ORDER
B.L. Chhibber, Accountant Member
1. This appeal by the assessee is directed against the order of CIT (Appeals).
2. The assessee is a Private Limited Company and derives income from dyeing and printing of grey cloth. During the year under appeal it collected excise duty amounting to Rs. 81,62,606 but not deposited the same in the Government Account. At the time of framing the original assessment no addition on this account was made by the Assessing Officer. However, certain other additions were made by the Assessing Officer and the assessee took the original assessment before the CIT(A). The CIT(A) vide his order dated 5-2-1992 set aside the original assessment observing as under:
I have considered the facts and the appellant’s submissions. It is the appellant company’s contention that considering the facts which can be verified, no addition or disallowance on any count can be made in the appellant’s case. It is the appellant’s contention that the Assessing Officer has made the impugned additions and disallowances in an arbitrary manner without adducing any material in support of his action. It is the appellant’s contention that the impugned additions/ disallowances have been made without considering the relevant material and without giving to the appellant a proper opportunity of being heard and of explaining its stand with the help of necessary supporting evidence. It may be pointed out that the Assessing Officer is a quasi-judicial authority and therefore as a quasi-judicial authority, he is supposed to give to the assessee a reasonable opportunity of being heard and of adducing necessary evidence in support of its claim. It may also be mentioned that the doctrine of ‘audi alterant partem’ is the basic ingredient of natural justice. Besides, it is held that the appellant’s contentions discussed in detail supra deserve proper examination and consideration by the Assessing Officer. Considering the totality of the fact and the appellant’s submissions and in the interest of justice, the impugned assessment order is set aside with the direction to the Assessing Officer to reframe the assessment afresh as per law after giving to the appellant a reasonable opportunity of being heard in the matter.
2.1 In the fresh assessment proceedings, the Assessing Officer made an addition of Rs. 81,62,606 being the excise duty collected by the assessee during the year under appeal following the judgment of the Hon’ble Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542 and Sinclair Murray & Co. (P.) Ltd. v. CIT[1974] 97 ITR 615.
2.2 The first issue relates to the jurisdiction of the Assessing Officer to take up an issue which was not in the earlier assessment order. It was the contention of the assessee before the CIT(A) that the original assessment was set aside on certain limited issues but the Assessing Officer took the matter further and made the addition of Rs. 81,62,606 in respect of the excise duty collected and sought to tax it as trading receipt; when no such addition was made; that point was not before the CIT(A) and the matter was set aside to examine the additions/disallowances and the Assessing Officer was not therefore entitled to examine this aspect and hence the addition was sought to be deleted. The CIT(A) negatived the contention of the assessee on the ground that his predecessor did not give any specific direction to the Assessing Officer and the assessment was set aside “to be reframed afresh in totality”.
3. Shri R.N. Venari the lerned counsel for the assessee submitted that the CIT(A) could not give more powers to the Assessing Officer than that he had. In support of his contention he relied upon the judgment of the Supreme Court in the case of CIT v. Rai Bahadur Hardutroy Motilal Chamaria[1967] 66 ITR 443 and the judgment of the Orissa High Court in the case of CIT v. S. V. Divakar [1993] 201 ITR 914. The learned Counsel for the assessee submitted that the Supreme Court in the case of Rai Bahadur Hardutroy Motilal Chamaria (supra) was concerned with the powers of the Appellate Assistant Commissioner (A.A.C) for enhancement. It was held that the A.A.C. has no jurisdiction to assess a source of income which has not been processed by the ITO and which is not disclosed in the return filed by the assessee or in the assessment order and the A.A.C. cannot travel beyond the subject-matter of the assessment. That was a case where the Supreme Court was concerned with powers of enhancement. The learned Counsel for the assessee submitted that the observations and conclusions apply in respect of powers of A.A.C. in other areas as well. Therefore, when the A.A.C. sets aside an assessment and refers the case back to the Assessing Officer for making a fresh assessment in accordance with the directions that he may give, then regardless of language of directions, they cannot cover areas not dealt with by him. The learned Counsel for the assessee further submitted that the Orissa High Court in the case of S. V. Divakar (supra) has pointed out as under :
In CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443, it was observed by the Apex Court that, while deciding an appeal from an order passed by the Assessing Officer, the Appellate Assistant Commissioner has no jurisdiction to assess a source of income which has not been processed by the Assessing Officer and which is not disclosed either in the return filed by the assessee or in the assessment order and the A.A.C., therefore, cannot travel beyond the subject-matter of the assessment. Consequently, the A.A.C., while setting aside the assessment, cannot empower the Assessing Officer to go into points which he himself could not have investigated in exercise of his power of enhancement. While the A.A.C. could not have empowered the Assessing Officer to assess a source of income not processed in the original order of assessment and not disclosed either in the return or in the assessment order, it is difficult to appreciate as to how the Assessing Officer could assume jurisdiction to tax that new source of income while making a fresh assessment in pursuance of an order or remand. The power to enhance if it existed, was confined to the old sources of income which were the subject-matter of appeal to the appellate authority.
Relying upon the ratio laid down in the aforesaid two judgments, the learned Counsel for the assessee submitted that even if the A.A.C. makes a general set aside or unrestricted set aside, the Assessing Officer cannot travel beyond the areas mentioned in the assessment order. The learned Counsel further submitted that this is a clear case of restricted set aside. In this regard entire para-4 of the order of the CIT(A) (reproduced supra) is required to be read. According to the learned Counsel, it would not be correct and proper to take out some words out of it to advance a case that there was unrestricted set aside.
