Commissioner of Income Tax vs Escorts Farms (P.) Ltd.

Kirpal, J.

This petition has been filed u/s 256(2) of the income tax Act, 1961 (''the Act'') seeking reference of the following question of law to this Court:

Whether the income tax Appellate Tribunal was correct in law and on facts in holding that the order passed in appeal by the Commissioner of income tax (Appeals) and the income tax Appellate Tribunal in IT Appeal No. 1325 (Delhi) of 1983 will lose effect and would become infructuous in view of the income tax Appellate Tribunal''s order in M.A. No. 4 (Delhi) of 1985, dated 17-2-1985, especially when the latter order has not been accepted by the department and reference application has been filed against the order?

Briefly stated, the facts are that in respect of the assessment year 1973- 74, the ITO made an assessment. An appeal was taken to the Commissioner, who allowed the same. Further appeal was filed by the department to the Tribunal and the same was decided in favour of the department.

The assessee, thereafter, moved an application u/s 254(2) of the Act in which it was contended that at the time of the hearing of the main appeal, the assessee''s counsel had submitted that the assessment order itself was barred by time. The submission was that this contention had not been dealt with by the Tribunal. The Tribunal then passed an order u/s 254(2) rectifying its earlier order. The Tribunal came to the conclusion that such a contention had been raised by the assessee and it decided that contention in favour of the assessee. The decision of the Tribunal, therefore, was that the assessment was barred by time, but, at the same time, on merits, the Tribunal had decided in favour of the department.

Against the aforesaid order passed u/s 254(2) , the department filed a reference application u/s 256(1) , but the said application was dismissed.

The assessee then moved a second miscellaneous application being No. 14 of 1986 in which it prayed that the Tribunal should recall its order passed in the main appeal being IT Appeal No. 1325 of 1983. The Tribunal observed, vide its order dated 12-2-1986, while disposing of the second miscellaneous application, that the effect of its order passed in M.A. No. 4 of 1985, was that all subsequent proceedings by way of appeal before the Commissioner and the Tribunal would lose effect and would become infructuous. Against the said decision, the department filed an application u/s 256(1) which was dismissed and now an application u/s 256(2) has been filed seeking reference of the question of law which has been reproduced above.

In our opinion, the decision of the Tribunal is correct when it stated that the effect of holding that the assessment was barred by time is that all further proceedings pursuant to the said decision would be infructuous. The ITO gets jurisdiction to pass an assessment order if it is within limitation. If the assessment is barred by time, then any decision on merits would be of no consequence, and for the same reason, the decision, on merits, by the appellate authorities would also be of no consequence and would have to be ignored. This is exactly what the Tribunal has observed in the impugned order. For, if the assessment is barred by time, no effect can be given to the other decision on merits. If, however, the reference of the department against the order passed in M.A. No. 4 of 1985 succeeds, then the decision on merits of the various appellate authorities would automatically remain.

In our opinion, there is no question of law as such arising in this order. Dismissed.

We may also note that Mr. Bishamber Lal, the counsel for the respondent, contended that in view of the decision in Commissioner of Wealth Tax Vs. Smt. Illa Dalmia, and Commissioner of Income Tax, Madras Vs. Mtt. Ar. S. Ar. Arunachalam Chettiar, , no reference is maintainable. For the view which we have already taken, it is not necessary for us to decide this question.

Petition dismissed.