ORDER
Y. Upadhyay, Vice President
1. The assessee, is limited company. It was following its previous year from 1st April to 31st March in each year. The assessee wanted to change its previous year for the assessment year 1977-78. The necessary application in this regard was made on 10-9-1975 and 31-10-1975 before the ITO under Section 3(4) of the Income-tax Act, 1961 (‘the Act’). The ITO vide his letter dated 21-11-1975 allowed the change of previous year from 1-4-1976 to 30-6-1976 on three conditions. The first and third conditions were that depreciation as well as relief under Section 80J of the Act will be allowed pro rata. The second condition was that the assessment year 1977-78 will be considered as one assessment year for the purpose of carry forward of unabsorbed business loss, unabsorbed development rebate and unabsorbed relief under Section 80J. The assessee thereafter made a petition under Section 264 of the Act to the Commissioner and raised objections against the conditions imposed by the ITO. The Commissioner deleted condition No. 1 regarding the allowance of pro rata depreciation. The assessee did not take any objection about condition No. 2 and condition No. 3 imposed by the ITO was confirmed by the Commissioner vide his order dated 30-10-1979. The assessee filed its original return on 30-6-1977 which was revised on 21-8-1979. The assessment for the assessment year 1977-78 for the period from 1-4-1976 to 30-6-1976 was completed on 29-2-1980.
2. The assessee filed an appeal before the Commissioner (Appeals) and, inter alia, took a ground that the ITO was not justified in allowing Section 80J relief pro rata. The objection of the assessee, in other words, was that the assessee should be allowed the relief under Section 80J at 6 per cent of the capital employed for the full year and it should not be restricted to four months. The Commissioner (Appeals) rejected the argument of the assessee vide his order in paragraph 7 as follows :
7. From the assessment records and the assessment order it is evident that the appellant had applied for a change of its previous year and in connection with this application the ITO had laid down certain conditions. One of the conditions laid down by the ITO was that relief under Section 80J would be allowed for a period of 3 months only instead of for the full year, i.e., relief will be allowed only at 25 per cent of 6 per cent of the capital employed. Against this decision of the ITO, the appellant filed a revision petition before the Commissioner of Income-tax, West Bengal V. “Calcutta, and the Commissioner of Income-tax, West Bengal V. in his order dated 30-10-1979 rejected the petition and confirmed the decision of the ITO that relief under Section 80J would be allowed at 25 per cent of 6 per cent of the capital employed. Since the Commissioner of Income-tax, West Bengal V. is a superior authority with reference to the authority of an ITO, subsequent to the passing of the order by the Commissioner of Income-tax, West Bengal V, on 30-10-1979, the order of the ITO regarding computation of relief under Section 80J has merged with the order of the Commissioner of Income-tax and the order no longer remains the order of the ITO. In terms of Section 246 of the Income-tax Act, an appeal is provided to an assessee who is aggrieved by any order specified under that section passed by an ITO. In the present case since the order of the ITO has merged with the order of the Commissioner of Income-tax, there is no order of the ITO against which an appeal can be filed. The ground, therefore, is not maintainable and is dismissed.
3. Shri Pathak, the counsel of the assessee, filed a paper book which included the letter of the ITO dated 21-11-1975, the order of the Commissioner dated 30-10-1979, the assessment order in dispute and the order of the Tribunal in IT Appeal No. 3299 (Cal.) of 1977-78. After narrating the facts Shri Pathak urged that the Commissioner (Appeals) was not justified to dismiss the ground of the assessee stating that the order of the ITO merged with the order of the Commissioner. It was indicated by him that the ITO passed the order on 29-2-1980, whereas the Commissioner passed the order under Section 264 on 30-10-1979 and, therefore, there was no question of any merger. It was also stated by him that the Commissioner passed the order under Section 3(4). The assessee has filed an appeal against the assessment made under Sections 143(3)/ 144B and 246(c) of the Act and, therefore, the assessee was very much right in agitating over this issue. Shri Pathak relied in J.K. Synthetics Ltd. v. O.S. Bajpai, ITO [1976] 105 ITR 864 (All.) and urged that while granting change of previous year the ITO cannot impose any condition. Shri Pathak on merit, relying on CIT v. Simpson & Co. [1980] 122 ITR 283 (Mad.), CIT v. Sanghi Beverages (P.) Ltd. [1982] 134 ITR 623 (MP), CIT v. Mysore Petro-Chemical Ltd. [1984] 145 ITR 416 (Kar.), CIT v. Metal Powder Co. Ltd. [1984] 145 ITR 510 (Mad.) and CIT v. Sambhai Sons Ltd. [1983] 143 ITR 473 (Guj.), urged that the relief should be allowed at 6 per cent for the full year. In this connection he stated that the special leave petition in Simpson & Co.’s case (supra) has been rejected by the Supreme Court and this fact has been mentioned in Mysore Petrochemical Ltd.’s case (supra) and Metal Powder Co. Ltd.’s case (supra).