In fact, in the aforesaid para-4, the CIT(A) has dealt with the contentions of the assessee and has emphasized that the contentions deserve proper examination and, therefore, the order is set aside, with directions to give the appellant a reasonable opportunity in the matter. According to the learned Counsel the word “the” is “Definite Article” and refers to what is previously mentioned. The learned Counsel has further submitted that “assessment” can never be a “matter” and if the whole para is read, then the clear and harmonious construction that emerges is that the assessee should be given a further opportunity in respect of various contentions which according to the CIT(A) have not been properly dealt with. The learned Counsel for the assessee submitted that what was given as an opportunity is sought to be converted by the department into a handle to make a huge uncalled for addition on a source which was never shown in the return, discussed in the assessment order or in the order of the CIT(A). According to the learned Counsel the object of the set aside was to give a better opportunity to the assessee on the issues and not to permit the Assessing Officer to travel in areas which were not in the picture at all. He, therefore, submitted that the Assessing Officer has overstepped his jurisdiction in adding the amount of Rs. 81,62,606 and the CIT(A) erred in confirming it.
4. Shri M.P. Lohia, the learned D.R. drew our attention to the order of the CIT(A) dated 5-2-1992 passed in the case of the original assessment and submitted that the CIT(A) had set aside the assessment in toto and he was competent to do so. In support of his contention he drew our attention to the Explanation appended to Section 251 of the Act which reads as under:
Explanation.–In disposing of an appeal, the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] by the appellant.
The learned D.R. submitted that after the assessment was set aside in toto all the issues were open before the Assessing Officer and he was entitled to probe into all aspects while framing reassessment. The learned D.R. submitted that in the course of de novo assessment the Assessing Officer noted that the excise duty amounting to Rs. 81,62,606 collected by the assessee but not deposited in the Govt. A/c. was disallowable under Section 43B of the Act and he accordingly made the impugned addition of Rs. 81,62,606, relying upon the judgments of the Supreme Court in the cases of Chowringhee Sales Bureau (P.) Ltd. and Sinclair Murray & Co. (P.) Ltd. (supra).
5. We have considered the rival submissions and perused the facts on record. We have very carefully gone through the order of the CIT(A) dated 5-2-1992 setting aside the original assessment order. His conclusion has been reproduced by us in para-2 above. A plain reading of the remarks of the CIT(A) reveals that the entire assessment was set aside by him and accordingly we do not agree with the contentions of the learned Counsel for the assessee that it was a case of restricted set aside. No doubt, that the issue relating to the excise duty collected by the assessee and not deposited in the Govt. A/c was not before the CIT(A) when he was adjudicating upon the original assessment order but all the same since substantial additions were challenged before him and it was the contention of the assessee before the CIT(A) that the additions/disallowances were made in a arbitrary manner without adducing any material in support of his action by the Assessing Officer, the CIT(A) set aside the entire assessment. Once the assessment was set aside, the entire assessment stood open before the Assessing Officer and he was not only free but required by law to probe into the case afresh on all aspects and arrive at a judicially correct conclusion. The CIT(A) was justified in setting aside the assessment in toto and in this connection we would rely upon the decision of the Supreme Court in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225. The three Judges Bench of the Supreme Court held that “If an appeal lies, Section 31 of the Act describes the powers of the A.A.C. in such an appeal. Under Section 31(3)(a) in disposing of such an appeal the A.A.C. may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under Clause (b) thereof he may set aside the assessment and direct the ITO to make a fresh assessment. The A.A.C. has therefore, plenary powers in disposing of an appeal. The scope of his power is coterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do.
[Emphasis supplied]
We may further add that the Explanation appended to Section 251 further confers wide powers on the CIT(A) in disposing of an appeal against the order of the Assessing Officer.
5.1 Coming to the two cases relied upon by the learned Counsel for the assessee, viz., Rai Bahadur Hardutroy Motilal Chamaria’s case (supra) and S. V. Divakar’s case (supra) it is noted that the Supreme Court in the first case has held that the A.A.C. has no jurisdiction to assess a source of income which has not been processed by the Assessing Officer and which is not disclosed either in the return filed by the assessee or in the assessment order and the A.A.C. therefore cannot travel beyond the subject-matter of the assessment. The same decision has been relied upon by the Orissa High Court in the case of S. V. Divakar (suprd), Both the above-noted cases related to cases of restricted set aside. In the case before us the CIT(A) has not tried to assess any new source of income. In fact, his order is silent so far as the taxability of the excise duty is concerned but he has set aside the assessment in toto and when the assessment was set aside in toto, nothing prevented the Assessing Officer from conducting investigation during the course of reassessment proceedings. In fact, in the case of S. V. Divakar (supra) the Orissa High Court has held that the principle that the Assessing Officer cannot assume jurisdiction to tax a new source of income while making an assessment in pursuance of an order of remand, applies where there is a specific direction given in the order of remand. The High Court further held that where, however, the remand is an open one, the Assessing Officer shall not be restricted to any particular source and all the relevant aspects can be taken into consideration by him including any new source of income which was not the subject-matter of assessment earlier. In short, the scope of fresh assessment following the appellate order depends on the subject-matter of the appeal and the appellate order read as a whole in its proper context (see pages 917G, H, 918A, G). Read as a whole we hold that order dated 5-2-1992 passed by the CIT(A) was an open one and accordingly the Assessing Officer was justified in bringing to tax a new source of income while framing the de novo assessment. We, accordingly, reject the ground raised by the assessee.
Paras 6. to 10. [These paras are not reproduced here as they involve minor issues].