COMMISSIONER OF INCOME TAX Vs. AHMEDABAD KEISER E HIND MILLS COMPANY LIMITED

JUDGEMENT

(1.) IN this case, at the instance of the Revenue, the following question has been referred to us for our opinion :

(2.) THE assessment year under reference is asst. year 1965 66. The assessee is a limited company and is engaged in the manufacture of cotton textiles. Against the order of assessment for asst. yrs. 1964 65 and 1965 66, the assessee preferred appeals to the AAC and in the course of those appeals it was claimed that the assessee was entitled to rebate at two per cent on the export sales made by the assessee during the concerned previous year. It was submitted on behalf of the assessee before the AAC that the ground relating to this claim of rebate on export sales was not raised before the ITO. The AAC, however, allowed the point to be raised and in his order for asst. yrs. 1964 65 he directed that the ITO should gather the details regarding the quantum of exports effected between 28th Feb., 1963, and 31st Dec., 1963, and should work out the rebate as mentioned in S. 5(1)(iii) of the Finance Act of 1964. (The reference is to S. 2, Sub S. (5)(a)(ii) of the Finance Act of 1964). Similarly, as regards asst. year 1965 66 which is under reference, by his order the AAC directed the ITO to verify export sales and to allow rebate under S. 2(5)(a)(iii) of the Finance (No. 1) Act of 1965. (The section is wrongly mentioned as S. 5(a)(iii) in the statement of the case). The Department being aggrieved by the order of the AAC filed an appeal in respect of the above assessment year before the Tribunal. The Tribunal held that the AAC was justified in entertaining the additional ground for allowing rebate on export profit at two per cent of the export sales made by the assessee during the two years under appeal. The Tribunal found that there was no dispute that the assessee's case was covered by the relevant section of the Finance Act of 1965 and the assessee would have been entitled to rebate at two per cent on the claim being made before the ITO. Though the assessee had admitted that no such claim was made before the ITO, it was raised before the AAC who had admitted the additional ground and directed the ITO to verify the claim of the assessee for allowance of rebate in accordance with law. Thereafter, at the instance of the Revenue the question hereinabove set out has been referred to us for our opinion.

(3.) AS regards the powers of the AAC in an appeal under S. 251 of the IT Act, 1961, being a section similar to S. 33(b) of the Indian IT Act, 1922, there has been the authoritative pronouncement of the Supreme Court in Addl. CIT vs. Gurjargravures P. Ltd. 1978 CTR (SC) 1 : (1978) 111 ITR 1 (SC) : TC7R.367. In that case, the Supreme Court reversed the decision of this High Court which is to be found reported in CIT vs. Gurjargravures P. Ltd. (1972) 84 ITR 723 (Guj) : TC7R.371. In the case of Gurjargravures P. Ltd. (supra) one of the grounds of appeal raised by the respondent in the appeal before the AAC was that the ITO had erred in not giving the respondent the benefit of S. 84 of the IT Act, 1961. No such claim had been made before the ITO when he completed the assessment, nor was there any material on record supporting such a claim. In the subsequent years relief under S. 84 had been allowed to the respondent. The appeal was dismissed by the AAC on the ground that the question of error on the part of the ITO did not arise as no claim for exemption under S. 84 had been made before the ITO. On further appeal, the Tribunal held that since the entire assessment was open before the AAC, there was no reason for his not entertaining the claim and directing the ITO to allow appropriate relief. On a reference to this High Court it was held by the High Court that it was competent for the Tribunal to so hold and direct the ITO. On appeal against the decision of this High Court the Supreme Court, reversing the decision of this High Court, held that as there was no claim made before the ITO and further as there was no material before the ITO, from the mere fact that such a claim had been allowed in subsequent years it could not be assumed that the prescribed conditions justifying a claim for exemption under s. 84 were also fulfilled and the Tribunal was not competent to hold that the AAC should have entertained the question of relief under S. 84 or to direct the ITO to allow the relief. The Supreme Court in that case followed its own earlier decision in CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) : TC7R.590, and the following passage from that earlier decision was extracted in Gurjargravures' case (supra) :