The Commissioner of Income Tax, Chennai vs South India Structural Corporation Limited

V. Ramasubramanian, J.—The Revenue has come up with the above appeal under Section 260A of the Income Tax Act, 1961.

Heard Mr. T. Ravikumar, learned Standing Counsel for the appellant and Mr. S. Sridhar, learned counsel for the respondent - assessee.

The only question of law, on which, the appeal was admitted, was as follows:

"Whether on the facts and in the circumstances of the case, the Income Tax Tribunal is right in law in quashing the re-assessment order for the assessment year 1990-91?"

The respondent assessee filed a return of income on 21.12.1990, declaring a loss. The case was processed under Section 143(1)(a) and it is claimed that an intimation was sent on 18.1.1993.

The assessment was then completed under Section 143(3) on 11.2.1993, assessing the book profits of the assessee on an income of Rs. 1.18 lakhs under Section 115J. Subsequently, the Assessing Officer looked into a lease agreement that the assessee had entered into with a public trust and the construction put up thereon and the lease agreement entered into by the assessee with a bank. On the strength of those details, a notice under Section 148 was issued on 17.2.1995 for reopening the assessment on the ground that some income has escaped assessment.

It appears that the assessee then filed a return of income on 10.9.1996. A hearing was granted, in which, the assessee objected to the reopening of the assessment. However, overruling the objections, the Deputy Commissioner of Income Tax passed an order on 24.2.1997. As against the said order, the assessee filed a statutory appeal in I.T.A. No. 38/1997-98. The First Appellate Authority dismissed the appeal by an order dated 10.5.2000. In the said order, the First Appellate Authority recorded as though the assessee took two grounds of appeal namely (i) that the reopening of assessment under Section 147 was not correct and (ii) that once a particular method of assessment of income was followed, the same could not have been changed. But, the First Appellate Authority recorded in paragraph 8 of his order dated 10.5.2000 that the first ground of attack relating to the reopening of assessment under Section 147 was given up.

Aggrieved by the recording made by the First Appellate Authority in his order dated 10.5.2000 to the effect that the appellant had given up the first ground of attack, the assessee filed an application under Section 154. That application was rejected by the Commissioner (Appeals) by another order dated 28.3.2001.

As against the first order dated 10.5.2000, the assessee filed a further appeal in I.T.A. No. 1268/2000 before the Tribunal. Similarly, as against the second order passed on 28.3.2001, by the Commissioner of Income Tax (Appeals), the assessee filed another appeal in I.T.A. No. 779/2001.

Both the appeals I.T.A. Nos. 1268/2000 and 779/2001 were taken up together by the Income Tax Appellate Tribunal for disposal. At the time when they were taken up for disposal, the Departmental Representative as well as the counsel for the assessee requested the Tribunal first to take up I.T.A. No. 799/2001 on the ground that the same questioned the very reopening of the assessment under Section 147 and that therefore, if the said appeal went in favour of the assessee, there would not be any occasion to deal with the assessment arising in the other appeal at all. Therefore, the Tribunal took up I.T.A. No. 779/2001 first and after going into the facts of the case, the Tribunal held that the very initiation of proceedings under Section 147 was bad due to non service of notice. After so holding and allowing I.T.A. No. 779/2001, the Tribunal closed the other appeal namely I.T.A. No. 1268/2000, without going into any issues raised therein.

Unfortunately, without filing an appeal as against the order in I.T.A. No. 779/2001, the Revenue has come up with one appeal challenging only the order in I.T.A. No. 1268/2000. The order in I.T.A. No. 1268/2000 was only consequential to the findings recorded by the Tribunal in I.T.A. No. 779/2001 to the effect that the very reopening of assessment was bad in law. So long as the order in I.T.A. No. 779/2001 is not challenged, the order passed in I.T.A. No. 1268/2000 cannot be challenged. Therefore, the question is answered against the appellant - Revenue.

Accordingly, the tax case (appeal) is dismissed. No costs.