I.T.A No. 524 of 2006 ::1:: IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A No. 524 of 2006 Date of decision : September 16, 2008 M/S Paras Rice Mills, Kurukshetra ...... Appellant. through Mr.Avneesh Jhingan, Advocate v. Commissioner of Income Tax, Karnal and another, ...... Respondents through Mr.Vivek Sethi, Advocate CORAM : HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY TEWARI *** 1. Whether Reporters of Local Newspapers may be allowed to see the judgment ? 2. To be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest ? *** AJAY TEWARI, J This appeal, filed under Section 260A of the Income Tax Act, 1961 (for short “the Act”), proposes the following questions of law :- “ I. Whether in the facts and circumstances of this case, the passing of the appeal effect order u/s 154/254 of the Income Tax Act, 1961 by the assessing officer instead of relevant section 240 of the I.T Act, 1961 is absolutely illegal rendering the appeal effect order Annexure A-2 as null and void ? II. Whether in the facts and circumstances of the case and in the event of quashing of the whole proceedings against the appellant and cancelling the assessment order I.T.A No. 524 of 2006 ::2:: by the Income Tax Appellate Tribunal vide order Annexure A-1, the assessing officer gravely erred in relying on adjudication of facts by the Income Tax Appellate Tribunal ? III. Whether the assessing officer was justified in creating demand against the appellant on the basis of the adjudication on facts by the Income Tax Appellate Tribunal in a situation when the appellant has suffered a net loss of Rs.36862.56 after telescoping and setoff of loss as per Section 70 of the Act ? IV. Whether in the facts and circumstances of the case the appellant is entitled to interest as per the provisions of section 132B of the Act on the seized assets with effect from 1996 when the notice u/s 158BC was issued to the appellant as well as refund of Rs.23330/- along with upto date interest ? V. Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in dismissing the appeal and upholding order of CIT(A) that appeal against order of Appeal effect is not competent? VI. Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in not deciding the ground numbers 2-6 of the grounds of appeal Annexure A-9 ? VII. Whether in the facts and circumstances of the case appeal is competent against the order of Appeal effect I.T.A No. 524 of 2006 ::3:: Annexure A-2 ? Assessment order under Section 158BC(c) of the Act was framed against the assessee for the block period 1.4.1985 to 26.9.1995 in consequence of the search conducted under Section 132 of the Act at the business and residential properties of the assessee and its partners. Ultimately, the assessment was framed after making various additions on an undisclosed income of Rs.1,41,75,090/-. The assessee impugned the assessment order before the Tribunal on merits. Subsequently, the assessee moved an application for addition of additional grounds relating to the validity of the search. On the allowing of this application by the Tribunal, the revenue challenged the same by way of ITA No.129 of 2002, in which no relief was granted to the revenue. Eventually, the Tribunal held that it had jurisdiction to look into the validity of the search in an appeal filed before it against the order passed under Section 158 BC(C) of the Act determining the undisclosed income of the assessee and that it could also call for the records of the authority authorizing the search. After noticing that the revenue had not produced the material to justify the search before it, the Tribunal drawing an adverse inference against the revenue, quashed the assessment framed by the Assessing Officer. Thereafter, the Tribunal noticed that even though the assessment order had been quashed but since both sides had advanced lengthy arguments on the merits, the same were also being considered. Ultimately on merits too, the Tribunal gave substantive relief to the assessee. The matter then went back to the Assistant Commissioner of Income Tax for giving effect to the appeal order wherein the total undisclosed income was reduced to Rs.14,12,234/- on which tax of I.T.A No. 524 of 2006 ::4:: Rs.8,47,340/- was computed. The above order was also challenged in appeal before the Commissioner of Income Tax, who dismissed the same holding that the appeal would lie only before the Tribunal. The matter was carried by the assessee again before the Tribunal on the grounds that firstly in law, the appeal would lie only before the Tribunal and not before the Commissioner, and secondly the Tribunal was required to adjudicate the matter on merits. The Tribunal held that the order of the Commissioner dismissing the appeal on the ground of jurisdiction was valid and, thus, dismissed the appeal. It, however, declined to go into the other grounds on merits. Before us, counsel for the appellant has pressed only grounds 5 and 6. As far as ground No.5 is concerned, we are of the opinion that the reasoning of the learned Tribunal that since the Assessing Officer had merely given effect to the order of the Tribunal, an appeal against the said order would lie only before the Tribunal and not before the Commissioner is correct. In our view, however, having found this, the Tribunal should have decided grounds 2 to 6, raised by the assessee, on merits. This assumes even greater significance, since in the appeal preferred by the revenue being ITA No.93 of 2004, The Commissioner of Income Tax, Karnal v. M/S Paras Rice Mills, Kurukshetra, decided on 16.9.2008, we have already struck down the finding of the Tribunal in respect of the quashing of search and seizure proceedings. Even otherwise, if the impugned order of the Tribunal is permitted to hold the field it would only result in the assessee having to file another appeal on merits against the appeal effect order. In this view of the matter, we decide question No.5 against the assessee and question No.6 I.T.A No. 524 of 2006 ::5:: against the revenue and consequently remand the case back to the Tribunal for decision of the questions on merits. ( AJAY TEWARI ) JUDGE ( ADARSH KUMAR GOEL ) JUDGE September 16, 2008 'kk'