K.P. Singh, J. - (1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961. The following question has been referred to us by the Income-tax Appellate Tribunal, Allahabad Bench : "Whether, on the facts and in the circumstances of the case and having regard to the relevant provisions of sections 251 and 253 of the Income-tax Act, 1961, the Tribunal was correct in law in holding that the disallowance of Rs. 59,117 and Rs. 11,594 on account of commission to selling agents could not be contested and considered on merits in the appeal filed against the relevant fresh assessment made after setting aside the original assessment?" The necessary facts leading to the above question are that the assessee-applicant is a private limited company engaged in the manufacture and sale of heavy chemicals. The assessment year under consideration is 1972-73. On February 27, 1973, the Income-tax Officer made an assessment and disallowed sums of Rs. 59,117 and Rs. 11,594 on account of commission paid to the selling agents. Against that order, the assessee went in appeal which was decided by the Appellate Assistant Commissioner of Income-tax, Special Range, Kanpur, through his judgment dated September 27, 1973 (see annexure 'E' to the paper book). It appears that the Appellate Assistant Commissioner agreed with the Income-tax Officer in disallowing the claim of the assessee on account of the commission paid to the selling agents. Against this order of the appellate authority, the assessee did not pursue the matter.
(2.) AFTER remand, the Income-tax Officer, through his order dated February 28, 1975, disallowed the claim of the assessee on account of the commission paid to the selling agents. Against the order of the Income-tax Officer, the appellate authority agreed with the Income-tax Officer in disallowing the claim of the assessee on account of commission payment to the selling agents. Aggrieved by the judgment of the appellate authority, before the Income-tax Appellate Tribunal 'A' Bench, Allahabad, which were dismissed by the Tribunal through its judgment dated January 15, 1977. Thereafter, the assessee applied for referring a question of law arising out of the order of the Appellate Tribunal and the Appellate Tribunal referred the above-mentioned question for the opinion of this High Court. In this way, the above-noted question has come up for consideration before us. Learned counsel for the assessee has contended before us that when the original assessment made by the Income-tax Officer was set aside by the Appellate Assistant Commissioner and the case was remanded for fresh assessment, the income-tax authorities have acted illegally in not examining the claim of the assessee regarding payment to commission agents on the ground that, in the earlier order of the Appellate Assistant Commissioner, the claim of the assessee was not accepted. According to learned counsel for the assessee, after remand, it was the duty of the Income-tax Officer to decide the claim of the assessee afresh and the Income-tax Officer could not refuse the claim of the appellant regarding disallowance of the payments to the commission agents on the ground that it had been decided at the earlier occasion. Our attention has been drawn to the rulings in CIT v. Seth Manicklal Fomra [1975] 99 ITR 470 (Mad), Ram Dayal Harbilas v. CST [1979] 44 STC 84 ; [1979] UPTC 999 (All) [FB] and Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 ; [1991] UPTC 125 (SC). At this stage, it is proper to mention the relevant finding recorded by the Appellate Assistant Commissioner in his order dated September 27, 1973, which is as below : "(P. 5) Regarding the commission paid to two concerns called Anand Chemicals, Kanpur, and Chemi Leather Traders, Madras, it being in violation of Section 294 of the Companies Act, the Income-tax Officer appears to be correct .... I agree with the Income-tax Officer that a company has to function under the company law. It is a juristic person and the company law is its personal law. A person may be an artificial or juristic person and it is not correct to say that such a person cannot have a personal law. I think a company acting in violation of the company law which is the very basis of its existence cannot incur expenditure prohibited by company law and claim such expenditure in income-tax proceedings. Such amounts are in fact refundable to the company and should not be allowed as outgoings." It may be pertinent to observe that, apart from the disallowance discussed in the preceding paragraphs, there were a number of other grounds on which the assessment order was objected to by the assessee before the Appellate Assistant Commissioner. It is not necessary for us to refer to those grounds inasmuch as we are not concerned with them in this reference. Suffice it to say that the Appellate Assistant Commissioner, after giving his comments, remanded the matter to the Income-tax Officer to make, a fresh assessment in the light of the directions given by him in respect of each ground. It is in this context that in paragraph 11 of his order, the Appellate Assistant Commissioner indicated that the assessment has to be reframed in the light of the observations made by him. In paragraph 12, he further observed that, during the fresh proceedings, the appellant will be free to agitate his other grievances and, accordingly, he set aside the assessment.
