TMI Blog1997 (12) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... constitute material for the Commissioner of Wealth-tax to revise the assessment by invoking section 25(2) of the Wealth-tax Act?" The facts of the case lie in a narrow compass. The Wealth-tax Officer passed four separate orders for the assessment years 1971-72, 1972-73, 1973-74 and 1974-75, on December 29, 1978, wherein it has accepted the valuation of a residential building of the assessee situated in Banjara Hills, Hyderabad, at Rs. 2,39,946, Rs. 2,78,300, Rs. 2,78,300 and Rs. 3,00,000, respectively, but disallowed the liability to the Life Insurance Corporation to the extent of Rs. 11,000 and passed the assessment orders accordingly. The respondent-assessee had instituted four separate appeals before the Appellate Assistant Commissioner challenging the disallowance of the liability to the Life Insurance Corporation. The appeals were dismissed by the Appellate Assistant Commissioner vide his order dated August 18, 1979. The Commissioner of Wealth-tax exercising powers under section 25(2) of the Wealth-tax Act and taking the view that the values of the property of the assessee as given by him and accepted by the Wealth-tax Officer were erroneous and prejudicial to the Revenue be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the Appellate Tribunal is right in law in holding that the report of the Valuation Officer constituted the basis for the Commissioner of Wealth-tax to revise the assessment by invoking section 25(2) of the Wealth-tax Act ?" Relying on the cases of State of Madras v. Madurai Mills Co. Ltd., [1967] 19 STC 144 and Kaliki Veera Reddy and Co. v. State of Andhra Pradesh [1974] 34 STC 517 (AP), it has been contended by learned standing counsel for the applicant-Department that the Wealth-tax Officer has accepted the valuation of the property in question as given by the assessee-respondent and has disallowed the liability to the Life Insurance Corporation, therefore, the assessee-respondent has challenged only that part of the orders of assessment in the appellate court, which had dismissed the appeals. Therefore, it cannot be said that the orders of the Wealth-tax Officer had merged with the order of the Appellate Assistant Commissioner dated August 18, 1979, with the result the Commissioner had jurisdiction to revise the order of the Assessment Officer and to pass appropriate orders. It has been further contended that the Commissioner has based his fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in favour of the assessee. Reliance has been placed on the case of CIT v. Rajasthan Mercantile Co. Ltd. [1995] 211 ITR 400 (Delhi) and on the case of CIT v. Patel Brothers and Co. Ltd. [1995] 215 ITR 165 (SC). Relying on the case of CIT v. Amritlal Bhogilal and Co. [1958] 34 ITR 130 (SC) and State of Uttar Pradesh v. Mohammad Nooh, AIR 1958 SC 56, it has been held in the case of State of Madras v. Madurai Mills, AIR 1967 SC 681, that (headnote of AIR 1967 SC 681 and headnote of [1967] 19 STC 144) : "The doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior authority and the other by a superior authority, passed in an appeal or revision, there is a fusion or merger of the two orders irrespective of the subject-matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. The application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the appellate or revisional jurisdiction." Reproducing the aforementioned doctrine of merger ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the Full Bench of the Madhya Pradesh High Court in the case of CIT v. K. L. Rajput [1987] 164 ITR 197, have been quoted with approval by a Division Bench of this court in the case of CIT v. East Coast Marine Products (P.) Ltd. [1990] 181 ITR 314 and the Division Bench of this court has also disapproved the contrary view taken by certain other High Courts. In the case of S. S. Rathore v. State of Madhya Pradesh, AIR 1990 SC 10, the cause of action in the case of a service dispute was considered and it was held that the cause of action arises not from the date of the original adverse order but on the date when the order of the higher authority where a statutory remedy is provided entertaining the appeal or representation is made and where no such order is made, though the remedy has been availed of, a six months' period from the date of preferring of the appeal or making of the representation shall be taken to be the date when the cause of action shall be taken to have first arisen. It has been further held that the distinction made between courts and Tribunals as regards the applicability of the doctrine of merger is without any legal justification. Powers of adjudication ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 ITR 130 (SC), has held that, once an appeal is preferred by the assessee, it is open to the Commissioner to raise before the Appellate Assistant Commissioner any matter dealing with the assessment of the assessee and there is nothing left for any authority which passed the initial order to reopen in the manner sought to be done as in that case. Similarly, a Division Bench of the Orissa High Court, in the case of CIT v. Orissa Oil Industries Ltd. [1992] 193 ITR 183, has held that where an appeal has been filed against the order of assessment, such order merges with the appellate order and there is no scope for the Commissioner to revise the order of assessment made by the Income-tax Officer. On the facts of the case, the Calcutta and the Orissa High Courts reached the conclusion that the orders of assessment passed by the assessing authority had been merged with the appellate orders respectively and, therefore, there was no scope for the Commissioner to revise the order of assessment made by the assessing authority. The principles laid down in the case of CIT v. Amritlal Bhogilal [1958] 34 ITR 130 (SC) have been referred to and explained by the apex court in the case of State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether or not such provision is made by reason of any express or implied contract or custom or usage of trade, but does not include expenditure on food or beverages provided by the assessee to his employees in office, factory or other place of their work." Explanation 2 was inserted by the Finance Act of 1983, with effect from April 1, 1976. Explanation (b) to sub-section (2) of section 25 of the Wealth-tax Act, reads as under : "Explanation.---For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,---. . . (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; . . ." In clause (b), after the word "record", the words "shall include and shall be deemed always to have included" have been inserted by the Finance Act of 1989, with effect from June 1, 1988. It is pertinent to note that the words "shall include and shall be deemed always to have included" do not find place in Explanation 2 to section 37(2A) of the Income-tax Act and for this reason only, the Division Bench of the Delhi High Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation (b) to section 263, there is an express provision wherein it is prescribed that "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"; therefore, due to the death of one of the two partners resulting in the dissolution of the assessee-firm on account of the said death which took place prior to the passing of the order by the Commissioner it could, therefore, be taken into consideration by him for the purposes of exercising his power under section 263 of the Income-tax Act. The event subsequent to the passing of the order by the Income-tax Officer had been taken into consideration by virtue of Explanation (b) to section 263 referred to above. Explanation (b) in section 263 of the Income-tax Act is in pari materia with Explanation (b) to sub-section (2) of section 25 of the Wealth-tax Act and in spite of a specific date given for enforcement of the provision on the strength of the deeming clause, the subsequent events had been taken into consideration. For the foregoing reasons, even if it is assumed that the Commissioner had taken the subsequent v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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