JUDGMENT
Ajit K. Sengupta, J.
1. At the instance of the assessee, the following questions of law have been referred to this court under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1971-72 :
” 1. Whether, on the facts and in the circumstances of the case and on a true interpretation of the order of remand dated January 29, 1983, passed by the Tribunal, the Tribunal is justified in law in holding that the Commissioner of Income-tax was bound to act within the four corners of the directions of the Tribunal and in not allowing the assessee to raise the question whether, in view of the notification dated January 6, 1970, by which the property in question stood vested in the State of West Bengal from that date, no transfer of property took place within the relevant accounting year and as such the capital gain, if any, exigible to tax, could not be assessed in the relevant assessment year?
2. Whether, on the facts and in the circumstances of the case and on a true interpretation of the relevant provisions of the Act, the Tribunal is justified in law in holding that the capital gain had escaped assessment at the time of making of the original assessment by the Income-tax Officer during the relevant assessment year and was further justified in upholding the order made by the Commissioner of Income-tax under Section 263 of the Act ?
3. Whether the conditions for exercise of power by the Commissioner of Income-tax under Section 263 have been satisfied and whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the order of the Commissioner of Income-tax?”
2. The facts relating to this reference are that the assessee did not file returns of income for the assessment year 1971-72. The Income-tax Officer issued a notice under Section 148 of the Income-tax Act, 1961. The assessee, in compliance with such notice, filed returns of income on March 14, 1977. The Income-tax Officer also completed the assessment in the status of an association of persons under Section 143(3) of the Act on March 21,
1979. The assessment was completed on the income from house property and other sources.
3. The Commissioner of Income-tax on a perusal of the assessment order was of the view that the assessment made by the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue on the ground that the land owned by the assessee was acquired by the Government of West Bengal and compensation of Rs. 8,40,410.48 was received by the assessee on August 7, 1970.
4. According to the assessee, delivery of possession was effected during the financial year 1970-71. The Departmental Valuation Officer made the valuation of the acquired land as on January 1, 1954, at Rs. 2,35,148. Accordingly, the capital gain was worked out at Rs. 6,05,900. Each assessee had 50% share in the said capital gain amounting to Rs. 3,02,950. The Commissioner of Income-tax held that this capital gain should have been assessed during the assessment year 1971-72 in the hands of each of the assessees. He set aside the assessment orders and directed the Income-tax Officer on March 10, 1981, under Section 263 of the Act, to assess the capital gains in the hands of the assessee.
5. The assessee being aggrieved by the order of the Commissioner of Income-tax passed under Section 263 of the Act filed appeals before the Income-tax Appellate Tribunal. The Tribunal passed an order on January 29, 1983, after hearing both the parties. The assessee contended before the Tribunal, firstly, that the returns were invalid and, therefore, no assessment could be made on the basis of the invalid returns, secondly, that no order under Section 263 could have been passed by the Commissioner of Income-tax and, thirdly, that the Commissioner of Income-tax did not give any opportunity to rebut the material relied upon by him for passing the order under Section 263. The Tribunal restored the matter to the file of the Commissioner of Income-tax for fresh disposal after taking into account the points raised by the assessee before the Tribunal.
6. The Commissioner of Income-tax fixed the proceedings for fresh hearing under Section 263. The assessee raised before him altogether new points other than the points on which the directions were issued by the Tribunal. The Commissioner of Income-tax held that he was not entitled to hear the assessee on the new points such as acquisition of land by the Government of West Bengal, delivery of possession, etc. The Commissioner of Income-tax allegedly acted within the four corners of the directions issued by the earlier Tribunal and completed the proceedings under Section 263. He again held the view that the capital gains arising out of
the acquisition of the land from the payment of compensation was taxable in the hands of the assessee. The assessee, being aggrieved by the said order, again brought the dispute before the Tribunal.
