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SUPREME COURT OF INDIA
A.C. GUPTA AND P.N. SHINGHAL, JJ.
The Addl. Commissioner of Income Tax, Gujarat, Appellant
Versus
M/s. Gurjargravures Pvt. Ltd., Respondent.
Civil Appeal No. 1655 of 1972
Decided on 8-11-1977.
Advocates appeared
M/s. B. B. Ahuja and R. N. Sachthey, Advocates, for Appellant; Mr. G. L. Sanghi, Sr. Advocate, (M/s. Ravinder Narain, D. N. Mishra, J. B. Dadachanji & O.C. Mathur, Advocates, with him), for Respondent.
Income-tax Act, 1961 - Section 261- Claim of compensation – Sales deed – Jurisdiction - Tribunal took a different view and held that since entire assessment was open before the Appellate Assistant Commissioner there was no reason for not entertaining claim of Tribunal accordingly directed Income-tax Officer to allow appropriate relief under Sec. 84 of Act - It is on record that in the subsequent years assessed asked for exemption under Section 84 42 and Income-tax officer accepted claim - On these facts Tribunal referred the following question to the High Court at the instance of Commissioner of Income-tax – Held, What consideration by Income-tax Officer means in this context was also explained consideration does not mean incidental or collateral examination of any matter by the Income-tax Officer in the process of assessment - There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection". If, as held in this case, an item of income noticed by the Income-tax Officer but not examined by him from the point of view of its taxability or non-taxability cannot be said to have been considered by him, it is not possible to hold that Income-tax Officer examining a portion of the profits from the point of view of its taxability only, should be deemed to have also considered the question of its non-taxability - As court have pointed out earlier, the statement of case drawn up by the Tribunal does not mention that there was any material on record to sustain the claim for exemption which was made for the first time before the Appellate Assistant Commissioner – Court are not here called upon to consider a case where assessed failed to make a claim though there was evidence on record to support it, or a case where a claim was made but no evidence or insufficient evidence was adduced in support. In the present case neither any claim was made before the Income-tax Officer, nor was there any material on record supporting such a claim. We therefore hold that on the facts of this case, the question referred to the High Court should have been answered in the negative - We find no basis for the assumption in the statement of the case drawn up by the Tribunal. What appears to have been admitted was that in the years subsequent to the assessment year in question, relief under section 84 had been allowed to the assessee. But from this it cannot be assumed that the prescribed conditions justifying a claim for exemption under the section were also fulfilled in an earlier year - Appeal allowed
JUDGMENT
GUPTA, J. :—This appeal by the Additional Commissioner of Income-tax, Gujarat, I, Ahmedebad, on a certificate under Section 261 of the Income-tax Act, 1961 granted by the Gujarat High Court, raises a question relating to the powers of the Appellate Assistant Commissioner in disposing of an appeal.
2. The respondent, a company carrying on the business of copper engraving and manufacturing of labels, appealed to the Appellate Assistant Commissioner against an order of assessment made under S. 143 (3) of the Income-Tax Act, 1961, and one of the grounds of appeal was that the Income-tax Officer had erred in not giving the assessee any benefit under Section 84 of the Act. The assessment year was 1963-64. No claim however had been made before the Income-tax officer when he completed the assessment that the assessee was entitled to an exemption in respect of a portion of its profits under section 84. The appellate Assistant Commissioner dismissed the appeal on the ground that the question of error on the part of the I.-T. Officer did not arise as no claim for exemption under Section 84 had been made before him. The Tribunal took a different view and held that "since the entire assessment was open before the Appellate Assistant Commissioner" there was no "reason for not entertaining the claim of the assessee." The Tribunal accordingly directed the Income-tax Officer to allow appropriate relief under Sec. 84 of the Act. It is on record that in the subsequent years the assessee asked for exemption under Section 84 42 and the Income-tax officer accepted the claim. On these facts the Tribunal referred the following question to the High Court at the instance of the Commissioner of Income-tax :
"Whether on the facts and in the circumstances of the case it was competent for the Tribunal to hold that the Appellate Assistant commissioner should have entertained the question of relief under Sec. 84, and to direct the Income-tax officer to allow necessary relief?"
The High Court answered the question in the affirmative. The correctness of this decision is questioned before us by the Revenue.
3. Referring to a number of authorities including the decision of this Court in Commr. of Income-Tax v. Shapoorji Pallonji Mistry, 44 ITR 891 and the case of Narrondas Manordass v. Commr. of Income Tax, 31 ITR 409 decided by the Bombay High Court, the High Court found it well settled that the various items of income or deductions which have been subjected to the process of assessment constitute the subject-matter of assessment, and that if there is any item of income or claim for deduction which is not processed by the Income-tax Officer, it would not be a part of subject-matter of assessment and the Appellate Assistant Commissioner would not have the power to consider and process it in an appeal preferred by the assessee. Both the decisions, Commr. of Income-Tax v. Shapoorji Pallonji Mistry (supra) and Narrondas Manordass v. Commr. of Income-Tax (supra), are based on S. 31 (3) of the Indian Income-Tax Act, 1922 defining the powers of the Appellate Assistant Commissioner in disposing of an appeal. Section 251 (1) (a) of the Income-Tax Act, 1961 which is the provision applicable to the case before us, is, as the High Court has noticed, almost similar in terms as Section 31 (3) of the Act of 1922.
4. Having noticed the established position in law, High Court proceeded to consider the contention of the Revenue which was that no claim for exemption having made by the assessee before the Income-tax officer, therefore be said to be the subject-matter of assessment. It appears to have been argued further that merely because a particular item of income was taxed, it did not carry with it a decision that it was not exempt from tax and the Appellate Assistant Commissioner had accordingly no power to interfere by considering and allowing such claim for exemption. The High Court rejected the contention on the following reasoning :
"Here, in the present case the Inco
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