Bombay H.C : By this petition, the petitioner challenges the order of the CIT, passed under s. 264 of the IT Act, 1961 (for short “the IT Act”).

High Court Of Bombay

Manmala Exhibitors vs. M.C. Joshi, CIT & Ors.

V.C. Daga & J.P. Devadhar, JJ.

Writ Petn. No. 2314 of 2001

21st December, 2001

Counsel Appeared

P.P. Pandit with V.P. Pandit & P.P. Prabhu, for the Petitioner : R.V. Desai with P.S. Jetly & B.M. Chatterjee i/b H.D. Rathod, for the Respondents.

JUDGMENT

J.P. DEVADHAR, J. :

By this petition, the petitioner challenges the order of the CIT, passed under s. 264 of the IT Act, 1961 (for short “the IT Act”). By the said order, the CIT has dismissed the revision application filed by the assessee both on the ground of maintainability as well as on the merits. We propose to take up the issue of maintainability of the revision petition first.

2. For the asst. yr. 1996-97, the return of income was filed on 30th Oct.,1996, disclosing capital gains at Rs. 4,78,19,737 by taking the book value as the cost of acquisition of the asset at Rs. 31,50,000. A revised computation of income was filed and on 12th Jan., 1999, assessment order was passed accepting the revised computation of income. Being aggrieved by the aforesaid order, the assessee filed an appeal before the CIT(A), inter alia, raising a plea that the assessee is entitled to substitute the book value of asset by the indexed value of the asset as per s. 48 of the IT Act and the AO 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 dt. 11th Jan., 1999, the assessee-had requested the AO to allow it to substitute the value of the property as on 1st April, 1981, as per s. 55(2)(b)(i) of the IT Act. It was submitted that if the value of the asset as on 1st April, 1981, was taken there would be no shortfall in payment of tax. The CIT(A) held that there was nothing to show that the letter dt. 11th Jan., 1999, was filed before the AO. However, the CIT(A) held that in the absence of revision or modification of the return filed on 30th Oct., 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 s. 249(4) of the IT Act, the appeal cannot be admitted and, accordingly, dismissed it being not maintainable. Thereupon the assessee filed a revision petition before the CIT under s. 264 of the IT Act seeking substitution of the book value by the indexed cost of acquisition of the asset as per the letter dt. 11th Jan., 1999, which the AO failed to take into account. In the revision petition, the assessee had also sought deletion of interest levied. As stated hereinabove, the CIT dismissed the revision petition both on the ground of maintainability as well as on merits. 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 CIT was justified in rejecting the revision petition on the 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 the book value to the indexed cost of acquisition before the CIT(A), whether the assessee is entitled to file a revision petition under s. 264 of the IT Act raising the very same plea merely because the appeal has been dismissed by the CIT(A) even before admission for noncompliance with s. 249(4)(a) of the IT Act ?

Mr. Pandit, learned counsel for the petitioner, contended that since the appeal has been dismissed even before it is admitted for non-compliance with s. 249(4)(a), there was no effective appeal before the CIT(A) and, hence, the revision petition under s. 264 was competent. Mr. Pandit relied upon CIT vs. Travancore Tea Estates Co. Ltd. (1988) 71 CTR (Ker) 1 : (1988) 172 ITR 733 (Ker), Jagmohandas Gokaldas vs. CWT (1963) 50 ITR 578 (Bom), (1965) 56 ITR 349 (SC) (sic), Warner Lambert Co. vs. CIT (1994) 120 CTR (Bom) 335 : (1994) 205 ITR 395 (Bom), Chiranjilal Daga vs. CIT 1978 CTR (Mad) 252 : (1978) 113 ITR 363 (Mad), CIT vs. Sakseria Cotton Mills Ltd. (1980) 124 ITR 570 (Bom) and CIT vs. S. Ratnam Pillai (1991) 97 CTR (Ker) 166 : (1991) 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 s. 264 of the IT Act was maintainable. It was submitted that there was no adjudication of the issues before the CIT(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.

