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Commissioner, Income Tax Vs. Rohtak and H. Distt. Ele. S.Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberIncome Tax Reference Appeal Nos. 200 and 201 of 1976
Judge
Reported in1981RLR566
ActsIncome Tax Act, 1961 - Sections 154(1A)
AppellantCommissioner, Income Tax
RespondentRohtak and H. Distt. Ele. S.Co.
Advocates: Bishamber Lal and; M.L. Varma, Advs
Cases ReferredSee Maharana Hills v. Income Tax Officer
Excerpt:
direct taxation - reconsideration - section 154 (ia) of income tax act, 1961 - power of recalling of order of income tax officer (ito) on ground of wrong assessment when matter decided by appellate assistant commissioner - held, ito have no power in such case to recall his order. - - can it be said on these facts that he did not consider and decide the two items ? we are clearly of the opinion (hat these two items will be deemed to have been considered and decided in the order of the appellate assistant commissioner dated 23rd january 1968. was it the subject matter of an appeal? clearly the new act applied......action u/s 154 in respect of assessment order for 1962 63 which had got merged with the order of appellate assistant commission. (3) whether the 'actual cost' of the service lines owned by the assessed co. for the purpose of allowing depreciation and development rebate under the income tax act, 1961, should he deteimined not in accordance with said act hut in accordance with electricity act, 1910 and the electricity (supply) act, 1940 after noting above, judgment proceeds : (3) avadh behari, j. question no. 1. on the first question we think the income tax officer was right and the tribunal was wrong. the assessment year in question is 1962-63. the written down value had to be found as on 1-4-1961. the tribunal thought that section 10(5) of the act of 1922 applied because the new income.....
Judgment:

S.B. Wad, J.

(1) assessed is an Electric Supply Co. For assessment year 1962-63, ending on 31.3.62, assessment made u/s 143(3) on 30.11.66, allowed it depreciation & development rebate for its service lines. assessed appealed against the assessment order to App. Asstt. Comm. Appeal was decided on 23.1.68 but the question D. & D. rebate was not considered. On 27.8.68, I.T'.O. issued notice u/s 154 of 1961 Act proposing to withdraw said rebate. assessed did not attend. By order of 31.5.69, I.T.O. held that he has wrongly allowed rebate u/s 10(5) of 1922 Act while provision applicable was S. 43(1) of 1961 Act and as consumers contributed to the service lines assessed was not entitled to rebate and he withdrew the same. assessed questioned this order by appeal saying that Income Tax Officer . had no jurisdiction as his order of 30.11.66 merged with appellate order of 23.1.68. App. Asstt. Comm. did not agree with this on the ground that in appeal question of rebate was not considered. Asses- see appealed to Tribunal who held that S. 43(1) of 1961 Act was not applicable and that S. 10(5) of 1922 Act applied. That it was wrong to suggest that Income Tax Act did not apply and matter was governed by Electricity Act which had a special mode of calculating said rebate. That assessed in his grounds of appeal had raised the controversy about rebate and hence order of Income Tax Officer . merged with appellate order (even if it did not consider the question) and hence Income Tax Officer . had no jurisdiction to reconsider the matter. 3 questions were referred to High Court; first 2 at the instance of Deptt. and the 3rd at the instance of assessed.

(2) Whether on the facts and circumstances of the case, the Tribunal was legally light in holding that the Income Tax Officer . was not justified in recomputing the written down value of the service lines for period up to 31.3.61 and that the written down value as on U.3.61 was to be taken as the value on 1.4.61. (2) Whether on facts and circumstances of the case Tribunal was right in holding that Income Tax Officer . was precluded from taking action u/s 154 in respect of assessment order for 1962 63 which had got merged with the order of Appellate Assistant Commission. (3) Whether the 'actual cost' of the service lines owned by the assessed Co. for the purpose of allowing depreciation and development rebate under the Income Tax Act, 1961, should he deteimined not in accordance with said Act hut in accordance with Electricity Act, 1910 and the Electricity (Supply) Act, 1940 After noting above, judgment proceeds :

(3) Avadh Behari, J. Question no. 1. On the first question we think the income tax officer was right and the Tribunal was wrong. The assessment year in question is 1962-63. The written down value had to be found as on 1-4-1961. The Tribunal thought that section 10(5) of the Act of 1922 applied because the new Income Tax Act of i96l came into force with effect from 1st April, 1962. This was their first conclusion.

(4) Secondly, they concluded that the written down value as on 31st March 1961 must be taken to be the written down value of the same assets on 1st April, 1961.

(5) In both these conclusions the Tribunal was wrong. Under section 297(1)(b) 'where a return of income is filed after the commencement of this Act otherwise than in pursuance of a notice under section 34 of the repealed Act by any person for the assessment year ending on 31st day of March 1962, or any earlier year, the assessment of that person for that year shall be made in accordance with the procedure specified in this Act'.

(6) The return of income for 1962-63 was filed after the commencement of the new Act of 1961 and thereforee the Income Tax Act of 1961 applied. 'Actual cost' had to be determined under section 43(1) of the new Act. The written down value could not be determined under the old Act of 1922 for the assessment year 1962-63. I his is the view which the income tax officer took in his order under section 154 and we think he was righl.

