Vildirect: IncomeTax-caselaws-1990-VIL-82-ITAT-AHM

1990-VIL-82-ITAT-AHM

Equivalent Citation: TTJ 039, 054,

Income Tax Appellate Tribunal AHMEDABAD

Date: 01.08.1990

SAKAR PATAL VIBHAG JUNGLE KAMDARR SAHAKARI MANDLI LTD.

INCOME TAX OFFICER.

BENCH

Member(s) : R. M. MEHTA., M. A. A. KHAN.

JUDGMENT

The two appeals by the same assessee and the cross-objection by the Revenue involving the same assessment year arise under the following circumstances.

2. The assessee is a co-operative society engaged in collective disposal of labour of its members by commercial exploitation of forest coupe. The society claimed exemption of its income for asst. yr.1983-84, which is under consideration in both the appeals and the C.O., as per provision of s. 80P(2)(a)(vi) of the IT Act, 1961 (the Act) and the ITO accepted the said claim. In the opinion of the learned CIT, Surat (the Commissioner), the assessment as made by the ITO was erroneous and prejudicial to the interest of Revenue is as much as the by-laws of the society provided that voting rights would also be available to such members of the society who were not contributing labour. In the opinion of the Commissioner such provision in the by-laws of the society contravened the proviso to s. 80P(2)(a)(vi) of the Act. He was of the opinion that exemption under s. 80P(2)(a)(vi) was available to a co-operative society only if the by-laws of such a society restricted the voting rights to its members who contribute labour and society, like the one under consideration, which gave right of voting power to such of its members who do not contribute labour would not be entitled to the exemption claimed. The Commissioner pointed out that 20 per cent of the total members of the assessee-society were not contributing labour in the present case. Holding thus the Commissioner set aside the assessment with a direction to the ITO to reframe same after making suitable modifications.

3. In compliance of the order of the Commissioner under s. 263, the ITO passed fresh assessment order in conformity with the observations made by the commissioner in his order. The aggrieved assessee carried the matter in appeal before the CIT(A) Surat. It may be observed at this stage that the CIT(A) had accepted the contention of the assessee-society for similar exemption of its income under s. 80P(2)(a)(vi) for asst. yr. 1982-83. But for the assessment year under consideration he took the view that since the ITO had passed the fresh assessment order as per directions of the Commissioner contained in s.263, there being no mistake in the interpretation of the directions, there was no justification in entertaining the appeal. The CIT(A) further observed that the assessee society had reportedly also filed an appeal before the Tribunal against the order of the Commissioner under s. 263. For these reasons the CIT(A) dismissed the assessee's appeal. The order passed by the CIT(A) has given rise to assessee's appeal No. 783/90.

4. After having lost his case before the CIT(A), the assessee society was advised to file an appeal against the order of the Commissioner dt. 29th March, 1988 passed under s. 263 in the Tribunal. The assessee-society accordingly challenged the order of the Commissioner by filing ITA No. 1857/90, which is, on the face of it, barred by limitation by 708 days. By filing an application along with the memorandum of appeal, the assessee-society has prayed for condonation of delay caused in filing this appeal.

5. The Revenue is in cross-objection against the appeal filed by the assessee society against the order under s. 263. In its cross objection Revenue has simply supported the order passed by the Commissioner.

6. Mr. K.H. Kaji, the learned counsel for the assessee has vehemently urged that the CIT(A) has fallen into an obvious error in not maintaining the appeal of the assessee and deciding the same on merit on the ground that the point involved in the appeal had already been decided by the Commissioner in his order under s.263 and, therefore, the CIT(A) was not competent to maintain the appeal and decide the same on merits.

7. On the other hand, the learned D.R., supporting the order under appeal submitted that since the point in the issue had been thoroughly examined by the Commissioner who had expressed his opinion on the merit of the issue involved, the CIT(A) was justified in taking the view with regard to the point involved. We, however, find much force in the arguments advanced on behalf of the assessee.

