TMI Blog2015 (3) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... oubted by Assessing Officer. Applicability of Section 10B of Act, 1961 for assessment year 2011-12, as claimed by assessee, was accepted by him. Thus, this aspect was not in appeal at any stage. It is only on the question of "quantum of profit" for which exemption was claimed that the appeal was filed. The Assessing Officer discussed the matter and found that instead of ₹ 4,97,28,163.45 which was claimed by assessee, it was entitled to exemption to the extent of ₹ 4,61,90,179.58 under Section 10B and there is taxable income of ₹ 3537980/-. On taxability of aforesaid amount, assessee preferred appeal and only that aspect was considered by CIT(A) as also Tribunal. At no stage, the issue whether assessee was entitled to claim exemption under Section 10B at all or not, having already exhausted beyond the period of exemption permissible under Section 10B, was not a subject matter of consideration before appellate authorities. Hence, this question was open to be looked into by Commissioner. - WRIT TAX No. - 185 of 2015 - - - Dated:- 11-3-2015 - Hon'ble Sudhir Agarwal and Hon'ble Shashi Kant, JJ. Counsel for Petitioner :- Suyash Agarwal,S.P. Gupta JU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed at ₹ 35,37,980/-. Against this assessment of taxable income ₹ 35,37,980/-, petitioner-assessee preferred appeal before Commissioner of Income Tax (Appeals) - II, Kanpur (hereinafter referred to as 'CIT(A)') on 28th March, 2014, which was allowed vide order dated 9th May, 2014. The Appellate Authority accepted return of assessee and determination of taxable income of ₹ 35,37,980/- was set aside. 5. Revenue preferred appeal before Tribunal vide memo of appeal dated 15th September, 2014. It was registered as ITA No. 734/LKW/2014. While appeal was pending before Tribunal, Assessing Officer issued notice dated 25.09.2014, under Section 154/155 of Act, 1961, stating that petitioner firm was not entitled for any exemption under Section 10B, since 10 years' period had already completed with assessment year 2010-11 and it has wrongly claimed exemption under Section 10B for assessment year 2011-12, which is a manifest error and need be rectified. 6. It is not clear whether petitioner submitted any reply or not, but admittedly no rectification order was passed by Assessing Officer. In the meantime appeal pending before Tribunal came to be decided v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner to show-cause as to how it was entitled to claim exemption under Section 10B for assessment year 2011-12 and to this extent assessment order dated 19th March, 2014 is erroneous and pre-judicial to the interest of Revenue. 9. Sri S.P. Gupta, learned Senior Advocate assisted by Sri Suyash Agarwal, contended that assessment order, passed by Assessing Officer, was set aside in appeal by CIT(A). It thus stood merged in appellate order. There existed no order of assessment of Assessing Officer in respect where to CIT could have exercised power under Section 263 of Act, 1961. He further, contended that in any case, appeal of Revenue against order of CIT(A) has been allowed by Tribunal and the matter has been remanded to Assessing Officer, whereafter, no further assessment has been made by Assessing Officer. In law, presently there does not exist any order of assessment and in absence of any order of assessment, power under Section 263 of Act, 1961 cannot be exercised. Therefore, impugned notice is patently without jurisdiction. 10. He next submitted that the question in respect to applicability of Section 10B of Act, 1961 for assessment year 2011-12 was never raised by responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial Co. Ltd. (supra) that this power of revision cannot be invoked in respect to each and every mistake or error committed by Assessing Officer. It is only when an order is erroneous and prejudicial to the interest of Revenue,, then Section 263 of Act, 1961 will be attracted. An incorrect assumption of fact or an incorrect application of law will satisfy the requirement of order being 'erroneous'. Court further said that orders passed without applying principles of natural justice or without application of mind, would also come within category of erroneous orders . 16. Coming to the phrase prejudicial to the interest of Revenue , Court said in Malabar Industrial Co. Ltd. (supra) that it is not an expression of art and not defined in Act, 1961. When considered with its ordinary meaning, it is of wide import and not confined to mere loss of tax. Court was of the view that scheme of Act was to levy and collect tax in accordance to the provisions of Act and this task is entrusted to the Revenue. If, due to erroneous order of Income Tax Officer, Revenue is loosing tax, lawfully payable by a person, it will certainly be prejudicial to the interest of Revenue. However, ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is the concept of 'merger' which has been recognised in Act, 1961. Ordinarily, when a judicial or quasi-judicial order becomes subject matter of appeal and is confirmed by Appellate Court or body, as the case may be, the order of Court below/Authority merges with the order passed in appeal. 21. The above general concept of 'merger' in respect to judicial and quasi-judicial orders has been considered and recognised time and again. 22. In Chandi Prasad and Others Vs. Jagdish Prasad and Others [2004 (8) SCC 724], the Court said : It is trite that when an Appellate Court passes a decree, the decree of the trial court merges with the decree of the Appellate Court and even if and subject to any modification that may be made in the appellate decree, the decree of the Appellate Court supersedes the decree of the trial court. In other words, merger of a decree takes place irrespective of the fact as to whether the Appellate Court affirms, modifies or reverses the decree passed by the trial court. (emphasis added) 23. In Gangadhara Palo Vs. The Revenue Divisional Officer Another [2011 (4) SCC 602), the Court said : According to the doctrine of merger, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner] or the Income-tax Officer on the basis of the4 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 or 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 sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 2st day of June, 1988], the powers of the Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal] 26. Words filed on or before or after 1st day of June, 1988 and further words and shall be deemed always to have extended came to be inserted in Clause (c) by F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s : (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law, in holding that the commissioner of Income-tax had no jurisdiction and powers to initiate proceedings under section 263 of the Income Tax Act, 1961, in respect of issues not touched by the Commissioner of Income-tax (Appeals) in his appellate order? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that not only the issues dealt with in the assessment order but also the other issues were merged in the Commissioner of Income-tax (Appeals)'s order ignoring the provisions contained in clause (c) of Explanation to sub-section (1) of section 263 of the Income-tax Act, 1961? Relying on CIT Vs. Abuda Mills Ltd. (Supra), the Court answered both the aforesaid questions in negative i.e. in favour of Revenue and against Assessee. 29. In EIMCO K.C.P. Ltd. Vs. C.I.T. [(2000) 242 ITR 659 (SC)], a question arose whether Commissioner can exercise power under Section 263 of Act, 1961, while agreeing with the order of assessment against which appeal is pending before Commissioner (A), involving the point upon which notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as weighted deduction under section 35B in the sum of ₹ 5,63,350 is concerned, the same was not a subject matter of the appeal before the Commissioner of Income-tax (Appeals). Factually, in this case, the doctrine of merger could not have been applied by the Tribunal to that part of the order ; which was not a subject matter of appeal as indicated, so as to exclude revisional jurisdiction of the Commissioner of Income-tax under section 263 of the Act. 33. On behalf of petitioner, reliance has been placed on a Division Bench decision of Karnataka High Court in CIT Vs. Tata Elxsi Ltd. [2012 (247) CTR 334], but having gone through the aforesaid decision, we find no application thereof to the issues which which we are concerned in this writ petition. The aforesaid decision therefore renders no help to petitioner at all. 34. In the circumstances, questions no. 1 and 2, are answered against petitioner. The question no. 3 is returned in favour of Revenue, holding that notice issued by Commissioner under Section 263 of Act, 1961, impugned in this writ petition is perfectly valid and in accordance to law. 35. In the result writ petition lacks merit. Dismissed. - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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