TMI Blog1994 (1) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment years under consideration 1980-81, 1981-82 and 1982-83 the ITO allowed weighted deduction on account of export market development allowance under section 35B(1)(b) of the Act at ₹ 1,15,401 being one-third of ₹ 3,46,223, ₹ 9,45,644 being one-third of ₹ 28,36,932 and ₹ 1,76,779 being one-third of ₹ 5,30,337. The said deductions were allowed without any detailed discussion in the assessment orders. The assessee preferred appeals against the said assessment orders before the Commissioner (Appeals). These appeals, however, did not relate to the question of weighted deduction under section 35B(1)(b). The appeals were disposed of by the Commissioner (Appeals) by his order dated 21-11-1984. 3. The Commissioner was, however, of the prima facie opinion that the ITO wrongly allowed relief/deduction under section 35B(1)(b) and initiated proceedings under section 263 of the Act. The assessee con tended before the Commissioner that the Commissioner had no jurisdiction to pass an order under section 263 because the ITO's order was subject of an appeal before the Commissioner (Appeals) who disposed of the appeals by his order dated 21-11- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce emphasised the scope and ambit of the power of the first appellate authority and brought home the principle that the first appellate authority's powers are co-extensive with the powers of the Assessing Officers. Therefore, when the assessment as made by the Assessing Officer is brought in appeal before the first appellate authority, the latter is invested with jurisdiction not only to decide the grounds of appeal but also the other matters contained in the assessment order not appealed against. This power arises from the power of the first appellate authority to enhance the assessment. For this proposition numerous decisions have been cited in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) and Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC). 5. Stress was laid on the decisions of this Court in Jeewanlal [1929] Ltd. v. Addl. CIT [1977] 108 ITR 407 (Cal.) and General Beopar Co. (P.) Ltd. v. CIT [1987] 167 ITR 86 (Cal.). Thus, the assessee has sought to impress on us that when the assessment order was subjected to appeal and an appeal order has been passed in pursuance thereof, the entire assessment order merges with the appeal order and ceases to be an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete fusion of the assessment order in the appellate order. The said decisions are concerned with altogether different aspect, namely, the scope of the powers of the first appellate authority. Even, if the doctrine of the total merger can be canvassed as a by-product of the principles laid down by the Supreme Court in the said decisions, that would not alter the conclusion this Court arrived at in Hamilton Co.'s case (supra), in the light of the amended provisions of section 263. 10. Even, in the absence of the new Explanation the revenue could advance its case by citing the judgment of the Supreme Court in State of Madras v. Madurai Mills Co. Ltd. AIR 1967 SC 681. Before parting with the matter we must place on record the arguments which the learned counsel for the assessee strenuously urged to persuade us to make a departure from our decision in Hamilton Co. (P.) Ltd.' s case (supra). It is respectfully submitted that the decision of the Supreme Court in Madurai Mills Co. Ltd.'s case (supra) does not decide the controversy involved in the present case under reference and is clearly distinguishable. In this case, their Lordships of the Supreme Court while deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under clause (i) are exercised when the order of the Deputy CTO is found to be erroneous and prejudicial to the interests of the revenue. The powers under clause (ii) are exercised with a view to giving relief to the assessee, if possible. In that case, the Deputy Commissioner had exercised powers of revision under clause (ii) of section 12(2). It was in that context that the Supreme Court made the aforesaid observations regarding merger. There is nothing in the decision of the Supreme Court to show that it expressed a view in Madurai Mills Co. Ltd.'s case (supra) different from the one taken in CIT v. Amritlal Bhogilal Co. [1958] 34 ITR 130 (SC). This very aspect has been stressed by their Lordships of the Bombay High Court in CIT v. P. Muncherji Co. [1987] 167 ITR 671 . Their Lordships held and observed that the decision of the Supreme Court in Madurai Mills Co. Ltd.'s case (supra) does not decide the issue in controversy. If the decision of the Supreme Court in Madurai Mills Co. Ltd.'s case (supra) does not decide the issue as regards merger, then we can say that the matter is an open issue not finally settled judicially. It is submitted that the ratio in Amri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Deputy Commissioner, the limitation should run from 21-8-1954 and the notice issued by the Board on 4-8-1958 was not barred by limitation of time and was valid. But, the dealer contended that the subject-matter of revision not being the subject-matter of consideration by the Deputy Commissioner, the revision is of the assessment order of the Deputy CTO, dated 28-11-1952 and the limitation of four years should run from 28-11-1952. It is the contention of the dealer that the revision by the Deputy Commissioner not dealing with the question of exemption of purchases from outside the State, the assessment order allowing such exemption does not merge with the revision order of the Deputy Commissioner. The Supreme Court held against the action of the Board of Revenue on the basis of the finding recorded in the following words:- It is manifest that the subject-matter of the revision proceedings before the Board of Revenue was the revised assessment order of the Deputy Commercial Tax Officer, Madurai dated 28-11-1952. It follows that the order of the Board of Revenue was made beyond the limit of four years prescribed by section 12(4)(b) of the Act, and it is, therefore, invalid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal [filed on or before or after 1st 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. 