8. Sec. 263 of the Act confers quasi-judicial powers on a Commissioner to revise the order passed by the ITO in any proceedings under the Act. The essential requirement for passing an order under s. 263 is that the Commissioner must feel satisfied that the order as passed by the ITO is erroneous in so far as it is prejudicial to the interest of Revenue. Such satisfaction on the part of the Commissioner, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, may pass such orders as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing fresh assessment. It may be noted that s. 263 authorises the Commissioner to pass an order of enhancement or modification of the assessment. If the Commissioner chose to pass an order of enhancement or modification of the assessment he need not cancel the assessment and direct fresh assessment. No fresh assessment under s. 143 (3) would be involved in those cases. However, if the Commissioner chose to cancel the assessment, then it would be obligatory on his part to have directed a fresh assessment. Once the Commissioner has opted for cancelling the assessment and directing fresh assessment, the ITO may proceed to make fresh assessment in the given case under s. 143(3) of the Act only and an order passed under s. 143(3) is undisputedly an appealable order under s. 246(c) of the Act. Once an order under s. 143(3) is challenged in appeal before the appellate authority, the right of the assessee-appellant to challenge the order under s.143(3) on merits cannot be taken away by the appellate authority on the ground that such an order had been passed in pursuance of an order passed and/or in conformity with the directions given by a revisional authority under s. 263. The expression of opinion by the Commissioner on any part which had appealed to him to consider the order of assessment as made by the ITO as erroneous and prejudicial to the interests of Revenue and which had promoted him to set aside the assessment and to direct the ITO to make fresh assessment, should not be interpreted as taking away the right of the assessee of challenging that point before the appellate authority or divesting the appellate authority of his power of deciding such points on his own merits. In that sense of the matter, in the present case the assessee had every right to require the CIT(A) to decide the point involved in his appeal on its own merits and the CIT(A) would be, in our opinion, fully competent and justified in maintaining the appeal and deciding such points on its own merits. We are, therefore, of the clear opinion that the CIT(A) was not right in law in not maintaining the appeal of the assessee and deciding the same merits. The order under appeal passed under s. 250 of the Act is, therefore, required to be set aside.

9. In so far as the appeal against the order under s. 263 is concerned, that is obviously barred by limitation by 708 days. The delay, no doubt, is quite inordinate. But the circumstances which, according to the assessee, caused so much of delay in filing the appeal against the order cannot also be altogether ignored. In view of the nature of the order passed by the Commissioner under s.263 the assessee could have entertained a reasonable belief that as the original assessment had been set aside and the ITO had been directed to make a fresh assessment, there was no necessity of challenging the order of the Commissioner in appeal before the Tribunal. It was in fact after the decision of his appeal by the CIT(A) against the order of the fresh assessment that the assessee, on legal advice, as has been contended by it, could have thought of filing an appeal, though belatedly, against the very order of the Commissioner passed under s. 263. In deciding assessee's appeal against the order under s.250 the Tribunal has itself taken the view that the original assessment having been set aside and the ITO having been directed to make fresh assessment by the Commissioner, the ITO was required to make fresh assessment after taking into account assessee's case on merits. Such an interpretation having been given to the order of the Commissioner justifies the condonation of the delay caused in filing the appeal against the order passed under s. 263. We accordingly condone the delay.

10. Mr. Kaji no doubt vehemently urged that we must decide the appeal against the order under s. 263 on its own merits. But we do not feel inclined to do so. Our reasons are obvious. The order under s. 263 as passes by the Commissioner has already been acted upon by the ITO. An appeal against the order of the fresh assessment is to be heard on merits by the CIT(A) in pursuance of our order passed in that appeal. Under these circumstances it is not desirable that we should express our opinion on the merits of the views taken by the Commissioner on the point in his order under s. 263. We, therefore, feel inclined to dismiss the appeal. But we hasten to add that our order of dismissing the assessee's appeal against the order under s. 263 should not be interpreted as upholding that order or confirming the view taken by the Commissioner in such order. It is only on the grounds mentioned above that we have felt inclined to dismiss the appeal against the order under s. 263 without expressing our opinion on the merits of the order passed by the Commissioner.

11. The cross-objection by the Revenue simply supports the order passed by the Commissioner under s. 263. Since the appeal against that order is to be dismissed as discussed above, the cross-objection also does not survive for any specific orders.

12. In the result the appeal against the order under s. 250 of the Act (ITA No. 783/Ahd/90) is allowed for statistical purposes. Consequently the order passed by the CIT(A) on 8th Jan, 1990 is set aside. The CIT(A) is directed to decide the appeal of the assessee afresh according to law after giving proper opportunity to the parties of being heard. The appeal against order under s. 263 (ITA No. 1857/Ahd/90) as also the cross-objection filed by the Revenue in support of the order under s. 263 are dismissed.

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