JUDGMENT
Y.V. Anjaneyulu, J.
1. The following three questions are referred for the consideration of this court by the Income-tax Appellate Tribunal at the instance of the Commissioner of Income-tax :
“(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the Commissioner of Income-tax (Appeals) erred in directing the Income-tax Officer to recompute the income under section 11, subject to the conditions under sections 12, 12A and 13 of the Income-tax Act, 1961 ?
(2) Whether, on the facts and in the circumstances of the case, under the powers vested in the first appellate authority under the Income-tax Act, the Commissioner of Income-tax (Appeals) could not have given such directions, irrespective of the orders of his predecessor ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that in view of the finding given in the appeal, it is not necessary for the Tribunal to consider all the issues raised by the assessee in respect of the jurisdiction of the Income-tax Officer to make the assessment in question ?”
2. The questions relate to the assessment year 1977-78. The question whether the assessee is a public charitable institution and, therefore, its income is exempt under section 11 of the Income-tax Act, 1961, it appears, came up for consideration first for the assessment years 1974-75, 1975-76 and 1976-77. The Income-tax officer rejected the assessee’s claim that it is a public charitable institution and, therefore, held that the provisions of section 11 have no application. There are also other disputes in the matter of assessments to which we need not make a reference. The assessee carried the matter in appeal for the aforesaid three assessment years. It appears, the Commissioner of Income-tax (Appeals), after examining the assessee’s contention, accepted the plea that it is a public charitable institution and that therefore, its income is entitled to exemption under section 11 of the Act. Having arrived at that conclusion, it would appear that the learned Commissioner directed that the income of the assessee should be exempt for the assessment years 1974-75, 1975-76 and 1976-77. That was the position so far as the three assessment years preceding the year under consideration are concerned.
3. Now, for the assessment year 1977-78, once again the same question has come up for consideration. The Income-tax officer again refused the assessee’s claim that it was a public charitable institution. The assessee carried the matter in appeal. The Commissioner of Income-tax (Appeals) examined the matter at length and came to the conclusion that his predecessor was right in holding that the assessee was a public charitable institution entitled to its income being exempted by reason of the provisions contained in section 11 of the Act. But, then, the Commissioner who heard and disposed of the appeal for the assessment year 1977-78 set aside the assessment with a direction to the Income-tax officer to consider whether the assessee satisfied the requirements of sections 12, 12A and 13 of the Act. The assessee felt aggrieved by the directions of the Commissioner to the Income-tax Officer to examine the provisions contained in sections 12, 12A and 13 of the Act because no such direction was given by the predecessor Commissioner of Income-tax (Appeals). According to the assessee, once the present Commissioner disposing of the appeal for the assessment year 1977-78 agreed in all respects with the conclusion of the predecessor Commissioner, it is not open to the present Commissioner to go further and give directions to the Income-tax Officer to examine whether the provisions contained in sections 12, 12A and 13 are satisfied or not. Therefore, the assessee carried the matter to the Tribunal and had no difficulty in convincing the Tribunal about the correctness of his contention. The Tribunal held that the Commissioner, while disposing of the present appeal for the assessment year 1977-78, ought not to have given the directions that he did and allowed the appeal. That is how the present reference is carried by the Commissioner.
4. While the matter relating to the reference was pending before the Commissioner, apparently, the assessee sought a cross question also for reference to the effect that question No. 3 relates to this.
5. We have heard learned counsel for the Revenue and Sri K.L. Rathi, for the assessee. It is elementary that the provisions contained in section 11 concerning the exemption of a public charitable institution do not take automatic effect. They take effect subject to the fulfilment of the conditions specified in the other provisions such as sections 12, 12A and 13 of the Act. There are conditions relating to the accumulation of income by a charitable institution. In the event of accumulation, the amount has to be invested in approved securities. There are also further restraints about the trustees being related to the settlor and in that even, the provisions contained in section 13 would come into operation. These are all matters which should have been gone into at the assessment stage. The Income-tax officer did not consider it necessary to go into these aspects because at the threshold, he refused the assessee’s claim under section 11. Once the claim that the assessee is a public charitable institution is rejected, then the further question, whether the conditions specified in sections 12, 12A and 13 are satisfied or not, is superfluous at the stage. But, once the Commissioner accepted the contention that the assessee is a public charitable institution, it becomes necessary to examine whether the conditions specified for exemption of income in sections 12, 12A and 13 are satisfied. It is for this purpose that the Commissioner had given directions which, in our opinion, he was quite justified in doing so. The Commissioner of Income-tax (Appeals), while disposing of the appeal for the earlier assessment years 1974-75, 1975-75 and 1976-77, was in error in straightaway declaring the exemption under section 11 without examining the fulfilment of the conditions specified in sections 12, 12A and 13. The Commissioner of Income-tax (Appeals) disposing of the present appeal for the assessment year 1977-78, is under no obligation to follow an erroneous order of his predecessor. In the circumstances, we are satisfied that the order of the Commissioner is perfectly justified and the Tribunal was in error in interfering with that order.
6. We, accordingly, answer question No. 1 in the negative, that is, in favour of the Revenue and against the assessee. Question No. 2 is again answered in favour of the Revenue to the effect that the Commissioner of Income-tax (Appeals) has power under law to give directions while setting aside the assessment.
7. Now, as regards question No. 3, Sri Rathi contends that before the Tribunal, a number of other contentions were raised and they remained to be considered and disposed of by the Tribunal as the assessee did not withdraw the same. The Tribunal did not, however, consider those grounds because the basic claim of the assessee as a public charitable institution was accepted. We agree with Mr. Rathi that the Tribunal is under an obligation to consider all the pleas raised by the assessee in the appeal. While passing an order conformably to this judgment, the Tribunal is directed to consider all the said issues and pass appropriate orders. The reference is answered accordingly. No costs.