Manmala Exhibitors vs M.C. Joshi, Commissioner Of ...
2001 Latest Caselaw 984 Bom

JUDGMENT

J.P. Devadhar, J.

1. By this Petition, the petitioner challenges the order of C.I.T. passed under Section 264 of the Income Tax Act, 1961 (for short, "the I. T. Act"). By the said order, the C.I.T. his dismissed the Revision

Application filed by the assessee both on the ground of maintainability as well as on merits.

2. We propose to take up the issue of maintainability of Revision Petition first.

For the assessment year 1996-97 the return of income was filed on 30-10-1996 disclosing capital gains at Rs. 4,78,19,737/- by taking book value as the cost of acquisition of the asset at Rs. 31,50,000/-. A revised computation of income was filed and on 12-1-1999 assessment order was passed accepting the revised computation of income.

3. Being aggrieved by the aforesaid order, the assessee filed an Appeal before C.I.T. (A), inter alia, raising a plea that the assessee is entitled to substitute book value of asset by indexed value of the asset as per Section 48 of the I.T. Act and the A. O. was wrong in rejecting the claim of the Petitioner. In response to an intimation regarding short payment of tax on the income returned by the assessee, it was submitted that by a letter dated 11-1-1999 the assessee had requested the A. O. to allow to substitute the value of the property as on 1-4-1981 as per Section 55(2)(b)(i) of the I.T. Act. It was submitted that if the value of the asset as on 1-4-1981 was taken there would be no shortfall in payment of tax. The C.I.T. (A) held that there was nothing to show that the letter dated 11-1-1999 was filed before the A.O. However, the C.I.T. (A) held that in the absence of revision or modification of the return filed on 30-10-1996, the assessee was liable to pay tax as processed on the basis of the return. It was held that since the tax was not paid as required under Section 249(4) of the I.T. Act, the Appeal cannot be admitted and accordingly, dismissed it being not maintainable.

4. Thereupon the assessee filed a Revision Petition before C.I.T. under Section 264 of the I.T. Act seeking substitution of the book value by indexed cost of acquisition of the asset as per the letter dated 11-1-1999 which the A.O. failed to take into account. In the Revision Petition, the assessee had also sought deletion of interest levied. As stated hereinabove, the C.I.T. dismissed the Revision Petition both on the ground of maintainability as well as on merits.

5. There can be no dispute that the assessee is entitled to substitute the cost of acquisition of an asset from book value to indexed cost of acquisition. In the instant case, the issue as to whether the C.I.T. was justified in rejecting the Revision Petition on merits would arise only if the assessee is able to overcome the hurdle of maintainability of the Revision Petition. Therefore, the crux of the problem in the instant case is having raised the issue of substituting the cost of acquisition of the asset from book value to indexed cost of acquisition before C.I.T. (A), whether the assessee is entitled to file a Revision Petition under Section 264 of the I.T. Act raising the very same plea merely because the appeal has been dismissed by C.I.T. (A) even before admission for non-compliance of Section 249(4)(a) of the I.T. Act?

6. Mr. Pandit, learned Counsel for the petitioner, contended that since the appeal has been dismissed even before it is admitted for non-compliance of Section 249(4)(a), there was no effective appeal before C.I.T. (A) and hence, the Revision Petition under Section 264 was competent. Mr. Pandit relied upon 172 ITR 733 (Ker), 50 ITR 578, 56 ITR 349 (S.C.), 205 ITR 395 (Bom), 113 ITR 363

(Mad), 124 ITR 570 (Bom) and 188 ITR 494 (Ker) and contended that where the appeal was withdrawn or was not maintainable or dismissed as time barred, there being no effective disposal of the Appeal, the Revision under Section 264 of the I.T. Act was maintainable. It was submitted that there was no adjudication of the issues before C.I.T. (A) and if the Revision is held not maintainable, then the petitioner will be without any remedy. It was submitted that when the appeal was not admitted as not maintainable, the Revision was maintainable.

7. Mr. Jetly, learned Counsel for the Revenue, on the other hand, contended that the issue is concluded by the decision of the Apex Court in the case of Hindustan Aeronautics Ltd. reported in 243 ITR 808 in favour of the Revenue. Mr. Jetly relied upon the judgment of Madras High Court in the case of Kadri Mills (Coimbatore) Ltd. reported in 243 ITR 861 and submitted that the assessee has an option to choose the remedy of pursuing an appeal under Section 246 or perusing the remedy of Revision Petition under Section 264 in respect of the issues arising out of the assessment order or otherwise. It was submitted that once the remedy of Appeal was chosen, it was open for the assessee to seek remedy on all issues in the Appeal and whether all issues were raised before the A.O. or not, in view of the specific bar contained in Section 264(4)(a), once the remedy of appeal was chosen, the jurisdiction of C.I.T. under Section 264 was ousted.

8. After hearing the learned Counsel on both sides and considering the facts on record, we are of the opinion that the contention raised on behalf of the Revenue deserves to be accepted.

9. Under Sections 246 and 246A of the I.T. Act, right to file an Appeal is conferred on any assessee aggrieved by such orders as more specifically set out in those provisions. Apart from the right of Appeal under Section 246, the assessee has a supplemental remedy of Revision under Section 264 of the I.T. Act. Thus, the assessee has the choice of seeking remedy under Section 246 or under Section 264. However, Section 264(4)(c) provides that the Commissioner shall not revise any order which has been made subject matter of an appeal. In the instant case, the assessment order was subject matter of an appeal before C.I.T. (A), but the same was not admitted and dismissed at the threshold for non-compliance of Section 249(4)(a) where it is mandatory on the part of the assessee to pay the tax due on the Income returned by him.

