COMMISSIONER OF INCOME-TAX Versus CARBORANDUM UNIVERSAL LTD.

1. R. JAYASIMHA BABU, J.‑‑ ‑Three questions have been referred to us, one at the instance of the Revenue and two at the instance of the assessee. The assessment year in question is 1978‑79. The question referred to us at the instance of the Revenue is as under:

2. "Whether, on the facts and in the circumstances of the case the Appellate Tribunal is correct in law in holding that the original assessment order got merged with the appellate order of the Commissioner of Income‑tax (Appeals) and hence the Commissioner had no jurisdiction to interfere under section 263 of the Income‑tax Act?"

3. The questions referred to us at the instance of the assessee are as under:

4. "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that on the facts though the assessment had been made in accordance with the directions of the Inspecting Assistant Commissioner under section '144B of the Act, the jurisdiction to revise the assessment by the Commissioner of Income‑tax under section 263 did not stand excluded?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the Commissioner of Income‑tax had jurisdiction to act under section 263 of the Income‑tax Act on the ground that dropping of proceeding commenced under section 147 was not synonymous in the circumstances of the case with an order of reassessment made under section 147 and, therefore, the bar prescribed by the provisions of section 263(2)(a) precluding the Commissioner of Income‑tax from exercising his powers under section 263 did not operate?"

5. The Supreme Court in the case of‑CI T v. Shri Arbuda Mills Ltd. (1998) 231 ITR 50, has held that it is open to the Commissioner to exercise the powers of revision under section 263(1) of the Act notwithstanding the fact that the original assessments had not been affected from (sic) and that revisional jurisdiction is available for exercise in respect of matters which was not the subject‑matter of the appeal. Here it is not the case of the assessee that the matter sought to be revised was the subject‑matter of the appeal. The first question, therefore, is answered in favour of the Revenue add against the assessee.

6. The second question is also to be answered in favour of the Revenue and against the assessee in the light of decision of the Court in the case of CIT v. V.V.A. Shanmugham (1999) 236 ITR 878 (Mad.), wherein it has been held that notwithstanding the fact that the initial assessment has been made in accordance with the direction given by the Inspecting Assistant Commissioner under section 144B of the Act, the Commissioner had jurisdiction to revise the order of the Income‑tax Officer.

7. So far as the third question is concerned, the Tribunal, in our view, has rightly held that the order dropping the proceedings is not an order of reassessment and, therefore, notwithstanding the fact of dropping of those proceedings, the Commissioner has jurisdiction to revise the original assessment order made under section 263(2)(a) of the Act. Our, answer to this question is against the assessee and in favour of the Revenue. As the Tribunal has not examined the merits of the case, we direct the Tribunal to do so now.

8. M. B. A./301/FC Order accordingly.