Case Law Details

Case Name : CIT Vs Hindustan Zinc Ltd. (Rajasthan High Court)
Appeal Number : AND 31, 35, 70, 117 & 142 OF 2008
Date of Judgement/Order : 27/04/2012
Related Assessment Year :

HIGH COURT OF RAJASTHAN

CIT v/s. Hindustan Zinc Ltd.

AND 31, 35, 70, 117 & 142 OF 2008

APRIL 27, 2012

JUDGMENT

Dinesh Maheshwari, J. – These six income-tax appeals by the revenue under section 260A of the Income-tax Act, 1961 [‘the Act of 1961’] in relation to the same assessee, arising out of similar nature and inter-related orders, and involving similar nature substantial question of law, have been considered together; and are taken up for disposal by this common judgment.

2. Put in a nutshell, these appeals, relating to the assessment years 1979-80, 1980-81. and 1981-82, have their genesis in the orders dated 29.04.2004 wherein the Commissioner of Income Tax (Appeals), Udaipur [‘the CIT(A)’] found that the Assessing Officer [‘the AO’] had failed to carry out the directions given by the Income Tax Appellate Tribunal [‘ITAT’] in the orders passed in the earlier round of the proceedings when the matters were restored to the file of the AO for decision afresh; and whereby the CIT(A) directed the AO to deal with the issue regarding claim of higher rate of depreciation on the building allegedly forming the part of plant and machinery in accordance with the directions of the ITAT. The respective appeals filed by the revenue against the aforesaid order dated 29.04.2004 were dismissed by the ITAT by a common order dated 20.02.2007. First three of the present appeals by the revenue (ITA Nos. 139/2007, 35/2008, 31/2008) arise out of this common order dated 20.02.2007. The revenue also made the respective rectification applications under section 154 of the Act, 1961 before the CIT(A) who proceeded to reject the same by the common order dated 12.08.2004. The appeals filed by the revenue against this order dated 12.08.2004 were also dismissed by the ITAT by another order of the even date i.e., 20.02.2007. Next three appeals by the revenue (ITA Nos. 117/2008, 70/2008, 142/2008) arise out of this other order dated 20.02.2007.

3. The sum and substance of the matter remains that in the respective orders dated 20.02.2007. the ITAT found the CIT(A) perfectly justified in issuing directions to the AO for compliance of its order as made in the earlier round of the same proceedings. The ITAT, thus, found no case for interference. Assailing the orders so passed by the ITAT and CIT(A) in these appeals, the revenue seeks to contend that in an appeal filed after the amendment to clause (a) of sub-section (1) of section 251 of the Act, 1961, as made w.e.f. 01.06.2001, the Commissioner (Appeals) has no power to remand the matter to the Assessing Officer, and hence, the order dated 29.04.2004, as passed by the CIT(A), remains wholly unauthorised.

4. Only the question of power of the Commissioner (Appeals) after the aforesaid amendment being in question in these appeals, we need not elaborate on all the factual aspects. A brief reference to the background aspects would suffice.

5. The relevant background aspects in ITA No. 139/2007 pertaining to assessment year 1979-80 are as follows: The assessment in this case was earlier completed by the AO on 20.01.1983 at nil income. The appeal against this order was decided by the CIT(A) on 08.03.1994. The assessee’s appeal [ITA No. 1232 (JP)/94] against this order was decided by the ITAT on 22.11.2001. In its order dated 22.11.2001, the ITAT restored essentially two issues to the file of AO for consideration afresh namely, the issue regarding disallowance of the provision for bad debts and written off advances: and regarding the assessee’s claim for higher depreciation on the building, said to be the part of plant and machinery, after inspection of the building by the AO.

6. Such relevant background aspects in ITA No. 35/2008 in relation to the assessment year 1980-81 are as follows; The AO passed the assessment order dated 24.01.1984 at nil income. The appeal was decided by the CIT(A) on 09.03.1994; and the assessee’s appeal [ITA No.1233(JP)/94] against this order was decided by the ITAT on 23.11.2001. In this matter, pertaining to assessment year 1980-81. the ITAT restored three issues to the file of AO for consideration afresh namely regarding non-allowance towards bad debts; the claim under section 80J; and the same issue regarding assessee’s claim for higher depreciation towards the building after inspection of the same by the AO.

