COMMISSIONER OF INCOME TAX vs LLOYD SALES CORPORATION

LAHOTI, J.

This is a reference u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as ''the Act'') at the instance of the assessed seeking opinion of the High Court on the following two questions of law arising out of the assessment year 1979-80 :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law to hold that the order of the Income Tax Officer had been the subject-matter of appeal when the point in issue before the Commissioner had not been agitated before the Appellate Assistant Commissioner nor considered by him ?

Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law to hold that the Commissioner has no jurisdiction to pass the order u/s 263 as the case has been the subject-matter of appeal before the Appellate Assistant Commissioner ?"

Expenses on advertisement to the extent of Rs. 9,19,644 and on sales promotion to the extent of Rs. 4,49,369 making a total of Rs. 13,69,013 were allowed by the Income Tax Officer while framing assessment on the assessed on 21-4-1980.

The Commissioner initiated the proceedings u/s 263 of the Act forming an opinion that the expenses were allowed without considering the applicability of the provisions of section 37(3A) and without holding any enquiry.

The Commissioner set aside the order of assessment and directed the Income Tax Officer to call for further details of expenses and look into the books of account and then apply the provisions of section 37(3A).

The order of the Commissioner was challenged before the Tribunal by the assessed mainly on the ground that the order of assessment had been the subject-matter of appeal before the Appellate Assistant Commissioner and, Therefore, the Commissioner could not have exercised the jurisdiction u/s 263 of the Act to touch the order of assessment. The plea has been upheld by the Tribunal.

As question No. 1 itself suggests, the point in issue before the Commissioner was not agitated before the Appellate Assistant Commissioner, nor considered by him. That being the factual position and the question being founded on those factual premises, in view of the principles laid down by us in CIT v. Printers House (IT Reference No. 307 of 1982, dated 19-1-1998), the applicability of the doctrine of merger was not attracted and the jurisdiction of the Commissioner u/s 263 was not excluded.

For the foregoing reasons, both the questions are answered in the negative, i.e., in favor of the department and against the assessee.