12. In the present case, we are only concerned with clause (c) of the said Explanation. This clause (c) was brought on the statute book for the first time by the Finance Act, 1988 with effect from 1-6-1988. Originally, this clause (c) read as under:- Where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal, the powers of the Commissioner under this sub-section shall extend to such matters as had not been considered and decided in such appeal. 13. The expressions in sq. brackets 'filed on or before or after 1-6-1988' and 'shall be deemed always to have extended' were inserted in clause (c) by the Finance Act, 1989 with effect from 1-6-1988. In other words, the entire clause (c) of the Explanation to section 263(1) has been inserted by the Finance Acts of 1988 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity is restricted to certain areas as spelt out from the Amendment Act itself. The decision of the Supreme Court in connection with the retrospective effect of amendment of section 23(2) is not applicable here because there the Court was concerned with substantive law enhancing the rate of solatium. But here, we are dealing with an explanation which is declaratory in nature. (b) The Finance Acts, 1988 and 1989 which inserted clause (c) in Explanation to section 263(1) clearly provide the degree of retrospectivity in the clause itself. The law is made retrospective with effect from 1-6-1988. In view of the insertion of clause (c) with effect from 1-6-1988, the Commissioner shall have jurisdiction to exercise the powers of revision under section 263(1) in respect of all matters, decided by an Assessing Officer, which has not been considered and decided in appeal by the appellate authority, whether such appeal is filed on or before or after 1-6-1988. In other words, although clause (c) was brought on the statute book with effect from 1-6-1988, the Commissioner may exercise the revisionary jurisdiction under section 263(1) on or after 1-6-1988 even in those cases where the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Explanation 1 to section 16(1) Inserted by Taxation Laws (Amendment) Act, 1984 with retrospective effect from 1-4-1975. 4. Explanation to section 34(3) Inserted by Finance Act, 1966 with retrospective effect from 1-4-1962. 5. Explanation 2 to section 35B Ordinarily inserted by the Finance Act, 1973 with retrospective effect from 1-4-1968. Sl. No. Provision Remarks 6. Explanation 2 to section 37(2A) Inserted by the Finance Act, 1983 with retrospective effect from 1-4-1976. 7. Explanation 8 to section 43 Inserted by the Finance Act, 1986 with retrospective effect from 1-4-197 As against these 7 instances there are 11 other instances including the one under section 263 where, though the same expression is used, there is no mention of retrospective effect having been given to it. Those instances are the following:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(1) with effect from 1-6-1988 clearly goes to suggest that the law prior to 1-6-1988, when CIT had already exercised jurisdiction, was otherwise and is not intended to be disturbed even by the statute. (g) The aforesaid aspects as discussed in detail hereinabove were not brought to the notice of this Court either in the case of Hindustan Aluminium Corporation Ltd. v. CIT [1989] 178 ITR 74 (Cal.) and/or in the case of Hamilton Co. (P.) Ltd. 's case (supra). This part of the argument has also been considered by us. Mr. Poddar in enumerating the instances where the Legislature inserted Explanations to the main provisions giving retrospective effect to the same not from the commencement of the Act but from an intermediate date, has omitted to mention Explanation that was inserted below section 26 relating to treatment of property owned by co-owners. The Explanation clarified that where more than one person owned a particular property each using it as his or her residence, the concessional tax treatment provided for in section 23(2) in respect of self-occupied dwelling house is to be allowed in computing the property income of each such co-owner as if each co-owner is indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it declaratory or annotative and is no new legislation. 14. The learned counsel has, however, contended that this view would be simplistic when examined from the total context of such amendment. Even while saying that the amendment has the purpose of removing doubts the Legislature has pegged its operation to a past date which means its intention is not to give it unrestricted retrospective operation. Multiple instances of similar legislative amendments have been given where, despite avowal of the single-minded purpose of removing doubts, retrospective effect has been given to such declaratory amendments from a particular point of time. Such drawing of the line of retrospectivity at different points of time cannot be said to have been done capriciously. Even though declaratory, the provisions cannot be stretched beyond the line drawn. 15. There are no doubt reasons why the Legislature has in some instances given divergent retrospectivity to different amendments. The date-lines depend on the circumstances and the requirement of rationalization and pragmatism. Such date-lines are fixed so that the matters buried in long past may not be revived creating undesirable multiplicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. In our view the dateline operates as a bar where the Commissioner proceeds to revive a proceeding by way of rectification of any order which he might have passed before 1-6-1988 taking a view opposed to what is now declared in the amendment. Many High Courts have held that the effect of the appeal order is total merger even if the subject- matter of appeal is in respect of part or parts of the assessment order and not the whole of it. Thus, possibility of revision proceeding having been dropped after initiation by reason of such pronouncements by the jurisdictional High Courts cannot be ruled out. The date-line only signifies that on the basis of the retrospectivity of the amendment no rectificatory measure should be taken in respect of any decision taken for giving up the proceeding prior to 1-6-1988. 18. This is the only way one can read the mind of Parliament. Parliament merely declared what it intended to enact at the very inception of the provision, but also took care that the amendment, though declaratory, may not lead to the reopening of the past cases given up. It was for that purpose that it thought fit to set a date to its retrospectivity. This should not, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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