7. The assessee wrote a letter dated July 8, 1987, to the Commissioner of Income-tax at the time of fresh disposal of proceedings under Section 263 and raised several objections. The main objection was that the land at Mouza Dhapamanpur, P. S. Bhangur, District 24-Parganas, was acquired by the Extraordinary Gazette Notification dated January 6, 1970, by the orders and notifications by the Governor of West Bengal under Section 4 of the West Bengal Land (Requisition and Acquisition) Act, 1948, and, therefore, the effective date of transfer took place on the date of the Gazette notification, i.e., January 6, 1970. It was also contended that the transfer of capital assets took place under Section 45 of the Income-tax Act, 1961, on the date of the Gazette notification, i.e., January 6, 1970, corresponding to the assessment year 1970-71, but not to the assessment year 1971-72, being the date of the receipt of the compensation. The Commissioner recorded the objections on the points raised before him and arrived at the conclusion that the compensation for acquisition of land was received on August 7, 1970, and, therefore, the assessment order for not including the capital gain was erroneous and prejudicial to the interests of the Revenue.
8. The Tribunal held that the assessee was not entitled to raise any other pleading and objections before the Commissioner of Income-tax after the appeals were remitted for fresh disposal before him except points which were agitated before the Tribunal.
9. It was not accepted that the capital gains could not be taxed for the assessment year 1971-72 on the basis of the date of acquisition on the point of not considering any fresh pleading by the Commissioner of Income-tax after the appeals were remitted to his file and the Commissioner of Income-tax was right in considering the directions issued by the Tribunal. The contention that the basic facts were required to be considered and decided by the Commissioner of Income-tax after the remittal of the appeal was not accepted because the transfer took place before the end of the previous year ending on March 31, 1970, corresponding to the assessment year 1970-71.
10. Two questions call for determination. Firstly, whether the Commissioner of Income-tax was justified in not entertaining the plea taken by the assessee for the first time in the course of the fresh proceedings under Section 263 pursuant to the order of the Tribunal ; secondly, whether
the Tribunal was justified in not entertaining the contention raised regarding the accrual of the capital gains which went to the root of the jurisdiction of the Commissioner of Income-tax in invoking Section 263 of the Act.
11. Dr. Pal, learned counsel for the assessee, strenuously contended that the Tribunal fell into an error in holding that the Commissioner of Income-tax could not go into the question which was raised before him regarding the particular year in which the capital gains accrued which would have gone to the root of the matter. He has also contended that the Tribunal should have entertained the contention raised by the assessee as to whether the transfer of property took place within the relevant accounting year or not.
12. On the other hand, the learned advocate for the Revenue supported the order of the Tribunal. To appreciate the contentions of Dr. Pal, it is necessary to set out the order of the Tribunal directing the Commissioner of Income-tax to pass a fresh order :
” We have perused the order of the Commissioner of Income-tax along with other papers placed before us for our consideration. As pointed out earlier, the first point raised on behalf of the assessee is that the order of the Commissioner of Income-tax under Section 263 is invalid inasmuch as the same was passed on an invalid assessment order. The case of the assessee is that the return was filed on March 14, 1977, for the above assessment year, which fact alone indicated that the return was invalid and, therefore, on an invalid return, no valid assessment could be made and, consequently, no order under Section 263 could be passed. It is pointed out by the assessee’s learned counsel that the Commissioner of Income-tax has not considered this aspect of the matter. Besides, it is also in the appeal by the assessee that the Commissioner of Income-tax has not given the assessee sufficient opportunity to rebut the materials relied on by the Commissioner of Income-tax before passing the order under Section 263. From the order of the Commissioner of Income-tax, it is seen that the notice of hearing was sent by his office on March 2, 1981, and the date of hearing was fixed for March 10, 1981, on which date the order impugned before us was passed. Apparently, there was little time for the assessee to properly represent his case before the Commissioner of Income-tax as provided in the proceedings under Section 263. Since the point of the invalid return has been raised before us, and there is actually no fact available before us, it is not possible to decide this point either way, particularly since this matter has also to be dealt with primarily at this stage
by the Commissioner of Income-tax. For these reasons, we deem fit that it would be fair to both the sides that we should restore the matter to the file of the Commissioner of Income-tax for fresh disposal after taking into account the point raised by the assessee and as discussed in the preceding paragraphs. Basic facts are required to be brought on record before the issue in the present case is finally decided. The Commissioner of Income-tax is, therefore, directed to dispose of the matter afresh in accordance with law and after giving the assessee sufficient opportunity of being heard.” (emphasis * supplied)