(3.) IT is apparent from the order of the Appellate Assistant Commissioner that he gave specific directions to the Income-tax Officer in respect of each contention that he had dealt with. In paragraph 5 of his judgment, he dealt with the controversy with which this reference is concerned. Therefore, it is apparent that the Appellate Assistant Commissioner had not remanded the case for fresh determination, rather he had asked the Income-tax Officer to deal with the claim of the assessee in the light of the observations made in his judgment dated September 27, 1973. No doubt, some observations in the ruling reported in CIT v. Seth Manicklal Fomra [1975] 99 ITR 470 (Mad) support the contention raised on behalf of the assessee before us. But, in the reported case, the Income-tax Officer was directed to redo the assessment in the light of the observations contained in the order of the Appellate Assistant Commissioner. In the present case, the Appellate Assistant Commissioner had recorded a clear cut finding against the assessee in his order dated September 27, 1973, and those findings cannot be termed as mere observations. Therefore, the assessee cannot derive any benefit out of the aforesaid ruling in the facts and circumstances of this case. Learned counsel for the assessee also placed reliance upon the ruling, in Ram Dayal Harbilas v. CST [1979] 44 STC 84 ; [1979] UPTC 999 (All) [FB]. The aforesaid ruling has considered the provisions of the U. P. Sales Tax Act and, while interpreting the provisions of Section 9 of that Act, some observations have been made which might help the assessee in the present case under our consideration. But, if the ruling is read as a whole, it would be evident that the judges have indicated that the powers of the Appellate Assistant Commissioner under Section 251(1) of the Income-tax Act, 1961, are wider than the powers exercised by the Appellate Assistant Commissioner under the U. P. Sales Tax Act. In paragraph 17 (at page 91 of 44 STC) of the ruling, their Lordships have indicated as below : "... But then it is open to the Appellate Assistant Commissioner, while setting aside the assessment, to direct the Income-tax Officer to consider only certain matters when making the assessment and, in that event, the Income-tax Officer cannot go behind the direction and enquire into other matters (see Pulipati Subbarao and Co. v. AAC of I. T. [1959] 35 ITR 673 (AP)). However, the appellate authority under the Sales Tax Act has not, while setting aside an assessment and remanding the case for making a fresh assessment, been given any power to limit the scope and ambit of reassessment proceedings and the power of the assessing authority for making assessment under Section 7 of the Act cannot be inhibited in any manner." In paragraph 18 of the aforesaid Full Bench ruling, their Lordships have observed as below (at page 91 of 44 STC) : "... In exercise of that power, the revising authority can remand a case to the assessing authority for making assessment or fresh assessment in accordance with the directions given by it. Here, the revising authority, like the Appellate Assistant Commissioner under the Income-tax Act, 1961, has been given ample power to inhibit the scope and ambit of the assessment proceedings to be carried on by the assessing authority. . ." In our opinion, the observations in this Full Bench do not support the contention raised on behalf of the assessee. According to the observations contained in paragraph 18 of the reported Full Bench ruling, it is evident that, under the Income-tax Act, 1961, the Appellate Assistant Commissioner has ample power to inhibit the scope and ambit of the assessment proceedings to be carried on by the assessing authority. The income-tax authorities, in the present case, have rightly construed the judgment of the appellate authority dated September 27, 1973, while disallowing the payment of commission to the selling agents claimed by the assessee. ;