COMMISSIONER OF INCOME TAX Vs. SIGMA PAINTS LIMITED

JUDGEMENT

(1.) BY this reference under S. 256(1) of the INCOME TAX ACT, 1961, the Tribunal has referred the following question of law to this Court for opinion at the instance of Revenue : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that where a claim of deduction was proposed to be disallowed by the ITO in the draft assessment order but was allowed in the assessment order in consequence of the direction of the IAC under s. 144B it was not open to the CIT to exercise his jurisdiction under S. 263 of the INCOME TAX ACT, 1961, in respect of that part of the assessment order.

(2.) THIS reference pertains to asst. year 1978 -79. The material facts giving rise to this reference are as under : The assessee is a limited company. In the draft assessment order, which was forwarded by the ITO to the IAC under Sub -S. (4) of S. 144B of the IT Act, 1961 ("Act'), the ITO had proposed disallowance of the claim of deduction of Rs. 1,36,639 on account of commission to persons whose names were not disclosed. The IAC, after considering the order and the objections of the assessee, directed the ITO to allow the above claim for deduction. The ITO, completed the assessment in conformity with the direction of the IAC and allowed this claim for deduction in working out the business income of the assessee. The CIT called for the records of the assessment proceedings and on examination of the same, was of the opinion that the claim of deduction of the above amount was wrongly allowed and the order of the ITO was erroneous and prejudicial to the interest of Revenue insofar as the deduction referred to above was concerned. Accordingly, in exercise of his revisional powers under S. 263 of the Act, the CIT set aside the order of assessment and directed the ITO to make a fresh assessment after taking into account the observations in his order and giving opportunity of hearing to the assessee. Aggrieved by the above order of the CIT under s. 263 of the Act, the assessee appealed to the Tribunal. The Tribunal held that the claim of deduction having been allowed by the ITO in pursuance of the directions of the IAC under S. 144B of the Act, it was not open to the CIT to exercise his revisional power under S. 263 of the Act for revising that part of the order. Aggrieved by the above order, Revenue is before us by way of this reference.

(3.) THE question referred to us in this case is thus squarely covered by the above decision. Following the same, we answer the question in the negative i.e., in favour of Revenue and against the assessee.