I.S. Nigam, Accountant Member - (1.) THIS is an appeal filed by the assessee against the order of the Commissioner, Bombay, under Section 263 of the Income-tax Act, 1961 ('the Act').
(2.) The assessee is a registered firm and the appeal relates to the assessment year 1978-79. We were given to understand at the time of hearing of the appeal that the business of the assessee-firm was to purchase milk from various sources, which was brought to Bombay in refrigerated tankers and was subjected to chilling and pasteurization before being bottled and sold under the brand name 'Doodh Amrut'. It was claimed before the ITO in the course of the assessment proceedings that this activity amounted to production or manufacture of an article or thing and, consequently, the assessee was entitled to investment allowance on machinery and plant used in the business. The ITO, while making the assessment by order dated 25-3-1981, allowed this claim of investment allowance. Subsequently, however, the Commissioner was of the view that the order of the ITO was erroneous and prejudicial to the interests of the revenue. He was not satisfied with the assessee's submission that since the assessment order was the subject-matter of appeal before the Commissioner (Appeals), the Commissioner had no jurisdiction under Section 263 and, alternatively, the assessee's activities amounted to manufacture or production of an article or thing and, therefore, the assessment order allowing investment allowance on machinery and plant used in this business cannot be said to be erroneous or prejudicial to the interests of the revenue. The Commissioner, therefore, by order under Section 263 dated 7-2-1983 set aside the assessment with a direction to the ITO to make a fresh assessment after giving the assessee an opportunity of being heard, to withdraw the investment allowance and to take all ancillary action which may be required at the time of making the fresh assessment. The assessee is aggrieved and has, therefore, come up in the present appeal before us. The assessee's learned Counsel, Shri Haribhakti, submitted to us that at the time of making the assessment, i.e., 25-3-1981, there were two decisions, one of the Hon'ble Kerala High Court in the case of CIT v. Castlerock Fisheries [1980] 126 ITR 382 and another of the Hon'ble Calcutta High Court in the case of CIT v. Radha Nagar Cold Storage (P.) Ltd. [1980] 126 ITR 66 wherein their Lordships laid down that even if the plant was temporarily let out to a sister concern, the income derived by such letting out was business income and the assessee was entitled to development rebate while working out the business income and the business of keeping potatoes in the cold storage was an activity, which falls within the meaning of processing of goods. He, therefore, submitted that, as laid down by the Hon'ble Calcutta High Court in the case of Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229, the assessment cannot be said to be erroneous simply because the ITO had followed the decisions of the Hon'ble High Courts, which he was bound to follow. It was also pointed out by him that since at the time of the proceedings under Section 263 the appeal against the assessment order was pending before the Commissioner (Appeals), it was open to the ITO to request for enhancement and the Commissioner had no jurisdiction under Section 263. In this connection, he pointed out that the reasoning in the decision of the Special Bench of the Tribunal in the case of Dwarkadas & Co. (P.) Ltd. v. ITO [1982] 1 SOT 495 (Bom.) was applicable here. Summing up Shri Haribhakti vehemently argued before us that the exercise of the jurisdiction under Section 263 by the Commissioner was void ab initio.
(3.) SHRI Haribhakti referred to a number of decisions of the Tribunals in the cases of ITO v. Elite Sea Foods [1983] 3 ITD 348 (Coch.) where the Tribunal held that investment allowance was admissible in the business of purchase of shrimps, etc., which, after de-heading, peeling, de-veining and freezing, were exported, Universal Spices v. ITO [1983] 4 ITD 367 (Hyd.) where the Tribunal held that the business of accommodating the tumeric dolls in a factory shed and carrying on the process of polishing as a result of which the final product underwent substantial vibration and wear and tear amounted to a sort of a manufacturing process, First ITO v. Dr. P. Vittal Bhat [1983] 6 ITD 560 (Bang.) (SB) where the Tribunal held that the X-ray photographs produced from an X-ray unit could be said to be production of an article or thing and Nishit Synthetics (P.) Ltd. v. ITO [1984] 7 ITD 486 (Ahd.) where the Tribunal held that the conversion of flat yarn into twisted yarn would amount to manufacture of a new article within the meaning of Section 32 A of the Act, in support of the contention that the assessee's business activity of converting the milk purchased from various sources into the brand product 'Doodh Amrut' amounted to manufacture or production of an article or thing. On this basis, SHRI Haribhakti submitted that the assessee-firm was entitled to investment allowance on new machinery and plant used in this business and the investment allowance was rightly allowed by the ITO. Summing up, SHRI Haribhakti vehemently contended before us that in the first place the Commissioner had no jurisdiction under Section 263 and, alternatively, the assessment order was not erroneous and, therefore, the order of the Commissioner under Section 263 should be cancelled.;