Commissioner of Income Tax vs Veepees Enterprises

C.N. Ramachandran Nair, J.—This appeal is filed by the revenue against Annex. C order of the Tribunal vacating suo motu revisional order passed by the Commissioner u/s 263 of the Income Tax Act directing revision of respondent''s assessment for the year 1996-97. The assessment originally completed was reopened on three grounds. In the first place, the Commissioner noticed that since assessee had not filed returns or claimed depreciation for the theatre building for several years, depreciation should not be reckoned in the computation of capital gains on the sale of the theatre building. Similarly, deduction of retrenchment compensation allowance granted by the officer on closure, of business in the threatre was found to be irregular by the Commissioner. The third ground on which reopening is made is on account of short assessment of capital gains inasmuch as the sale proceeds taken were less by Rs. 5 lakhs. On appeal by the assessee, the Tribunal reversed the order of the Commissioner against which this appeal is filed by the revenue. We have heard senior Counsel appearing for the department and Sri K.R. Sudhakaran Pillai appearing for the respondent assessee.

We find from the order of the Tribunal that they have interfered with the Commissioners order without conclusively deciding on merit that assessee is entitled to reckon depreciation in the computation of capital gains on sale of theatre building u/s 50 of the Income Tax Act. They have considered the divergent views expressed by various High Courts and held that in view of the difference of opinion, the assessee is entitled to the view favourable to it. We do not think we should consider the findings of the Tribunal on other issues because order of the Tribunal is liable to be interfered with on this ground alone. Prima facie depreciation can be reckoned in the computation of capital gains u/s 50 of the Act only if it was allowed as provided under the provisions of the Act. The department''s case is that returns were not filed by the assessee and consequently there was no occasion to allow any depreciation for the assessment years 1985-86 to 1989-90. So far as assessments for the years 1983-84 and 1984-85 are concerned, assessment is stated to be made on estimated income of Rs. 16,000 for each year. Against these findings made by the Commissioner, the assessee pretended ignorance on the non-filing of returns on the ground that files were with the estranged partner. While Counsel for the appellant has relied on decision of the Madras High Court in Sri Rajarathinam Transports Pvt. Ltd. Vs. Commissioner of Income Tax, , Counsel for the assessee has relied on decision of the Punjab & Haryana High Court in Commissioner of Income Tax Vs. Haryana Hotels Ltd., . The issue is not admittedly covered by decision of the Supreme Court or that of this Court. We do not find any justification for the Tribunal to interfere with Section 263 order merely because different High Courts have taken different views in the matter. If the findings entered by the Commissioner are right, then he was justified in interfering with the assessment u/s 263 of the Act. Therefore, the Tribunal could not have interfered with the order of the Commissioner except on merits. Since Tribunal has not considered the issue on merits, we set aside the order of the Tribunal and remand the matter back to the officer for completion of assessment pursuant to Section 263 order of the Commissioner. However we make it very clear that the assessee will be free to place full facts and raise all contentions on merit and the findings if any recorded by the Commissioner in the order u/s 263 should be treated as only opinions or observations by him which assessee is free to contest in regular assessments. The officer is directed to take decision objectively without being influenced by the Commissioners order, but on all the issues stated by him in Section 263 order. Since we have given freedom to the assessee to raise objection on all issues on merits, the assessee can file appeal against regular assessment on merits. The appeal is allowed by setting aside the order of the Tribunal, but subject to the above terms.