdiction to revise

the order in view of the fact that the order of assessment had merged with the order of the appeal. That view of the Tribunal is plainly untenable

and is not in conformity with the law declared by the Supreme Court in Commissioner of Wealth-tax, Calcutta Vs. U.C. Mehatab, wherein it has

been held by the apex court that the jurisdiction u/s 263 of the Act is unaffected by any appellate order, if the subject-matter of the appeal was not

the subject-matter of the revision. The ground referred to in the first question is the ground that the revisional jurisdiction cannot be exercised if the

original order has merged with the order in appeal. Such a ground is only a question of law which it was open to the assessee to raise, and it was

within the jurisdiction of the Tribunal to have allowed that question to be raised. The Tribunal, however, has not gone into the correctness of the

order of the Commissioner on the merits. We therefore direct the Tribunal to examine the assessee''s case on the merits.

Our answer to the second question is, therefore, in favour of the Revenue and against the assessee. Though the first question is in favour of the

assessee, that is of no help to the assessee, in view of our answer to the second question. No costs.