JOLLY ENGINEERS AND CONTRACTORS P LTD Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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K.C. Srivastava, Accountant Member -
(1.) THIS appeal by the assessee-company is against the order of the Commissioner (Central), Ludhiana, passed under Section 263 of the Income-tax Act, 1961 ('the Act'), for the assessment year 1974-75. The assessee-company had purchased a fleet of twenty passenger buses from New Suraj Transport Co. Ltd. "the vendor-company" for an amount of Rs. 14,50,000. THIS was in accordance with the agreement with the vendor-company and the assessee-company had claimed a depreciation on these passenger buses purchased in this year. The claim of depreciation had been duly allowed in the original assessment. The purchase had taken place on 10-1-1973. The original assessment had been made on 14-9-1977.
(2.) The seller of these buses, the vendor-company, had claimed before the ITO that the total sale consideration included the price for 24 route permits as well as goodwill and the price of goodwill was estimated at about Rs. 5,00,000 and was claimed to be exempt. This claim was, however, rejected by the ITO in the case of the vendor-company and the total consideration of Rs. 14,50,000 was taken for the purpose of working out profits under Section 41(2) of the Act. This order in the case of the vendor-company was passed on 21-8-1977 and the vendor-company filed an appeal before the appellate authorities and by an order dated 18-5-1979 the Tribunal held that the amount of Rs. 5,00,000 represented the value of route permits and other rights required by the seller-company and that was not to be taken into consideration for working out the taxable income of the vendor-company. On the basis of this decision of the Tribunal, the case was brought to the notice of the Commissioner stating that the assessee-company had been allowed larger depreciation than would be proper if the amount of Rs. 5,00,000 is excluded from the consideration paid for the buses. It was in these circumstances that the Commissioner assumed jurisdiction under Section 263 and passed his order which is challenged before us. Various objections were raised before the Commissioner and it was contended that at the time of the assessment of the vendor-company the ITO had taken a consistent view and the later order of the Tribunal passed on 18-5-1979 was not before the ITO who had made assessment in this case. It was. therefore, submitted that the decision of the Tribunal in the case of the vendor-company could not make the order of assessment erroneous. Reliance was placed on the decision of the Calcutta High Court in the case of Ganga Properties v. ITO  118 ITR 447. Reliance was further placed on the agreement and it was submitted that the agreement showed the consideration of Rs. 14,50,000 for the buses. It was also pointed out that it was not possible to transfer route permits just by delivery and both the parties have to file affidavits before the motor vehicle authorities and on the passing of such by the motor vehicle authorities (he route permits can be transferred. It was also pointed out that both the companies had filed a joint affidavit stating that no payments had been made for route permits. It was also denied that any part of the payment was for goodwill or route permits. It was further pointed out that the order of the Tribunal in the case of the vendor-company is a subject-matter of reference before the High Court, where the Commissioner has taken the view that the whole consideration was for the buses. It was, therefore, contended that there was no error in the order of the ITO when he passed it and it should not be interfered with.
The Commissioner did not accept the plea of the assessee and he held f that the ITO at the time of making the assessment should have taken into consideration the contention of the vendor-company and should have on the basis of that contention reduced the consideration in the hands of the assessee and allowed depreciation on the reduced amount while stating that this assessment would be protective in nature. The Commissioner observed that the ITO should have anticipated an appeal in the case of the vendor-company and should have taken recourse to protective assessment to safeguard the revenue. In this connection, he made reference to the decision of the Calcutta High Court in the case of Jagannath Harnamdas. The Commissioner, therefore, held that the error in the order of the ITO was in not making the protective assessment and this error was prejudicial to the interests of revenue. He, therefore, set aside the order of the ITO with the directions of making a protective assessment in the case of the assessee-company on the basis of his order.
(3.) BEFORE us, the learned counsel for the assessee, has submitted that the order of the Commissioner was assailable for more than one reason. He submitted that the assumption of jurisdiction by the Commissioner was invalid as there was no error in the order of the ITO who had taken a considered and consistent view in the case of the two assessees. He contended that the directions given by the Commissioner were also illegal insofar as he had directed for making a protective assessment though, in fact, his direction was for making an allowance of depreciation on a lower value and that was to be done on a protective basis till the question was finally decided in the case of the seller-company. It was contended by the learned counsel that at the time when the ITO passed the order, he did not commit any error and he read the agreement and found that Rs. 14,50,000 had been paid for the buses and adopted it as the basis for allowance of depreciation in the hands of the assessee It was further contended by the learned counsel for the assessee that the error in the order of assessment has to be found as on the date of passing the order and the Commissioner cannot invoke his powers under Section 263 in respect of an order which according to him had become erroneous on a latter date as a result of an appellate order passed in another case. Strong reliance was placed on the decision of the Calcutta High Court in the case of Ganga Properties (supra). In this case, it was held that revisional jurisdiction under Section 263 could not be exercised by the Commissioner on the basis of a subsequent valuation report and any such action could conflict with the jurisdiction of the ITO under Section 147(6) or Section 154 of the Act.;
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