7. Similar are the background aspects relating to ITA No. 31/2008 pertaining to assessment year 1981-82 wherein the assessment was made on 06.03.1985, the appeal by the CIT(A) was decided on 09.03.1994, and the ITAT considered the appeal of the assessee [ITA No.1234(JP)/94] in its similar nature order dated 23.11.2001, In this case, pertaining to assessment year 1981-82, the ITAT restored the three issues of same nature to the file of AO. In all these appeals, the issue regarding higher depreciation for the building remains the bone of contention.

8. It is borne out that the AO proceeded to decide all the remanded cases by the different orders of the even date i.e., 10.03.2003. The AO rejected the claim of higher depreciation essentially with the observations that the assessee did not file the requisite details for inspection despite granting of sufficient time. Against the aforesaid orders dated 10.03.2003, separate appeals were filed by the assessee on 22.04.2003 before the CIT(A). All these appeals were decided by separate but similar nature orders dated 29.04.2004. So far the issue at hands is concerned, regarding the claim of depreciation, the CIT(A) found that the AO failed to carry out the requirements of the orders as earlier passed by the ITAT on 22.11.2001 and 23.11.2001 restoring the issue to the file of AO. Thus, the CIT(A) did not approve of the order passed by the AO and directed that the AO, after inspecting the constructed building and keeping in view the directions of ITAT, should come to a finding as to whether the building was a part of the plant and allow depreciation accordingly. For ready reference, the observations as made by the CIT(A) in the order pertaining to assessment year 1979-80 could be noticed as under:-

“3.2 I have considered the observations of the AO and the contentions of the appellant. The Hon’ble ITAT, Jodhpur Bench vide its order in ITA No. 1232(JP)/94 dated 22-11-2001, looking to the nature of buildings claimed as plant restored the matter back to the AO for considering the matter afresh with the following directions:

“A characteristic of plant is that it is an adjunct to the carrying on of a business and not the essential site or core of the business itself. Keeping in view the facts of the case it is necessary to restore this issue to the file of the AO with direction that after proper appraisal of facts and inspection of the building constructed and keeping in view the various judgments discussed above, he should decide this issue afresh as to whether the building is a plant or not.”.

As per the direction of the Hon’ble ITAT, the AO was to decide whether the buildings are plant or not after proper appraisal of the facts and inspection of the buildings constructed and keeping in view the various judgments discussed in the order From the facts as discussed above it is clear that the AO has not followed the directions of the Hon’ble ITAT. The appellant company had submitted that name and address of the units where the buildings were constructed as also photographs of the buildings. The appellant company also offered its assistance for inspecting the buildings at units. Therefore, the AO was not justified in stating that the appellant did not furnish proper information for inspecting the buildings. In view of the above, the AO is directed to comply with the directions of the Hon’ble ITAT as contained in its order dated 22-11-2001. The AO after inspecting the buildings constructed and keeping in view the above directions of the Hon’ble ITAT should come to a finding whether the buildings are plant or not and accordingly allow the depreciation on the same.”

9. Aggrieved by the aforesaid orders dated 29.04.2004, the revenue preferred respective appeals which have been dismissed by the ITAT alongwith other appeals in its common order dated 20.02.2007. The relevant part of the said order dated 20.02.2007 reads as under:-

“ITA NOS. 372 to 375/JU/2004 (A.Y.1979-80 to 1981-82 & 1992-93)

7. Following solitary effective common ground has been raised by the Revenue in these appeals:

“On the facts and in the circumstances of the case, the ld. CIT(A) has erred in directing the Assessing Officer to decide the matter afresh after inspecting the building to ascertain whether it is forming part of plant ignoring the material and other facts brought on record by the Assessing Officer.”

8. Briefly stated, the facts of this ground are that the assessee claimed building to be eligible for higher depreciation. In the absence of the assessee having assisted properly by furnishing necessary details, the Assessing Officer came to hold that higher rate of depreciation was not eligible. The ld. CIT(A) directed the Assessing Officer to decide the matter afresh after inspecting the building to ascertain whether or not it is forming part of plant.