13. The question whether or not the view taken by the Tribunal is erroneous would necessarily depend on the interpretation of the aforesaid order of the Tribunal. The order of the Tribunal has to be read as a whole to find out the intention behind the order. It is true that the Tribunal directed the Commissioner of Income-tax to take into account the points raised by the assessee before the Tribunal regarding the validity of the return and other connected issues. It is also equally true that, when an order is set aside with a direction to pass a fresh order in accordance with law, the concerned authority can entertain all issues of facts and law in the course of the proceeding in which the fresh order would be made, unless there are directions to decide specific issues only. If a direction is made only to deal with a particular issue, the authority to whom the matter is remanded cannot travel beyond such direction. The power and jurisdiction to make further enquiry in passing a fresh order will necessarily be governed and should strictly be confined to the order of the appellate authority. Where there is no limitation imposed on the power of the lower authority to make a fresh order, the authority making such fresh order is not precluded from considering all the issues raised in the course of the proceeding held de novo in accordance with the direction of the appellate authority. On a reading of the entire order of the Tribunal, it appears to us that, since the matter was restored to the file of the Commissioner of Income-tax for fresh disposal in accordance with law, it was open to the parties to urge all points of law and facts before the Commissioner of Income-tax to whom the matter has been remanded. It is not a case where the Commissioner of Income-tax was directed only to deal with the contentions urged before the Tribunal. In that event, the Tribunal ought to have clearly said that the Commissioner of Income-tax should confine himself to the issues raised before the Tribunal and that the order was being set aside to that limited extent only. But that is not the case here. The Commissioner of Income-tax was no doubt
directed to consider all the issues raised before the Tribunal but, at the same time, a direction was given to him to dispose of the matter afresh in accordance with law. In our view, the fresh disposal was not restricted to the contentions urged before the Tribunal. The controversy before the Commissioner as well as before the Tribunal was whether the Commissioner of Income-tax had jurisdiction to invoke the provisions of Section 263 of the Act. In other words, the contention was that the Commissioner of Income-tax had no jurisdiction on the facts of this case to revise the assessment as was purported to have been done. One of the issues was that, when there was no valid assessment at all, the question of revision of such assessment could not arise. The contention urged before the Commissioner when the matter was remanded to him for fresh disposal by the Tribunal was that the transfer resulting in the accrual of capital gains did not take place during the relevant year and as such the question of assessment of the capital gains having escaped assessment in that year could not arise. This contention, in our view, went to the root of the jurisdiction of the Commissioner in revising the order of the Income-tax Officer. If the capital gains did not accrue in the year under reference, the question of assessment being erroneous in so far as it was prejudicial to the interests of the Revenue did not arise, unless, of course, the Commissioner of Income-tax had other materials justifying the invocation of the jurisdiction under Section 263. The Commissioner of Income-tax ought to have considered the legal issue raised before him by the assessee inasmuch as it was another facet of the question pertaining to the jurisdiction of the Commissioner to invoke Section 263 on the facts and in the circumstances of the case.
14. Even assuming that the direction for fresh disposal by the Tribunal was only limited to the grounds raised before the Tribunal, in that event, the Tribunal should have decided this question. The Tribunal took a very technical view of the matter in avoiding decision of the issue, although the Tribunal was of the view that whether capital gains would be chargeable in the relevant year would necessarily depend on the date of transfer of the capital asset. This legal issue was raised before the Commissioner of Income-tax and, since he refused to entertain the said issue, it must be deemed to have been decided against the assessee and, accordingly, in the appeal before the Tribunal, it was competent to decide that legal issue if, on the basis of the facts admitted and/or found, such issue could be decided one way or the other. This would invariably result in multiplicity of proceedings inasmuch as if a fresh assessment is made by the Income-tax Officer pursuant to the direction of the Commissioner, the legal
contention raised by the assessee has to be decided. In our view, when an issue pertains to the jurisdiction of the authority to make the order, it was not proper for the Tribunal to bypass that issue, taking shelter under technicalities and refraining from entertaining such legal contention.
15. For the foregoing reasons, we decline to answer the questions referred to us and remand the case to the Tribunal for fresh disposal in the light of the observations made in the judgment. The Tribunal may, if thought fit and proper, remand the matter to the Commissioner of Income-tax for consideration of the question whether capital gain, if any, is exigible to tax for the relevant assessment year.
16. There will be no order as to costs.
Shyamal Kumar Sen, J.
17. I agree.
