Om Prakash, C.J. Heard counsel for the parties.
This appeal is filed against the judgment dated 29-5-1991, in O.P. No. 4558 of 1991 [see 919920 193 ITR 772 (Ker)]. In the original petition, the assessee challenged, exhibit P-6 order, dated 31- 10-1990, passed by the Commissioner, under section 264 of the Income Tax Act, 1961 (hereinafter referred to as "the Act").
2. In appeal filed against an assessment order relating to the year 1986-87, the assessee (appellant herein) claimed deduction of loss of Rs. 65,590 in chitty account. The assessing officer disallowed the loss claimed on the ground that the chitties from which such loss was claimed by the assessee were terminated prior to the commencement of the previous year under consideration.
2. In appeal filed against an assessment order relating to the year 1986-87, the assessee (appellant herein) claimed deduction of loss of Rs. 65,590 in chitty account. The assessing officer disallowed the loss claimed on the ground that the chitties from which such loss was claimed by the assessee were terminated prior to the commencement of the previous year under consideration.
3. In the appellate order the Commissioner (Appeals)- I, Cochin, confirming disallowance of loss on chitty observed as under :
3. In the appellate order the Commissioner (Appeals)- I, Cochin, confirming disallowance of loss on chitty observed as under :
"... In my view, however, any such dispute cannot justify the loss being claimed in a later year. Admittedly, the appellant followed the mercantile system of accounting and the loss accruing to the appellant could be claimed and allowed only in the year in which such loss accrued. In this view, I would confirm the disallowance of loss on chitty.
[Emphasis, here italicized in print, Supplied by the Court].
4. Fortified by the appellate order, the assessee filed a revision under section 264 of the Act before the Commissioner. By the impugned order dated 31-10-1990 (Exhibit P-6), the Commissioner held as under :
4. Fortified by the appellate order, the assessee filed a revision under section 264 of the Act before the Commissioner. By the impugned order dated 31-10-1990 (Exhibit P-6), the Commissioner held as under :
"I find that against the assessment for the assessment year 1985-86, the assessee had filed an appeal before the Commissioner (Appeals) and that appeal was disposed of on 12-12- 1986. The assessment order sought to be revised has thus merged with the order of the Commissioner (Appeals). It is provided in section 264(4)(c) that the Commissioner shall not revise any order where the order has been made the subject of an appeal to the Commissioner (Appeals). In the above circumstances, the assessee's petition for revision under section 264 is rejected."
5. Learned counsel for the assessee submits before us that the amount of loss of Rs. 65,590 in chitty account was not claimed before the assessing authority for the year 1985-86 and, therefore, that was not part of the assessment order. The simple submission of learned counsel for the assessee is that claim of loss in chitty account not being part of the assessment order relating to the year 1985-86, no appeal could be said to have been filed against that order and, therefore, the reasons given by the Commissioner in the impugned order passed under section 264 is fully erroneous. The question is whether the loss claimed by the assessee which was not part of the assessment order, can be said to be the subject-matter of the appeal filed against the assessment order relating to the assessment year 1985-86.
5. Learned counsel for the assessee submits before us that the amount of loss of Rs. 65,590 in chitty account was not claimed before the assessing authority for the year 1985-86 and, therefore, that was not part of the assessment order. The simple submission of learned counsel for the assessee is that claim of loss in chitty account not being part of the assessment order relating to the year 1985-86, no appeal could be said to have been filed against that order and, therefore, the reasons given by the Commissioner in the impugned order passed under section 264 is fully erroneous. The question is whether the loss claimed by the assessee which was not part of the assessment order, can be said to be the subject-matter of the appeal filed against the assessment order relating to the assessment year 1985-86.
6. In Digvijay Cement Co. Ltd. v. CIT (1994) 210 ITR 797 (Guj), the Gujarat High Court enunciated as under (headnote) :
6. In Digvijay Cement Co. Ltd. v. CIT (1994) 210 ITR 797 (Guj), the Gujarat High Court enunciated as under (headnote) :
"... In a case where there is no decision of the Appellate Assistant Commissioner on the point decided by the Income Tax Officer or on a point not raised before the Income Tax Officer, then the order of the Income Tax Officer does not get fully merged in the order of the Appellate Assistant Commissioner."
7. Sub-section (4) of section 264 of the Act, in so far as relevant, states that the Commissioner shall not revise any order under this section where the order has been made the subject of an appeal. The question for consideration is whether an order which does not refer to the claim of loss on chitty account can be said to be the subject-matter of an appeal within the meaning of clause (c) of sub-section (4) of section 264. Admittedly, the claim of loss, in the chitty account was not made in the assessment year 1985-86. It is only on the strength of the appellate order relating to the assessment year 1986-87 that the assessee filed a revision under section 264 claiming loss of Rs. 65,590 in chitty account. When there was no order at all relating to the claim of loss in the chitty account, we are of the view that the Commissioner was not right in refusing to exercise its jurisdiction under section 264 of the Act on the specious reasoning that the order relating to the assessment year 1985-86 was under appeal. No doubt, the order relating to the assessment year 1985-86 was in appeal but, there was no order, in so far as the claim of loss in the chitty account is concerned and, therefore, the Commissioner could not have held that no jurisdiction can be exercised under section 264, simply because the assessment order relating to the assessment year 1985-86 was under appeal.
7. Sub-section (4) of section 264 of the Act, in so far as relevant, states that the Commissioner shall not revise any order under this section where the order has been made the subject of an appeal. The question for consideration is whether an order which does not refer to the claim of loss on chitty account can be said to be the subject-matter of an appeal within the meaning of clause (c) of sub-section (4) of section 264. Admittedly, the claim of loss, in the chitty account was not made in the assessment year 1985-86. It is only on the strength of the appellate order relating to the assessment year 1986-87 that the assessee filed a revision under section 264 claiming loss of Rs. 65,590 in chitty account. When there was no order at all relating to the claim of loss in the chitty account, we are of the view that the Commissioner was not right in refusing to exercise its jurisdiction under section 264 of the Act on the specious reasoning that the order relating to the assessment year 1985-86 was under appeal. No doubt, the order relating to the assessment year 1985-86 was in appeal but, there was no order, in so far as the claim of loss in the chitty account is concerned and, therefore, the Commissioner could not have held that no jurisdiction can be exercised under section 264, simply because the assessment order relating to the assessment year 1985-86 was under appeal.
8. For the above reasons, the writ appeal succeeds and is allowed. The impugned order dated 31-10-1990 (Exhibit P-6), passed by the Commissioner, is quashed. The case is remanded to the second respondent with a direction that he shall pass a fresh order under section 264 in the revision of the assessee in accordance with law.
8. For the above reasons, the writ appeal succeeds and is allowed. The impugned order dated 31-10-1990 (Exhibit P-6), passed by the Commissioner, is quashed. The case is remanded to the second respondent with a direction that he shall pass a fresh order under section 264 in the revision of the assessee in accordance with law.