9. Having heard the rival submissions and perused the relevant material on record, we find that the ld. CIT(A) has not decided the issue in assessee’s favour. Rather, the matter has been restored to the Assessing Officer for deciding it afresh. The Hon’ble Jurisdictional High Court in the case of Prem Agencies v. CIT [1988] 173 ITR 110 (Raj.) has held that no infirmity can be traced in the restoration of the matter to the lower authorities. We observe that the ld. CIT(A) has given a simple direction that the Assessing Officer should make inspection of the building constructed and then decide as to whether it should be considered as plant. In our considered opinion, there is no cause of grievance at the Revenue’s end because the issue is open at large before the departmental authorities. We are, therefore, not inclined to disturb the finding of the first appellate authority on this count.

10. Similar ground raised on similar facts and finding of the ld. CIT(A) has been assailed by the Revenue in the other years. Both the sides are in agreement that the facts and circumstances of this ground are mutatis mutandis similar to all the other years. We, therefore, uphold the impugned order as it is not suffering from any infirmity.”

10. As noticed above, the first three appeals herein (ITA Nos. 139/2007, 35/2008 and 31/2008) have been filed against the aforesaid common order dated 20.02.2007 whereby the ITAT has affirmed the order passed by CIT(A) on 29.04.2004 while essentially contending that the CIT(A) had no authority to remand the matter to the AO after the amendment to section 251(1)(a) of the Act, 1961 with effect from 01.06.2001 taking away his powers of remand.

11. For completion of background aspects, it could be noticed that as against the order dated 29.04.2004 the revenue made the respective rectification applications under section 154 of the Act, 1961 before the CIT(A) who proceeded to reject the same by the common order dated 12.08.2004. The appeals preferred against this order dated 12.08.2004 were dismissed by ITAT by the common order of even date i.e., 20.02.2007. The next three appeals herein (ITA Nos. 117/2008, 70/2008 and 142/2008) relate to this other order dated 20.02.2007.

12. Coming to the matters concerning rectification applications later, appropriate it shall be to take up for consideration at the first the three appeals (ITA Nos. 139/2007, 35/2008, 31/2008) arising out of the basic similar nature orders dated 29.04.2004 as passed by the CIT(A) in the respective appeals filed on 22.04.2003. Similar nature substantial question of law as formulated in these three appeals relating to the assessment years 1979-80, 1980-81, and 1981-82 respectively reads as under:-

“Whether the learned Commissioner had the power to send the matter back to the Assessing Officer to decide the matter afresh in view of the amendment made in section 251(1)(a) taking away such power, which was made with effect from 1.6.2001, while the appeal in the present case before the learned Commissioner was filed on 22.04.2003?”

13. The learned counsel for the appellant has questioned the orders impugned essentially with the submission that for the appeals filed on 22.04.2003 i.e., after amendment to section 251(1)(a), the CIT(A) was having no power or authority to remand the matter to the AO. Per contra, the learned counsel for the respondent assessee has referred to the decision of the Hon’ble Supreme Court in the case of S. Shanmugavel Nadar v. States of Tamil Nadu [2003] 263 ITR 658 to submit that the orders earlier passed by the AO merged in the orders passed by the ITAT on 22.11.2001 and 23.11.2001. According to the learned counsel, the AO was, thereafter, duty bound to carry out the compliance of the directions of the ITAT and if he failed to do so, the CIT(A) cannot be faulted at directing him to carry out the compliance of the order of ITAT that had become final. The learned counsel also referred to the decision in the case of Union of India v. Umesh Dhaimode [2002] 124 Taxman 422 (SC) to submit that the appellate authority has power to annul the order and the order of remand necessarily annuls the decision which is under appeal. The learned counsel yet further referred to the decision of the Hon’ble Gujarat High Court in the case of CCE v. Medico Labs 2004 (173) ELT 117 to submit that in relation to section 35A of the Central Excise Act, 1944, similar nature amendment was made by the Finance Act, 2001 in regard to the powers of Commissioner (Appeals); and the Hon’ble Gujarat High Court, with reference to the decision in Umesh Dhaimode (supra), held that even after amendment, such powers of remand have not been taken away specifically.