4. Shri Chakraborty, the departmental representative, on the other hand, relying on CIT v. Amritlal Bhogilal & Co. [1958] 34 ITR 130 (SC) and CIT v. Gaekwade Vasappa & Sons [1983] 143 ITR 1 (AP) urged that the order of the ITO merged with the order of the Commissioner (Appeals) and, therefore, the ground has rightly been dismissed by the Commissioner (Appeals). On merit, the departmental representative referred to Section 80J and urged that the relief was available at 6 per cent per annum. The assessee’s previous year is only for three months and, therefore, the ITO has rightly allowed the relief on pro rata basis.
5. The point in question is interesting. The facts of the case have been stated earlier. However, the chronological dates are given below which will clarify the position :
(1) Application to the ITO dated 10-9-1975 and 31-10-1975 for change of previous year under Section 3(4).
(2) The ITO’s letter dated 21-11-1975 indicating the three conditions.
(3) Original return filed by the assessee on 30-6-1977.
(4) Revised return filed by the assessee on 21-8-1979.
(5) The Commissioner’s order under Section 264 dated 30-10-1979.
(6) The ITO’s assessment order dated 29-2-1980.
(7) The Commissioner (Appeals)’s order dated 22-10-1981.
The assessee made application for change of its previous year before the ITO and the same was granted by the ITO vide his letter dated 21-11-1975 in which he put three conditions. The assessee was not satisfied with the conditions imposed by the ITO and, consequently, went in revision under Section 264 before the Commissioner and the Commissioner deleted the condition regarding the allowance of pro rata depreciation. The assessee was not aggrieved by the conditions of carry forward of unabsorbed business loss, development rebate and Section 80J relief. However, the grievance of the assessee regarding the non-allowance of Section 80J relief for full year was confirmed by the Commissioner. This point has been agitated by the assessee while an appeal has been filed against the assessment framed under Sections 143(3)/144B and 246(c).
6. It would be relevant to discuss the reasoning on which the argument of the assessee has been dismissed by the Commissioner (Appeals). The Commissioner (Appeals) has dismissed the ground of the assessee on the ground of merger. The reasoning adopted by the Commissioner (Appeals) may not be correct. The Commissioner has passed his order on 30-10-1979, whereas the assessment was made by the ITO on 29-2-1980. Therefore, when the Commissioner passed his order under Section 264, there was no order passed by his subordinate which could have merged with his order.
This fact is clear from the two dates given above. Therefore, on this ground the dismissal of the ground of the assessee is riot proper. The revenue has cited some of the cases but it is not necessary to discuss those cases when on facts it is found that there was no question of merger of the order of the ITO with the order of the Commissioner.
7. However, the point for consideration is whether the assessee, inter alia, could have taken a ground for allowance of Section 80J relief for full year which was confirmed by the Commissioner under his order under Section 264 in revision. The power of revision conferred by Section 264 on the Commissioner is not an administrative power. It is a quasi-judicial power–Dwarka Nath v. ITO [1965] 57 ITR 349 (SC)]. The Commissioner by an order under Section 264 adjudicates upon the rights and liabilities of the applicant. No appeal and/or revision has been provided against the order of the Commissioner. Therefore, unless a party goes under article 226 of the Constitution of India before the High Court, the order passed by the Commissioner under Section 264 becomes final. The assessee has accepted the order passed by the Commissioner under Section 264. Therefore, the order passed by the Commissioner is final and is not only binding upon the ITO who is subordinate to him but it was also binding upon the applicant who has accepted the order.
8. Under the above circumstances, it is to be seen whether the assessee was right in taking a ground for adjudication in appeal filed by it under Section 246(c). The assessment which was framed under Section 143(3)/144B also is related with the previous year. Previous year is the ambit within which the income of the assessee is determined for the purpose of levy of tax. The determination of previous year was made as required under Section 3(4) and one of the conditions was that the assessee will get relief under Section 80J on pro rata basis. This point was concluded by the Commissioner under Section 264 and, therefore, the assessee was not right in agitating over this issue in appeal. Under the above circumstances, the ground of the assessee is liable to be dismissed but not on the ground on which it has been dismissed by the Commissioner (Appeals). The ground of the assessee is not admissible because the assessee has no right to appeal when the matter was concluded by the Commissioner by his order under Section 264. As the ground is not admitted, the case is not discussed on merit for which the assessee has cited a number of cases.
9. The only other point in the appeal is that the assessee should be allowed relief under Section 80J even on the borrowed fund and the assessee has placed reliance in Century Enka Ltd. v. ITO [1977] 107 ITR 909 (Cal.). Section 80J has been amended with retrospective effect. However, writs are pending before the Hon’ble Supreme Court. Consequently, the orders of the authorities on this issue are set aside and the matter is referred back to the ITO for reconsideration in view of the Supreme Court decision/amended provision of the Act. The assessee should be allowed an opportunity of being heard.
10. For statistical purpose, the appeal is allowed.
