COMMISSIONER OF INCOME TAX Vs. GURJARGRAVURES PVT LTD

JUDGEMENT

(1.) THE short question which arises for consideration in this reference concerns the scope and ambit of the jurisdiction of the AAC to entertain a new claim for exemption made before him for the first time. THE assessee is a company carrying on business of copper engraving and manufacturing of labels. THE assessee was admittedly entitled to exemption in respect of a portion of its profit for the asst. yr. 1963-64 under s. 84 of the IT Act, 1961, but due to some oversight the assessee omitted to make a claim for such exemption at the time of assessment by the ITO, with the result that this profit was subjected to tax in the assessment order dated 12th February, 1965, made by the ITO. THE assessee realised that by reason of its omission to make a claim, profit exempt from payment of tax had been erroneously subjected to tax and it, therefore, included in the memorandum of appeal against the order of assessment, a ground that the ITO had erred in not exempting such profit from tax under s. 84. THE assessee pointed out to the AAC at the hearing of the appeal that the benefit of s. 84 had been allowed to the assessee in the subsequent assessment years and, if that was so, there was no reason why it should not be granted to the assessee also in the assessment year in question. THE AAC, however, refused to entertain this contention on the ground that the claim for exemption under s. 84 was not advanced before the ITO, and it was, therefore, not possible to say that the ITO had erred in not granting the benefit of s. 84 to the assessee. THE assessee thereupon preferred a further appeal to the Tribunal in which, apart from raising various grounds relating to other items in the assessment order, the assessee challenged the decision of the AAC that the assessee was not entitled to claim exemption under s. 84 at the appellate stage because no such claim had been put forward by him before the ITO. THE Tribunal found that this challenge to the view taken by the AAC was wellfounded and the AAC ought to have entertained the claim of the assessee for exemption under s. 84. THE Tribunal observed in a very brief order : "THE assessment did not become final on the issuance of the assessment order by the ITO, but was kept alive by way of appeal to the AAC. Since the entire assessment was open before the AAC, we do not see any reason for not entertaining the claim of the assessee by the AAC."

(2.) THE Tribunal accordingly directed the ITO to allow appropriate relief under s. 84. THE CIT was aggrieved by this decision and he, therefore, applied for a reference and on the application the following question of law was referred for the opinion of this Court :

(3.) IT is clear that the AAC has been constituted a revising authority against the decisions of the ITO ; a revising authority not in the narrow sense of revising what is the subject-matter of the appeal, not in the sense of revising those matters about which the assessee makes a grievance, but a revising authority in the sense that once the appeal is before him he can revise not only the ultimate computation arrived at by the ITO but he can revise every process which led to the ultimate computation or assessment. In other words, what he can revise is not merely the ultimate amount which is liable to tax, but he is entitled to revise the various decisions given by the ITO in the course of the assessment and also the various incomes or deductions which came in for consideration of the ITO." 5. This last passage was quoted with approval by the Supreme Court in CIT vs. McMillan and Co. (1958) 33 ITR 182 (SC) IT must, therefore, be taken as settled that s. 251, cl. (a), confers not only appellate power on the AAC to reduce or annul the "assessment" at the instance of an assessee but also revisional jurisdiction to revise the "assessment" and enhance it : vide judgment of Hidaytullah, J. in CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC). This power of interference is, by the language of s. 251, cl. (a), restricted to the "assessment" : the AAC may reduce or annul the "assessment" or enhance the "assessment". The question is what is the true meaning and connotation of the word "assessment". There were two rival contentions urged before us in regard to the interpretation of the word "assessment". The assessee contended that the word "assessment" here means the ultimate amount which the assessee is held liable to pay having regard to the charging section and his total income and, therefore, the assessee can ask the AAC to reduce or annul the computation of the total income or the determination of the amount of tax by putting forward a new claim even if such claim was not advanced before the ITO. The assessee relied strongly on the observations of the Supreme Court in CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), where Subba Rao, J., delivering the judgment of the Court, said : "The AAC has, therefore, plenary powers in disposing of an appeal. The scope of his power is conterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do."