14. The relevant provision i.e., Section 251(1)(a) of the Act, 1961 reads as under :-

“251. Powers of the Commissioner (Appeals)

(1)  In disposing of an appeal, the Commissioner (Appeals) shall have the following powers-

(a)  in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment;”

15. Noticeable it is that earlier, there existed an expression after semicolon in the above-quoted clause (a), which conferred other powers on the Commissioner (Appeals); and which was deleted by the Finance Act, 2001 with effect from 01.06.2001. The said deleted portion as occurring in clause (a) after semicolon was as under:-

“or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by the Commissioner (Appeals) and after making such further inquiry as may be necessary, and the Assessing Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment;”

16. The only question is whether for such deletion of the aforesaid wordings in clause (a) of sub-section (1) of Section 251, the CIT(A) was not justified in restoring the matter to the file of AO in the present cases.

17. Taking into comprehension the factual scenario and particularly the background aspects, it is, at once, clear that the CIT(A) in his impugned orders dated 29.04.2004 has not passed an order as if he was setting aside the order of assessment and referring the matter back to the AO for making fresh assessment in accordance with his directions. The fact of the matter had been that the order as passed by the AO earlier had already been subjected to appeal before the CIT(A) and then before the ITAT. As noticed, the ITAT in its orders dated 22.11.2001 and 23.11.2001 restored the question of claim of higher depreciation to the file of AO for decision afresh after inspection of the building. In the orders dated 29.04.2004, the CIT(A) found that such directions of ITAT had not been complied with. The directions of ITAT were in any case required to be complied with by the AO. The CIT(A), in fact, had done nothing more than issuing directions for implementation of the order of the ITAT. In this position, when the CIT(A) was hearing the appeal against an order of assessment passed after the directions of ITAT, his power to annul the assessment order if found contrary to the ITAT’s directions and directing the AO to carry out the requirements of the order of ITAT cannot be denied.

18. In the case of Umesh Dhaimode (supra) in relation to the appeal under the Customs Act, 1962, the Hon’ble Supreme Court has observed as under:-

“The then judicial Commissioner, Goa, Daman and Diu, took the view that s. 128(2) of the Customs Act, 1962 as it then read, did not vest the appellate authority with the power to remand. Accordingly, he set aside such order and the Revenue is in appeal.

2. As the order under appeal itself notes, the aforesaid provision vested the appellate authority with powers to pass such order as it deemed fit confirming, modifying or annulling the decision appealed against. An order of remand necessarily annuls the decision which is under appeal before the appellate authority. The appellate authority is also invested with the power to pass such order as it deems fit. Both these portions of the aforesaid provision, read together, necessarily imply that the appellate authority has the power to set aside the decision which is under appeal before it and to remand the matter to the authority below for fresh decision.”

19. Even if the amendment in the aforesaid clause (a) of section 251(1) has been made so as to provide that the Commissioner (Appeals) may not set aside the assessment and refer the case back to the AO for making fresh assessment with a view to help bringing an early finalisation of the assessment, it cannot be assumed that the CIT(A) is divested of the power to annul the assessment and then to pass appropriate consequential order.

20. This apart, in the present case, as observed hereinbefore the factual aspect has been that the order as passed by the AO which was subject of appeal before the CIT(A), was not an original order of assessment but was an order of assessment passed after remand by the ITAT. The directions in remand order having not been complied with, the course as adopted by the CIT(A) cannot be said to be de hors the powers available to him under the statute.

21. On the facts and in the circumstances of the present cases, we are clearly of the view that even if the appeal had been filed after amendment to section 251(1)(a) of the Act, 1961, the order as passed by the CIT(A) directing the AO to decide the matter in accordance with the directions of the ITAT cannot be said to be unauthorised. These first three appeals (ITA Nos. 139/2007, 35/2008 and 31/2008) deserve to be dismissed.

