TMI Blog1997 (10) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... e point for the same assessment year ? (3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee was a manufacturing company and was, therefore, liable to tax at the lesser rate ? (4) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee-company was to be taxed at the lesser rate under item II of Para. F of Part I of Schedule I to the Finance Act, 1965, as a manufacturing company ?" It would suffice to briefly notice the relevant facts in their chronological order. The four assessment years involved are 1965-66 to 1968-69. The Income-tax Officer completed the assessments under section 143(3) of the Act on the dates given hereunder : Assessment year Date of assessment 1965-66 5-1-1970 1966-67 5-1-1970 1967-68 19-1-1970 1968-69 7-2-1970 For all the four assessment years, the assessee was treated as a non-manufacturing company liable to income-tax at higher rate of tax, though such a finding is not specifically mentioned in the orders. For the assessment years 1965-66 and 1966-67, the assessee preferred appeals before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1969-70. Thus the assessee's claim for lower rate of tax rejected by the Income tax Officer under section 154 was allowed by the Appellate Assistant Commissioner for the four assessment years in question. It is pertinent to note that in the four appeals before the Appellate Assistant Commissioner attention was not invited to the order dated March 28, 1972, of the Commissioner of Income-tax dismissing the assessee's revision petitions. The Appellate Assistant Commissioner thereafter received a request of the Income-tax Officer for rectification of his orders dated February 22, 1973, inviting the latter's attention to the fact that the assessee's revisions having been rejected by the Commissioner of Income-tax and the assessment orders of the Income-tax Officer having been maintained in revision, the Appellate Assistant Commissioner could not have exercised his appellate jurisdiction. The Appellate Assistant Commissioner having satisfied himself on the provisions of section 154 being attracted in such circumstances issued notices to the assessee to show cause as to why his orders dated February 22, 1973, be not recalled and rectified as there was a mistake apparen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for the production of books right from the point of selling the complete books. All the intermediate processes including the process of printing and binding were undertaken at the assessee's risk and cost and responsibility and it was getting the books printed and bound under contracts other than contracts of purchase. In most cases it was supplying the raw materials and even the stores required for completing the processes, say of binding. It was also responsible for design of the jackets and also for providing the material for the same. In the circumstances, the assessee was clearly engaged in the manufacture of goods and the mere fact that it did not own the printing press or the binding machine did not in any manner derogate from its engagement as such. The orders of the Appellate Assistant Commissioner, therefore, are in accordance with law and did not call for any interference on our part.'." In substance, the Income-tax Appellate Tribunal while hearing the appeal arising out of the assessment years 1969-70 to 1971-72 had held the assessee to be a manufacturing company. In its opinion, it was the finding of the Income-tax Appellate Tribunal which was binding on the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectified by an income-tax authority. It has been held in T. S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 (SC) that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long-drawn thrust of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point is not a mistake apparent from the record. (Also see K. M. Shanmugam v. S. R. V. S. (P.) Ltd., AIR 1963 SC 1626 and Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, AIR 1960 SC 137). The original orders of assessment---all the four---were dealt with in revision by the Commissioner and the questions---whether the petitioner was a manufacturing company or not and hence entitled to a lower rate of tax or not, were adjudicated upon and decided adversely to the assessee by the order of the Commissioner dated March 28, 1972. The assessment orders stood merged in the revisional order of the Commissioner to the extent of that issue. The Appellate Assistant Commissioner could not have thereafter passed any such order (whether original or appellate) which would have had the effect of rectifying the orders of assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The opinion on this aspect of law came to be settled much thereafter by the Tribunal deciding appeals relevant to some subsequent years of assessment, i.e., 1969-70 to 1971-72. An order of assessment which had already achieved a finality (and where the plea that the assessee was liable to tax at a lower rate being a manufacturing company was not even raised) could not have been rectified by exercising jurisdiction under section 154 of the Act so as to grant a relief on the merits by upholding a claim based on subsequent change or development of judicial opinion. By way of abundant caution it may be placed on record that the Appellate Assistant Commissioner rightly entertained the application of the Department under section 154 of the Act and recalled his earlier order at the instance of the Department inasmuch as the Appellate Assistant Commissioner had committed an obvious error of law in allowing the assessee's appeal earlier by overlooking the fact that the assessment orders of the Income-tax Officer wherein rectification was sought had ceased to exist, having merged into the revisional order of the Commissioner of Income-tax. Taking up the second contention, we may proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which is being invoked in exercise in a wider and larger sense. Their Lordships have held that the order of the court below having merged into the order of the High Court passed in exercise of revisional jurisdiction conferred by section 115 of the Civil Procedure Code, the writ jurisdiction of the High Court could not be invoked to challenge the order of the court below. It is true that the revisional order in the case at hand was passed by the Commissioner of Income-tax which is not a court. However, the distinction between a court and a Tribunal or Departmental authority exercising appellate or revisional jurisdictions has been lost so far as the applicability of the doctrine of merger is concerned. In S. S. Rathore v. State of Madhya Pradesh, AIR 1990 SC 10, their Lordships have held while overruling an earlier decision of the Supreme Court in the case of Sita Ram Goel v. Municipal Board, AIR 1958 SC 1036: "The distinction made between courts and Tribunals as regards applicability of the doctrine of merger is without any legal justification. Powers of adjudication ordinarily vested in courts are being exercised under the law by Tribunals and other constituted authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground of the bar of limitation may still be an order in appeal for the purpose of determining whether a right of further appeal would be available or not but that does not amount to saying that the order appealed against merges into the appellate order dismissing the appeal in limine as barred by time. Section 264 of the Income-tax Act, 1961, which confers revisional jurisdiction on the Commissioner over orders passed by an authority subordinate to him is wide in its terms. The Commissioner is empowered to make such inquiry or cause such inquiry to be made after calling for the record of any proceedings under this Act as he thinks fit and may pass such order thereon as he thinks fit subject to the provisions of the Act. The Commissioner is governed by rules of limitation. The function discharged by the Commissioner is judicial in nature. We are therefore clearly of the opinion that the order forming the subject-matter of revision would merge into revisional order of the Commissioner to the extent of the controversies or issues forming the subject-matter of revision and decided thereby expressly or by necessary implication. We can usefully borrow on the principles too we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fective in law. Mere pendency of an appeal does not have the effect of suspending the operation of the order under appeal. In our opinion, the pendency of the revision before the Commissioner of Income-tax did not suspend or render ineffective the order under revision but with the decision of the Commissioner of the Income-tax in revision, the order of the Income-tax Officer had ceased to exist having merged into the revisional order of the Commissioner of Income-tax. In the light of the abovesaid discussion, the questions are answered as under : (1) The proceedings under section 154 of the Income-tax Act, 1961, initiated by the assessee were misconceived and unsustainable in law and hence the Tribunal was not justified in giving-relief to the assessee on the merits in an appeal arising from the rectification proceedings as there was no error apparent from the record. The question is, therefore, answered in the negative, i.e., in favour of the Revenue and against the assessee. (2) By the date on which the Appellate Assistant Commissioner came to decide the appeals, revisions against the orders of assessment were confirmed by the Commissioner of Income-tax and in view of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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