10. Mr. Pandit, relying upon the decision of the Kerala High Court in the case of C. C. Jayaram v. C.I.T., 207 ITR 662, contended that refusal to entertain the appeal on the ground that the assessee failed to pay admitted tax cannot render the order sought to be revised, covered under Section 264(4)(c) of the I.T. Act. In other words, it was submitted that an order can be said to be the "subject matter of an appeal" within the meaning of Section 264(4)(c) only if the appeal was considered and disposed of on merits. Mr. Pandit brought to our notice that the decision of the Kerala High Court was, inter alia, based upon the decision of the Apex Court in the case of Board of Revenue v. Raj Brothers Agencies, 31 STC 434 where the identical expression "the order made subject of an appeal" was construed by the Apex Court to mean "subject of an effective appeal". Mr. Pandit contended that in the instant case, since the appeal was dismissed even

before it was admitted, in effect there was no appeal at all and hence, the Revision under Section 264 was maintainable.

11. In our view, the decision of the Kerala High Court, with respect, does not lay down correct interpretation of law. As held by the Madras High Court in the case of Kadri Mills (Coimbatore) Ltd. v. C.I.T., 243 ITR 861 (supra), once the assessee has chosen the remedy of Appeal, there is a bar under Section 264(4)(c) of the Act to file a Revision Petition. In the instant case, the assessee did choose to file an appeal against the order of assessment. Moreover, the plea of substitution of indexed cost of acquisition was specifically raised and the C.I.T. (A) in his order specifically dealt with that issue and held that the assessee was liable to pay tax due on the income returned by him and not on the basis of substituted indexed cost of acquisition. Therefore, the order of assessment being subject matter of an Appeal before C.I.T. (A), the Revision Petition under Section 264 was clearly barred under Section 264(4)(c) of the I.T. Act.

12. In our view, the decision of the Kerala High Court referred to hereinabove, runs counter to the decision of the Supreme Court reported in 29 ITR 607 and 243 ITR 808. The Apex Court in the case of Mela Ram and Sons v. C.I.T., 29 ITR 607 while dealing with Section 30(2) of the I.T. Act, 1922 similar to Section 249(2) of I.T. Act, 1961 held that the dismissal of an appeal as time barred is an order passed in the appeal and hence, an appeal lies from that order to the Appellate Tribunal. It was clearly held by the Supreme Court in that case, that it makes no difference whether the order of dismissal is made before or after the appeal is admitted.

13. Applying the aforesaid ratio to the facts of the present case, even if the appeal was dismissed before it was admitted, the remedy available to the assessee was to file a further appeal to the Tribunal and not to file a Revision Petition under Section 264 of the I.T. Act. Once the remedy of appeal was chosen, the only way open to the assessee was to proceed on the same path by availing further remedy of appeal before the Tribunal. As soon as the remedy of appeal was chosen and the appeal was filed, the remedy of revision was shut once and for all.

14. The Supreme Court in the case of Hindustan Aeronautics Ltd. v. C.I.T., 243 ITR 808 (supra) has clearly held that the C.I.T. has no power to revise any order under Section 264 of the I.T. Act, if the order has been made subject to an appeal, even if the relief claimed in the revision is different from the relief claimed in the appeal and irrespective of the fact whether the appeal is by the assessee or by the department. The Supreme Court clearly brought out the distinction between the revision powers of the C.I.T. under Sections 263 and 264 of the I.T. Act. It was clearly held that under Section 263, the legislature intended that the scope of the revision should extend to a part of the order which had not been considered and decided in an appeal and accordingly made suitable amendment to Explanation 'C' to Section 263. It was held that when the legislature does not make such distinction and provides that once the remedy of appeal is chosen, the remedy of revision is barred, it is not open to the assessee to seek recourse to the revision after the appeal is dismissed.

15. In the light of the aforesaid decision of the Supreme Court, it is not necessary for us to deal with the various decisions cited on behalf of the assessee. Although the decision of the Supreme Court in the case of The Board of Revenue v. Raj Brothers Agencies, 31 STC 434 (supra) on an analogy supports the contention of the assessee, the same is distinguishable, firstly on account of it being a matter pertaining to the Madras General Sales Tax and secondly, in that case, there was a decision of Madras High Court which was followed for several years and the Supreme Court did not want to disturb the settled position in law.

16. In the instant case, the petitioner did argue before C.I.T. (A), regarding applicability of Section 249(4) and tried to make out a case on merits that he was entitled under Section 48 read with Section 55(2)(b)(i) of the Income Tax Act, 1961 to substitute the value of the asset as on 1-4-1981 and hence, he was not required to comply with Section 249(4)(a) of the I.T. Act. Having failed in his submission before C.I.T. (A), the assessee has chosen to seek the same relief before C.I.T. under Section 264 of the I.T. Act. But the fact remains that the original assessment order was subject matter of an appeal. Even the issue of substituting the value of the asset as on 1-4-1981 was argued before C.I.T. (A). In this view of the matter, it is difficult to accept that the appeal was not competent or not an effective appeal. Therefore, irrespective of appeal, being dismissed for non-compliance of Section 249(4)(a) of the I.T. Act, the revision under Section 264 of the I.T. Act was not maintainable being hit by Section 264(4)(c) of the I.T. Act.

17. In this view of the matter, we are of the opinion that the Revision Application filed by the assessee under Section 264 of the I.T. Act was not maintainable. Once it is held that the appeal is not maintainable, there is no need to go into the merits of the case. However, it is made clear that if the petitioner chooses to pursue the remedy of Appeal before Income Tax Appellate Tribunal against the order of C.I.T. (A), then the findings given by C.I.T. in the order under Section 264 on merits will not come in the way of the petitioner.

18. Under the circumstances, the petition is dismissed with no order as to costs.