Sri.sajith Kumar v. This Income Tax Appeal Having Been Finally Heard

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN MONDAY, THE 16TH JUNE 2008 / 26TH JYAISHTA 1930 ITA.No. 21 of 2003() -------------------- ITA.125/COCH/2001 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT ------------------------------------ THE COMMISSIONER OF INCOME TAX, COCHIN BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: RESPONDENT ----------------------- M/S. VEEPEES ENTERPRISES, NARAKKAL, KOCHI-11. BY ADV. SRI.K.R.SUDHAKARAN PILLAI SRI.SAJITH KUMAR V. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 16/06/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &V.K.MOHANAN, JJ. .................................................................... ....................................................................Dated this the 16th day of June, 2008. JUDGMENT Ramachandran Nair, J. This appeal is filed by the Revenue against Annexure-C order of theTribunal vacating suo motu revisional order passed by the Commissionerunder Section 263 of the Income Tax Act directing revision of respondent'sassessment for the year 1996-97. The assessment originally completed wasreopened on three grounds. In the first place, the Commissioner noticedthat since assessee had not filed returns or claimed depreciation for thetheatre building for several years, depreciation should not be reckoned inthe computation of capital gains on the sale of the theatre building.Similarly, deduction of retrenchment compensation allowance granted bythe officer on closure of business in the threatre was found to be irregular bythe Commissioner. The third ground on which reopening is made is onaccount of short-assessment of capital gains in as much as the sale proceedstaken was less by Rs.5 lakhs. On appeal by the assessee, the Tribunalreversed the order of the Commissioner against which this appeal is filed bythe Revenue. We have heard Senior counsel appearing for the department and Sri.K.R.Sudhakaran Pillai appearing for the respondent-assessee. 2. We find from the order of the Tribunal that they have interferedwith the Commissioner's order without conclusively deciding on merit thatassessee is entitled to reckon depreciation in the computation of capitalgains on sale of theatre building under Section 50 of the Income Tax Act.They have considered the divergent views expressed by various HighCourts and held that in view of the difference of opinion, the assessee isentitled to the view favourable to it. We do not think we should considerthe findings of the Tribunal on other issues because order of the Tribunal isliable to be interfered with on this ground alone. Prima facie depreciationcan be reckoned in the computation of capital gains under Section 50 of theAct only if it was allowed as provided under the provisions of the Act. Thedepartment's case is that returns were not filed by the assessee andconsequently there was no occasion to allow any depreciation for theassessment years 1985-86 to 1989-90. So far as assessments for the years1983-84 and 1984-85 are concerned, assessment is stated to be made onestimated income of Rs.16,000/- for each year. Against these findingsmade by the Commissioner, the assessee pretended ignorance on the non-filing of returns on the ground that files were with the estranged partner.While counsel for the appellant has relied on decision of the Madras High Court in SRI.RAJARATHINAM TRANSPORTS PVT. LTD. V.COMMISSIONER OF INCOME-TAX (1993) 199 ITR 203, counsel for theassessee has relied on decision of the Punjab and Hariana High Court inCOMMISSIONER OF INCOME-TAX V. HARYANA HOTELS LTD.(2005) 276 ITR 521. The issue is not admittedly covered by decision ofthe Supreme Court or that of this court. We do not find any justification forthe Tribunal to interfere with Section 263 order merely because differentHigh Courts have taken different views in the matter. If the findingsentered by the Commissioner are right, then he was justified in interferingwith the assessment under Section 263 of the Act. Therefore, the Tribunalcould not have interfered with the order of the Commissioner except onmerits. Since Tribunal has not considered the issue on merits, we set asidethe order of the Tribunal and remand the matter back to the officer forcompletion of assessment pursuant to Section 263 order of theCommissioner. However, we make it very clear that the assessee will befree to place full facts and raise all contentions on merit and the findings ifany recorded by the Commissioner in the order under Section 263 should betreated as only opinion or observations by him which assessee is free tocontest in regular assessments. The officer is directed to take decisionobjectively without being influenced by the Commissioner's order, but on all the issues stated by him in Section 263 order. Since we have givenfreedom to the assessee to raise objection on all issues on merits, theassessee can file appeal against regular assessment on merits. The appeal isallowed by setting aside the order of the Tribunal, but subject to the aboveterms. C.N.RAMACHANDRAN NAIRJudge pms V.K.MOHANANJudge