1. By this reference application, the following questions are referred for the opinion of this Court: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the provisions of section 263 of the Income Tax Act, 1961, as amended by the Finance Act, 1988, would not be available to the Commissioner of Income-tax in this case?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in cancelling the order of the Commissioner of Income-tax under section 263 of the Income Tax Act, 1961?"
2. The assessee is a limited company. It has filed a return on December 31, 1983, showing total income for the year Rs.2,89,275 and also claim for deduction under sections 80M and 80VV. After setting off earlier years' unabsorbed loss and depreciation to the tune of Rs.2,74,135, the net income of Rs.4,390 has been shown by the assessee. The relevant assessment year is 19,82-83 for the accounting period ended on December 31, 1981. After examining the books of account and materials placed before the Assessing Officer, he computed the income of the assessee at Rs.4,08,404. Against that order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) has passed an order in appeal on December 27, 1985. Thereafter, the Commissioner of Income-tax has issued a notice for revision of the assessm ent order under section 263 on the ground that the assessee has claimed service charges and vehicle hire charges amounting to Rs.6,65,162 and Rs.18,900 respectively, accruing in the assessm ent year 1982-83. That has not been properly enquired into by the Income-tax Officer.
3. Therefore, the assessm ent order was set aside with a direction upon the Assessing Officer to examine and give opportunity to the assessee and reconsider whether service charges and vehicle hire charges amounting to Rs.6,65,162 and Rs.18,900 can be allowed. The order of the Commissioner of Income-tax under section 263 of the Act has been challenged by the assessee before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal following the decision of this Court in the case of General Beopar Co. (Pvt.) (1987) 167 ITR 86, set aside the order of the Commissioner of Income-tax under section 263 of the Act and restored the assessment order which was set aside by the Commissioner of Income-tax under section 263 of the Act.
4. None appears for the assessee.
5. Learned counsel for the Revenue submits that the judgment is dated September 5, 1986. Thereafter, there is an amendment in the provision of section 263 of the Act by insertion of the Explanation whereby the provision has been clarified providing that if any item which has not been considered and decided in the appeal by the Commissioner of Income-tax (Appeals) on those matters, the assessm ent order can be revised. That amendment has been made with effect from June 1, 1988.
6. Therefore, the judgment of this Court in the case of General Power Co. (P.) Ltd. v. CIT (1987) 167 ITR 86, is no more a good law. He also referred to a decision of the Supreme Court in the case of CIT v.
7. Shri Arbuda Mills Ltd. (1998) 231 ITR 50, wherein the apex Court has considered the amended provision of section 263 and held that the power of the Income-tax Commissioner shall extend and shall be deemed always to have.Extended to such matters not considered and decided in appeal filed by the assessee before the Commissioner of Income-tax (Appeals).
8. The Explanation to section 263 of the Act inserted and made effective from June 1, 1988, reads as under: "Explanation.---For the removal of doubts, it is hereby declared that, for the purposes of this subsection,---
(a) an order passed on or before or after the 1st day of June, 1988, by the Assessing Officer shall include---
(i) an order of assessm ent made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the (Joint) Commissioner under section 144A;
(ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to him under the orders or directions issued by the Board or by the Chief Commissioner of Director-General or Commissioner authorised by the Board in this behalf under section 120;
(b) 'record' shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner;
(c) Where any order referred to in this subsection and passed by the Assessing Officer had been the subject-matter of any appeal, filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this subsection shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal."
9. Clause (c) of the Explanation leaves no doubt that the power of the Commissioner under section 263 shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in appeal before the Commissioner of Income-tax (Appeals) or the Appellate Assistant Commissioner.
10. We perused the order of the Commissioner of Income-tax (Appeals), dated December 27, 1985. In the grounds of appeal before the Commissioner of Income-tax (Appeals) as well as the matter considered by the Commissioner of Income-tax (Appeals), the issues regarding service charges and vehicle hire charges amounting to Rs.6,65,162 and Rs.18,900 are not figured. The Commissioner of Income-tax (Appeals) has not considered those issues. When the matter was not before the Commissioner of Income-tax (Appeals) nor is there any decision on the issues by the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax was justified in invoking the provision of section 263 of the Act to revise the order of the Income-tax Officer on these issues.
11. Therefore, following the decision of the apex Court in the case of CIT v. Shri Arbuda Mills Ltd. (1998)
12. 231 ITR 50, we answer both the questions in the negative, that is, in favour of the Revenue and against the assessee.
13. The reference application is disposed of accordingly. .