5. Mr. Jetley, 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. vs. CIT (2000) 160 CTR (SC) 524 : (2000) 243 ITR 808 (SC) in favour of the Revenue. Mr. Jetley relied upon the judgment of the Madras High Court in the case of Kadri Mills (Coimbatore) Ltd. vs. CIT (2000) 243 ITR 861 (Mad) and submitted that the assessee has an option to choose the remedy of pursuing an appeal under s. 246 or perusing the remedy of revision petition under s. 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 AO or not, in view of the specific bar contained in s. 264(4)(a), once the remedy of appeal was chosen, the jurisdiction of the CIT under s. 264 was ousted.

After hearing 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. Under ss. 246 and 246A of the IT Act, the 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 s. 246, the assessee has a supplemental remedy of revision under s. 264 of the IT Act. Thus, the assessee has the choice of seeking remedy under s. 246 or under s. 264. However, s. 264(4)(c) provides that the CIT shall not revise any order which has been made the subject-matter of an appeal. In the instant case, the assessment order was the subject-matter of an appeal before the CIT(A), but the same was not admitted and was dismissed at the threshold for noncornpliance with s. 249(4)(a) where it is mandatory on the part of the assessee to pay the tax due on the income returned by him.

8. Mr. Pandit, relying upon the decision of the Kerala High Court in the case of C.C. Jayaram vs. CIT (1994) 116 CTR (Ker) 33 : (1994) 207 ITR 662 (Ker), contended that refusal to entertain the appeal on the ground that the assessee failed to pay the admitted tax cannot render the order sought to be revised, covered under s. 264(4)(c) of the IT 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 s. 264(4) (c) only if the appeal was considered and disposed of on the 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 vs. Raj Brothers Agencies (1973) 31 STC 434 (SC), 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 s. 264 was maintainable.

9. In our view, the decision of the Kerala High Court, with respect, does not lay down the correct interpretation of law. As held by the Madras High Court in the case of Kadri Mills (Coimbatore) Ltd. vs. CIT (supra), once the assessee has chosen the remedy of appeal, there is a bar under s. 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 CIT(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 the substituted indexed cost of acquisition. Therefore, the order of assessment being the subject-matter of an appeal before the CIT(A), the revision petition under s. 264 was clearly barred under s. 264(4) (c) of the IT Act.

10. In our view, the decision of the Kerala High Court referred to hereinabove, runs counter to the decisions of the Supreme Court in Mela Ram & Sons vs. CIT (1956) 29 ITR 607 (SC) and Hindustan Aeronautics Ltd. vs. CIT (supra). The apex Court in the case of Mela Ram & Sons vs. CIT (supra) while dealing with s. 30(2) of the Indian IT Act, 1922 [similar to s. 249(2) of the IT 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 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. [Emphasis, italicised in print, supplied]

11. 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 s. 264 of the IT Act. Once the remedy of appeal was chosen, the only way open to the assessee was to proceed on the same path by availing of the 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.

12. The Supreme Court in the case of Hindustan Aeronautics Ltd. vs. CIT (supra), has clearly held that the CIT has no power to revise any order under s. 264 of the IT 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 CIT under ss. 263 and 264 of the IT Act. It was clearly held that under s. 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 Expln. (c) to s. 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.

13. 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 Board of Revenue vs. Raj Brothers Agencies (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 the Madras High Court which was followed for several years and the Supreme Court did not want to disturb the settled position in law.

14, In the instant case, the petitioner did argue before the CIT(A), regarding the applicability of s. 249(4) and tried to make out a case on the merits that he was entitled under s. 48 r/w s. 55(2)(b) (i) of the IT Act, 1961, to substitute the value of the asset as on 1st April, 1981, and, hence, he was not required to comply with s. 249(4)(a) of the IT Act. Having failed in his submission before the CIT(A), the assessee has chosen to seek the same relief before the CIT under s. 264 of the IT Act. But the fact remains that the original assessment order was the subject-matter of an appeal. Even the issue of substituting the value of the asset as on 1st April, 1981, was argued before the CIT(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 the appeal being dismissed for non-compliance with s. 249(4)(a) of the IT Act, the revision under s. 264 of the IT Act was not maintainable being hit by s. 264(4)(c) of the IT Act.

In this view of the matter, we are of the opinion that the revision application filed by the assessee under s. 264 of the IT 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 the Tribunal against the order of the CIT(A), then the findings given by the CIT in the order under s. 264 on the merits will not come in the way of the petitioner.

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

[Citation : 257 ITR 563]

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