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Express Newspapers Ltd. Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1992)42ITD102(Mad.)
AppellantExpress Newspapers Ltd.
Respondentincome-tax Officer
Excerpt:
.....loss.consequently, the assessment was made on 13-8-1984 by the ito allowing such a deduction. the assessee appealed against the assessment in respect of other matters. while the appeal was pending, the iac wrote a letter dated 18-1-1988 to the cit (appeals) stating that the allowance of the capital loss was not correct and, therefore, the cit (appeals) should enhance the assessment by a sum of rs. 14,27,500. thereupon the cit (appeals) issued a notice dated 29-3-1989 to the assessee proposing to enhance the assessment by disallowing the claim for short-term capital loss and called for objections. the assessee sent its objections by letter dated 16-5-1989 stating that the assessment had been made after due deliberations following the procedure laid down by section 144b and consequently.....
Judgment:
1. This appeal is directed against the order of the CIT (Appeals) setting aside the assessment for the purpose of considering the question of enhancement of the assessment.

2. The assessee is acompany. For the Assessment Year 1981 -82, corresponding to the previous year ended 30-4-1980, a draft assessment was made on 30-3-1984. In that draft the Income-tax Officer proposed the disallowance of the claim of the assessee for deduction of loss on sale of investment amounting to Rs. 14,27,500. The assessee's objections to this draft were forwarded to the Inspecting Assistant Commissioner who by his order dated 13-8-1984 under Section 144B(4) directed the ITQ to allow the deduction as a short-term capital loss.

Consequently, the assessment was made on 13-8-1984 by the ITO allowing such a deduction. The assessee appealed against the assessment in respect of other matters. While the appeal was pending, the IAC wrote a letter dated 18-1-1988 to the CIT (Appeals) stating that the allowance of the capital loss was not correct and, therefore, the CIT (Appeals) should enhance the assessment by a sum of Rs. 14,27,500. Thereupon the CIT (Appeals) issued a notice dated 29-3-1989 to the assessee proposing to enhance the assessment by disallowing the claim for short-term capital loss and called for objections. The assessee sent its objections by letter dated 16-5-1989 stating that the assessment had been made after due deliberations following the procedure laid down by Section 144B and consequently the issue was not amenable for enhancement. However, by his order dated 19-3-1990, the CIT (Appeals) came to the conclusion that the matter required re-consideration in the light of certain facts which have been subsequently gathered by the Assessing Officer. He, therefore, set aside the assessment in order that the assessing authority may have an opportunity to examine the issue afresh in the light of the information which has subsequently came to his possession.

3. The assessee is in appeal to contend firstly that in an appeal against an assessment made under Section 144B(5) the CIT (Appeals) cannot exercise the power of enhancement. It was pointed out that the provisions of Section 144B themselves have been introduced to reduce litigation by in troducingasuperiorofficerattheassessment stage itself so as to exercise an objective and judicial test over the assessment proposed by the Income-tax Officer. Reference was made to the decision in the case of East Coast Marine Products (P.) Ltd. v. ITO [1983] 4 ITD 73 (Hyd.)(SB) where it was held that an assessment made under Section 144B(5) was not amenable to revision under Section 263 and the subsequent introduction of an Explanation to that section to enable such a revision to point out that such an assessment is not regarded as an ordinary assessment as such. It was also argued that under the power of enhancement, the CIT (Appeals) can only direct the Assessing Officer to do what he had failed to do as held by the Supreme Court in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 and as in this case he had not failed by giving effect to the direction under Section 144B, there could be no enhancement. In the alternative, it was submitted that even if the petition for enhancement were to be entertained the Commissioner (Appeals) should have himself decided the issue without remitting the matter to the Assessing Officer. Thirdly, it was argued that in any case the entire assessment should not have been set aside as it would amount to a harassment by a fishing enquiry when the issue was confined to the issue of deduction of the short-term capital loss.

4. On the other hand, it was contended on behalf of the revenue relying on the decision in the cases of Premier Cable Co. Ltd. v. CIT [1992] 193 ITR 719 (Ker.), Popular Automobiles v. CIT [1991] 187 ITR 86 (Ker.), Sudhir Sareen v. ITO [1981] 128 ITR 445 (Delhi), Narrondas Manordass v. CIT [1957] 31 ITR 909 (Bom.) and CIT v. McMillan & Co.

[1958] 33 ITR 182 (SC) that even an assessment under Section 144B is amenable to the appellate jurisdiction and consequently for enhancement. It was submitted that if the Assessing Officer could bring to tax an escaped income, there was no reason why such escaped income should not be brought to tax under the power of enhancement. It was also argued that if the assessment had been made by an IAC, an appeal would have been maintainable and, therefore, merely because the assessment was made under a direction given by him, it cannot be said that the appeal powers could not be exercised in that regard. With regard to the alternate claim it was argued that the question of remanding the issue was a matter of judicial discretion and hence it should not be entertained. On the last point it was stated that it was not the intention of the revenue to have a roving enquiry and in the reassessment to be made an Assessing Officer would confine himself to the issue remitted back to him and perhaps repeat the other parts of the assessment as in the original assessment.

5. We have considered the submissions and have perused the orders of the authorities below. We have also considered the decisions cited before us. We find that the assessment was made under Section 144B(5) because the direction given by the IAC under that section was binding on the Assessing Officer. When the appeal came before the CIT (Appeals) his power, no doubt, extended over the assessment but he could only direct the Assessing Officer to do what he has failed to do as held by the Supreme Court in the case of Kanpur Coal Syndicate (supra). In the present case can it be said that the Assessing Officer has failed to consider the claim for deduction of short-term capital loss properly when he has given effect to the directions by the IAC as he is bound to do under Section 144B(5)? The answer obviously is in the negative.

Hence the Commissioner (Appeals) could not have entertained the enhancement petition in respect of a matter which the Income-tax Officer was bound to carry out under the statute. In other words, Section 144B(5) places a limitation on the power of the CIT (Appeals) to enhance the assessment. Moreover, the plea of the Assessing Officer was for a review of that issue on the ground that he has gathered information subsequently. If that were so, it would be a matter for a re-assessment under Section 147(6) which naturally falls outside the scope of an enhancement of the assessment.

6. The revenue pointed out that the decision of the Kerala High Court in the case of Popular Automobiles (supra) also related to an enhancement in a case of an assessment made under Section 144B. But we find that the issue decided in that case was whether an appeal by the revenue was maintainable where the Commissioner (Appeals) has omitted to consider an enhancement petition. The question whether enhancement is possible in a case of an assessment under Section 144B because of Sub-section (5) was not considered in that decision. We are, therefore, of the considered opinion that the CIT (Appeals) was not right in entertaining the enhancement petition. Consequently, his order setting aside the assessment with a direction to reconsider the issue was untenable. It is accordingly set aside. It follows that the appeal has to be restored to his file, for disposal in respect of the grounds of appeal raised by the assessee.


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