Gupta, J. - (1.) This appeal by the Additional Commissioner of Income-tax, Gujarat, I, Ahmedebad, on a certificate under Section 261 of the Income Tax Act, 1961 granted by the Gujarat High Court, raises a question relating to the powers of the Appellate Assistant Commissioner in disposing of an appeal.
(2.) The respondent, a company carrying on the business of copper engraving and manufacturing of labels, appealed to the Appellate Assistant Commissioner against an order of assessment made under S. 143 (3) of the Income Tax Act, 1961, and one of the grounds of appeal was that the Income-tax Officer had erred in not giving the assessee any benefit under Section 84 of the Act. The assessment year was 1963-64. No claim however had been made before the Income-tax officer when he completed the assessment that the assessee was entitled to an exemption in respect of a portion of its profits under section 84. The appellate Assistant Commissioner dismissed the appeal on the ground that the question of error on the part of the I.-T. Officer did not arise as no claim for exemption under Section 84 had been made before him. The Tribunal took a different view and held that "since the entire assessment was open before the Appellate Assistant Commissioner" there was no "reason for not entertaining the claim of the assessee." The Tribunal accordingly directed the Income-tax Officer to allow appropriate relief under Sec. 84 of the Act. It is on record that in the subsequent years the assessee asked for exemption under Section 84 and the Income-tax officer accepted the claim. On these facts the Tribunal referred the following question to the High Court at the instance of the Commissioner of Income-tax: "Whether on the facts and in the circumstances of the case it was competent for the Tribunal to hold that the Appellate Assistant commissioner should have entertained the question of relief under Sec. 84, and to direct the Income-tax officer to allow necessary relief - The High Court answered the question in the affirmative. The correctness of this decision is questioned before us by the Revenue.
(3.) Referring to a number of authorities including the decision of this Court in Commr. of Income-Tax v. Shapoorji Pallonji Mistry, 44 ITR 891 and the case of Narrondas Manordass v. Commr. of Income Tax, 31 ITR 409 decided by the Bombay High Court, the High Court found it well settled that the various items of income or deductions which have been subjected to the process of assessment constitute the subject-matter of assessment, and that if there is any item of income or claim for deduction which is not processed by the Income-tax Officer, it would not be a part of subject-matter of assessment and the Appellate Assistant Commissioner would not have the power to consider and process it in an appeal preferred by the assessee. Both the decisions, Commr. of Income-Tax v. Shapoorji Pallonji Mistry (supra) and Narrondas Manordass v. Commr. of Income-Tax (supra), are based on S. 31 (3) of the Indian Income Tax Act, 1922 defining the powers of the Appellate Assistant Commissioner in disposing of an appeal. Section 251 (1) (a) of the Income Tax Act, 1961 which is the provision applicable to the case before us, is, as the High Court has noticed, almost similar in terms as Section 31 (3) of the Act of 1922.;