Commissioner of Income Tax vs Novelty Jewellers

By this petition u/s 256(2) of the Income Tax Act, 1961, the Revenue seeks a direction to the Income Tax Appellate Tribunal (for short "the Tribunal"), to state the case and refer the following questions, stated to be of law, in respect of the assessment year 1983-84, arising out of ITA No. 3603 (Delhi) of 1991, for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in confirming the order of the Commissioner of Income Tax (Appeals) which deleted the addition of Rs. 13,77,563 being bogus purchases debited in the profit and loss account without appreciating the fact that the addition made by the Assessing Officer was in conformity with the directions of the Commissioner of Income Tax u/s 263 in regard to the valuation of closing" stock ?

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal has not erred in not appreciating the fact that the valuation of closing stock either at average cost or at cost or market price--whichever is less, is closely and intimately connected with the factum of real purchase of goods ?

Without prejudice to the above, whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal has not erred in not giving a specific finding or direction in regard to the income escaping assessment through bogus purchase so as to enable the Assessing Officer to reopen the assessment u/s 150 when the factum of bogus purchases was staring in the face of the reassessment order which was the subject-matter of appeal ?

Whether, on the facts and in the circumstances of the case, the order of the Income Tax Appellate Tribunal should not be held as perverse inasmuch as the Income Tax Appellate Tribunal failed to take note of its earlier order confirming the order of the Commissioner of Income Tax passed u/s 263 of the Income Tax Act which had set aside the assessment order to be framed afresh on issues including the issue relating to the valuation of closing stock ?"

Having heard learned counsel for the parties, we are of the view that none of the afore noted questions arise out of the order of the Tribunal in the Revenue''s afore noted appeal.

The only issue before the Tribunal in the said appeal was whether the Assessing Officer could make an addition to the returned income of an assessee, pursuant to the direction of the Commissioner of Income Tax u/s 263 of the Act, on points which were not subject-matter of action by the Commissioner. While concurring with the view taken by the Commissioner of Income Tax (Appeals) that the issue of bogus purchases not being a point at issue in the order u/s 263 of the Act, the Assessing Officer should not have raised the said point again while making a fresh assessment, the Tribunal held as follows :

"We have perused the orders passed by the tax authorities and have also seen the order passed by the Commissioner u/s 263. No doubt, the assessment has been set aside by the Commissioner to be framed de novo as per law, but this does not mean that the entire assess- ment is to be framed once again including the points and issues which the Income Tax Officer himself accepted at the assessment stage. The set aside was only vis-a-vis the points specifically noted by the Commissioner and which were the subject-matter of the action u/s 263. In case the Income Tax Officer had any information in his possession at the time of the reassessment pursuant to the order u/s 263 then the remedy lay elsewhere and resort could be had to the other provisions of the Income Tax Act. In our opinion, the Commissioner of Income Tax (Appeals), has rightly deleted the addition of Rs. 13,77,563 on account of ''bogus purchases''."

It is evident from the afore-extracted order of the Tribunal that none of the questions proposed by the Revenue touches upon the main issue with regard to the jurisdiction of the Assessing Officer to take into consideration those points which were not the subject-matter of the order passed by the Commissioner in exercise of his powers u/s 263.

In this view of the matter, we do not find any infirmity in the order of the Tribunal rejecting the Revenue''s application u/s 256(1) of the Act on the ground that the afore noted questions do not arise out of the order of the Tribunal in ITA No. 3603 (Delhi) of 1991.

The petition is accordingly dismissed.