(7) It will also be wrong to say that the written down value as on 31st March 1961 was the same as on 1st April 1961. For the assessment year 196l-62, the written down value as on 1.4.1960 had to be determined and depreciation allowed there on under section 10(5) of the Act of 1922 which was applicable at (hat time. The written down value thus reduced would be the written down value of the assets as on 31.3.1961 and would also have bem taken as the written down value ou 1.4.1961, had the 1922 Act continued in force unamended. However, the position changed for the assessment year 1962-63 for which ihe previous year was the financial year 1961-62. On 1st April 1962 the new Act of 1961 came into force and the 'actual cost' under section 43(1) ought to be determined after deducting ihe contributions received from the consumers. The contributions received from the consumers could not be deducted from the 'actual cost'under section 10(5) of the Act of 1922. That is what the House of Lords have held in Corporation of Birmingham v. Barnes, 19 Reports of Tax Cases 195. The 'actual cost' under section 10(5), as under the English Law, means 'the cost, the whole cost and nothing but the cost', to use the words of Lord Atkin. Hut on 1st April 1961 the actual cost had to be determined under section 43(1) after deducting the contributions received from the consumers. (See Commissioner of Income Tax v. Hides and Leather Products Pvt. Ltd 10 Itr 61).

(8) The Tribunal was not right in holding that written down value en 1st April 1961 was the same as on 31st March 196l. Nor was ihe 7 tribunal right in holding that the Act of 1922 applied. Subject to what we have to say on Question No. 2 our answer to question No. 1 is in favor of the Department.

(9) Question No. 2. On this question we think the Tribunal was right in holding that the Income Tax Officer had no jurisdiction under section 154 to revise the original assessment order dated 30th November, 1966 because that order had merged and fused with the order of the Appellate Assistant Commissioner.

(10) Once the assessment order of 30th November, 1965, is challenged in appeal before the Appellate Assistant Commissioner the order of the Income Tax Officer dated 30th November, 1966 merges in the order of the Appellate Assistant Commissioner dated 23rd January, 1968. The doctrine of merger ought to apply. It is undisputed that in the grounds of appeal before the Appellate Assistant Commissioner the assessed took, amongt other grounds, the question of the determination of depreciation and development rebate. It is true that the Appellate Assistant Commissioner's order in respect of depreciation and rebate is silent. But nevertheless the basic general principle imbedded in the doctrine of resjudicata will apply. If the Appellate Assistant Commissioner did not modify or reverse the Income Tax Officer on these two items it means that he confirmed the decision of the ITO. The operative order in the field was the order of the Appellate Assistant Comissioner and not of the Income Tax Officer. After the order of the Appellate Assistant Comissioner dated 23rd January 1968 the Income Tax Officer . had no jurisdiction to issue a notice under section

(11) Counsel for the department referred us to section 154(1-A) which says :

'WHEREany matter has been considered and decided in any preceding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.'

(12) This amendment was made on 6th October, 1964. Even before the amendment numerous decisions took the view that even after an appeal from an order has been preferred and decided, a mistake in that part of the order which was not the subject-matter of the appeal and was left untouched by the Appellate Authority, can be rectified by the Authority which passed the order. (See Karson Dass Paid v. Shaw, 87 Itr 255 (262) . This principle is now given statutory recognition by sub-section (1-A).

(13) The question is : What is meant by the words 'considered and decided' which are used twice in the sub-section. In the present case the question of depreciation and development rebate was taken as a specific ground in the memorandum of appeal before the Appellate Assistant Commissioner. Whether this ground was argued before the appellate authority or was abandoned or was not pressed we do not know. All that we know is that the Appellate Assistant Commissioner did not pass any order in respect of depreciation and development rebate. Can it be said on these facts that he did not consider and decide the two items We are clearly of the opinion (hat these two items will be deemed to have been considered and decided in the order of the Appellate Assistant Commissioner dated 23rd January 1968. Was it the subject matter of an appeal? This is the question. If the answer is 'yes' the matter ought to be held as having been considered and decided. The expression 'considered and decided' used in 1964 in the Income Tax Act is as old as the hills. It was used in the Civil Procedure Code (Act V of 1908) in a slightly different form. There the expression is 'heard and decided' which means much the same thing as 'considered and decided'.

(14) The matter can also be looked at from this point of view. If it is said that the Appellate Assistant Commissioner had not considered and decided this ground, it would be open to the assessed (and even the Department, for the Appellate Assistant Commissioner has powers of enhancement) to move him u/s 154 and request him to deal with this ground. That would result in the position that both the Income Tax Department and Appellate Assistant Commissioner could rectify the position in regard to the same matter, which was exactly the position which sub-section (1-A) was intended to obviate. It appears to us that the order of the Ito dated 30th November, 1966 merged in the order of the Appellate Assistant Commissioner dated 23rd January 1968 and thereafter the Ito lost jurisdiction to rectify any error apparent on its face u/s 154.

(15) We do not doubt that the mistake by the Income Tax Officer in his original assessment order dated 30th November, 1966 in the matter of depreciation and development rebate was a mistake apparent on the face of the record. Clearly the new Act applied. Erroneuously the Income Tax Officer . had applied the old Act. Under section 154 the Income Tax Officer . can recompute the correct amount of depreciation allowance after checking up the previous calculations : See Maharana Hills v. Income Tax Officer ., : [1959]36ITR350(SC) . The application of wrong statutory provisions is a mistake apparent on the face of the record. But fortunately for the assesses the Income Tax Officer discovered the mistake too late. He discovered it after an appeal had been taken from his original assessment order and decided by the Appellate Assistant Commissioner. It is the order of Appellate Assistant Commissioner dated 23rd January 1963 which is the determining factor in the matter of jurisdiction of the ITO. After this order he did not have any jurisdiction to act u/s 154. This question is answered in favor of the assessed and against the department.

(16) Question No. 3. In our opinion, the Tribunal was right in holding that the Electricity Acts of 1910 and 1948 had no application for the purpose of allowing depreciation and development rebute. These had to be determined under the Income Tax Act of 1961. The reason is simple. The assessed asked for these reliefs under the Income Tax Act. thereforee the Income Tax Act governs. The Electricity Acts have no relevance for the purpose of computation of income. The question is answered in favor of the Department.


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