22. In view of what has been discussed and held hereinabove, the issues raised in other three appeals (ITA Nos. 117/2008, 70/2008 and 142/2008) are rendered rather academic. There being no illegality or infirmity in the principal order dated 29.04.2004, the CIT(A) was justified in rejecting the rectification applications by the common order dated 12.08.2004; and the ITAT was also justified in dismissing the appeals filed by the revenue by the other common order dated 20.02.2007. The ITAT, in fact, decided four appeals together, three of them relating to the present appeals and another one relating to the assessment year 1992-93 with a short common order that is reproduced in extenso as under:-

“This is a bunch of four appeals, which have been filed by the Revenue in relation to Assessment Years 1979-80, 1980-81, 1981-82 and 1992-93. For three assessment years, viz., 1979-80 to 1981-82, there is a common appellate order, which is dated 12.08.2004. For A.Y.1992-93, there is separate appellate order dated 04.08.2004. In all these appeals, however, exactly identical issue is involved. Therefore, for the sake of convenience and brevity, we are deciding them all by a common order.

2. The relevant facts are that the ld. CIT(A) set aside the issue of depreciation on building, forming part of plant and machinery, by giving a direction to Assessing Officer as per the directions of the Hon’ble ITAT, to decide whether the buildings in question are plant or not after proper appraisal of facts and inspection of the buildings constructed, in view of the various judgments discussed in the order. This order of the Tribunal is dated 22.11.2001. Section 251(1)(a) came into effect from 01.06.2001, according to this amended provision, the power of the ld. CIT(A) to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with his directions, has been withdrawn. In view of these amended provisions the ld. ACIT, Circle-2, Udaipur filed petition u/s 154 of the Act to rectify the order by calling the order back. The ld. CIT(A), however, rejected the application so filed u/s 154, by observing that the specific directions given by him are in consonance and in compliance with the direction of the Hon’ble ITAT so his order was very well within the four-corners of law, and these directions could not be considered as simple set aside of the issues or that of the assessment order. This finding of the ld. CIT(A), is the subject-matter of all these four appeals. The facts and issues involved in all these appeals are, mutatis mutandis, identical.

3. We have heard the rival submissions and perused the evidence available on record.

4. The department has raised similar plea as was raised before the ld. CIT(A). The subject matter of all the above appeal is exactly similar. Having gone through the orders of the CIT(A), the applications u/s 154 so filed, the provisions of section 250 as amended upto date and the ITAT order referred to in this regard, we are of the considered opinion that the ld. CIT(A) has given his direction in compliance of the order of Hon’ble ITAT. The ld. CIT(A) is perfectly correct when he says that this set aside is not a simplicitor set-aside as has been envisaged by the amended provisions of section 251(1)(a) of the Act. We are totally in agreement with the ld. CIT(A), who has done nothing more than getting the order of the Tribunal implemented in its letters and spirit. This is not a simple set aside, which is barred now. Therefore, we confirm the finding of the ld. CIT(A), for all the four years. The grounds taken in all these years, thus, have to fail. This order was pronounced in the open Court, at the end of the hearing.

4. In the result, all the appeals of the Revenue for Assessment Years 1979-80 to 1981-82 and 1992-93, stand dismissed.”

23. We may observe that these three appeals arising out of the aforesaid order of the ITAT, whereby the order passed by the CIT(A) on 12.08.2004 in rejection of the rectification application was affirmed (ITA Nos. 70/2008, 117/2008 and 142/2008), have been admitted on the lines of the other three appeals and while formulating similar nature substantial question of law with change of date of filing of appeal as under:-

“Whether the learned Commissioner had the power to send the matter back to the Assessing Officer to decide the matter afresh in view of the amendment made in section 251(1)(a) taking away such power, which was made with effect from 1.6.2001, while the appeal in the present case before the learned Commissioner was filed on 29.4.2004?”

24. There appears to be an obvious error in the question abovementioned because none of the appeals in question was filed before the CIT(A) on “29.04.2004” . In fact, this date i.e., 29.04.2004 has been date of the basic order passed by the CIT(A), as noticed and discussed hereinbefore. Be that as it may, the core question as to whether the CIT(A) was right in passing the order dated 29.04.2004 has already been answered against the revenue. As a necessary consequence, it follows that the CIT(A) has rightly rejected the rectification applications and the ITAT has rightly dismissed the appeals relating thereto. Hence, these appeals also deserve to be dismissed.

25. As a result of the discussion aforesaid, all these appeals fail and are dismissed. No costs.

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