TMI Blog2001 (4) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowed from the Rajasthan Finance Corporation and other scheduled banks amounting to Rs. 6,01,635 and deduction was computed accordingly. Aggrieved by the lesser allowance of deduction than claimed under section 80J of the Act, the assessee filed an appeal before the Appellate Assistant Commissioner of Income-tax, Range Kota, who, vide his order dated August 24, 1979, accepted the appeal filed by the assessee and directed the Assessing Officer to recompute the deductions allowable under section 80J of the Act by including the borrowed capital in the fixed capital investment. On that basis, the assessment was completed. Thereafter, the Assessing Officer sought to recall the allowance under section 801 by rectification of the assessment made in pursuance of the directions of the Appellate Assistant Commissioner relating to the allowance of deduction under section 80J of the Act on the ground that the audit report was not submitted along with the return of income and thus deduction under section 80J of the Act was not at all allowable. Against that, an appeal was filed before the Commissioner of Income-tax (Appeals). In the appeal, two-fold points were raised by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is supposed to have merged in the appellate order and, therefore, the Income-tax Officer could not have started rectification proceedings under section 154 of the Incometax Act, 1961?" (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer passed the order under section 154 due to change of opinion and that there was no mistake apparent from the record within the meaning of section 154 of the Income-tax Act, 1961 ?" We have heard Mr. J. K. Singhi, learned counsel appearing for the Revenue, and N. M. Ranka and J. K. Ranka, for the respondent-assessee. It has been contended by learned counsel appearing for the Revenue that the Tribunal has erred in not properly appreciating the principle relating to doctrine of merger particularly keeping in view the provisions of section 154(1A) of the Act. The doctrine of merger which inhibits the jurisdiction of an authority to rectify its own order on finding it to be suffering from a mistake apparent from the record is only confined to the subject-matter of appeal and not in its entirety irrespective of the fact whether the appeal is restricted to a limited question or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the doctrine of merger applies only with respect to the subject-matter of controversy that has been made subject to an appeal. Thus, sub-section (1A) gives statutory recognition to the principle that the doctrine of merger so far as the question of rectification is concerned, operates only on the field of the subject-matter of appeal and not beyond that. The question then arises what is meant by the expression "in relation to any matter other than the matter which has been so considered and decided". On a plain reading of the statute, we find that it conveys that the subject matter of appeal in all its aspects which can call for consideration on the dispute raised and that will always depend upon the nature of the dispute raised before the appellate authority and the answer cannot be found in the abstract. Reliance has been placed on a decision of the Gujarat High Court in Karsandas Bhagwandas Patel v. G. V. Shah, ITO [1975] 98 ITR 255. It was a case which related to disallowance of certain depreciation already allowed by the Assessing Officer in respect of the claims made regarding specific business assets but withdrawn later on by taking recourse to the rectification proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the Income-tax Officer. The decision of the Income-tax Officer allowing additional depreciation on motor-car and motor-cycle did not, therefore, merge in the order of the Appellate Assistant Commissioner and if the allowance of such additional depreciation was patently erroneous, the Income-tax Officer was entitled to rectify the mistake under section 35, sub-section (1), by adding back the amount of such additional depreciation." It may be recalled here that, in the aforesaid case, the principle of merger was applied keeping in view the facts and circumstances of that case before the court. In this connection, we may refer to a recent decision of this court in CIT v. Eklingji Trust [2001] 250 ITR 699-D.B. Income-tax Reference No. 16 of 1987, decided at jodhpur vide order dated February 23, 2001. In that case, the assessee was a public religious and charitable trust. The claim made by it was in respect of the income derived from different sources to be exempted from income-tax under sections 11 and 12 of the Act of 1961. The Assessing Officer, while invoking the provisions of section 13 of the Act, held that part of the income from the property of the trust during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised any jurisdiction to amend the order passed by the Appellate Assistant Commissioner in exercise of his power under section 154 of the Act of 1961. In such an event splitting the question of applicability of sections 13, 11 and 12 could not have been made which forms a component part of the whole scheme, to get over the binding nature of the appellate order on the Income-tax Officer." "It may be pertinent to notice that it is only on the finding that the income part of the funds of the trust has continued to be lent to Lake Palace Hotels and Motels Pvt. Ltd. in which the managing trustee of the trust has substantial interest for a period of nine months during the previous year at inadequate interest on the finding that the reasonable rate of interest chargeable was 10 per cent. whereas money has been lent to the company for a period of nine months only at the rate of 5 per cent. merely because the provision has not been referred to. It cannot be said that the additions in the income have been made without reference to those provisions." Another decision which has been made brought to our notice in this connection is the decision of the Gauhati High Court in P. Das and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h section 80J was attracted. Therefore, so far as the matter relating to the applicability of the provisions of section 80J of the Act is concerned, was considered and found in favour of the assessee. Thus, the applicability of section 80J was not at all the subject-matter of the appeal. The subject-matter of the appeal was limited to the extent that by application of the provisions of section 80J of the Act for the availing of which no impediment was found, how much benefit is to be computed to which the assessee is entitled to deduction under section 80J of the Act. That being the position, it cannot be said that the matter regarding the applicability of section 80J of the Act or non-fulfilment of any condition by the assessee in any sense was the subject-matter of the appeal, which would result in denuding the Assessing Officer to invoke his jurisdiction under section 154 of the Act if otherwise the case is made out that the order suffers from the mistake apparent on the face of the record on the matter regarding the applicability of section 80J of the Act as such, or non-fulfilment of any condition for availing of its benefit by the eligible undertaking. In these spheres, if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igned and verified by such accountant. As stated above, in the instant case, while submitting the original return, the audit report was not filed. However, it cannot be gainsaid that in view of the pronouncements made by various High Courts on the question whether the requirement of filing of the audit report is mandatory or directory and whether it can be cured at a later stage, there is division of opinion. In CIT v. Jaideep Industries [1989] 180 ITR 81 (P H), it has been held by the Punjab and Haryana High Court that the requirement of filing of the audit report under sub-section (6A) of section 80J of the Act along with the return is mandatory in nature and filing of such audit report during the assessment proceedings would not satisfy the requirement of the aforesaid provision. However, on the other hand, the Gujarat, Madras, Bombay, Allahabad, Patna and Jammu and Kashmir High Courts have held that the requirement under section 80J(6A) that the audit report should be filed along with the return of income is not a mandatory condition and, therefore, the filing of the audit report after the submission of the return but before the completion of the assessment is sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X
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