M. N. Chandurkar, J. - In the assessment proceedings for the asst. yr. 1958-59, the assessee was disallowed a sum of Rs. 4,000 out of the total salary amount of Rs. 10,200 which was claimed to be deductible by the assessee, the AAC took the view that the ITO failed to apply his mind to some important aspects relating to the claim for payment of salary and he held that the assessee had not been able to clarify the issues as to the service rendered or as to how the payments were allocated. He, therefore, set aside the assessment with a direction that the ITO should complete the proceedings de novo.
2. In appeal by the assessee the IT Appl. Tribunal considered this aspect of the order as amounting to enhancement and according to the Tribunal, the AAC was not entitled to set aside the order of the ITO and ask him to deal with the assessment afresh thus disallowing even that portion of the claim which the ITO had allowed in the first year. However, the operative finding given by the Tribunal was in these words :
'In this view of the matter, we uphold the objection raised by the ld. counsel for the assessee and hold that the ITO should restrict his investigation only with regard to the amount that he has disallowed under the head salaries in the first year. This portion of the directions of the AAC will be treated as modified by this order of ours'.
3. At the instance of the revenue, the following two questions have been referred :
(1) Whether on the facts and in the circumstances of the case the direction given by the AAC in setting aside the assessment without giving a notice of enhancement is proper u/s 31(3) of the Indian IT Act, 1922 ?
(2) Whether on the facts and in the circumstances of the case modification of the order of the AAC by the Tribunal requiring the ITO to restrict his investigation only with regard to the amount that he had disallowed under salaries was proper
4. It is obvious that if the second question is answered against the Revenue, the first question clearly becomes academic because the legality of the operative order of the Tribunal which followed as a result of the view taken earlier in the order that a notice of enhancement was necessary, is put in issue in the second question. Shri Joshi appearing for the Revenue fairly concedes that in view of the decision of this Court in CIT v. Devidayal Metal Industries Private Ltd. : 68ITR50(Bom) the second question has to be answered in the affirmative and against the Revenue, and therefore, the first question need not be answered. Accordingly the two questions referred are answered as follows :
Q. No. (1) need not be answered in view of the answer to question No, (2).
Q. No. (2) is answered in the affirmative and against the Revenue.
5. The assessee does not appear to have been served in this reference. But having regard to the fact that the Question No. (2) is being answered against the Revenue and the order of the Tribunal which was in favour of the assessee will not in any way be adversely affected by the answer given by us, we do not think it necessary to direct service of notice of the reference on the assessee though the reference has been pending since 1965. In the circumstances of the case there will be no order as to the costs of this reference.