TMI Blog1988 (2) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... als) by his order dated January 16, 1982. The Commissioner directed the Incometax Officer to make a fresh assessment after giving the assessee a reasonable opportunity of being heard. Aggrieved by the order of the Commissioner, the assessee appealed to the Tribunal. The Tribunal, following the decision of the Special Bench of the Income-tax Tribunal in Dwarkadas Co. (P.) Ltd. v. ITO, in ITA No. 1852 (Bom) 1977-78 dated July 27, 1979 (reported in Selected Orders of Tribunal, Vol. I, page 495), held that the entire order of assessment had merged in the order of the Commissioner of Income-tax (Appeals) and the Commissioner was, therefore, not entitled to exercise any power under section 263 in regard to the order of the Income-tax Officer. Upholding the assessee's contention, the Tribunal stated that, although the appeal was taken by the assessee only in regard to certain matters and the appellate authority did not deal with the other matters arising from the order, the entire order of the Income-tax Officer had merged in the appellate order. The fundamental point which arises for our consideration in regard to the exercise of power under section 263 is whether the order of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment..." The Commissioner can exercise his power under this section only in relation to an order of the Income-tax Officer. To the extent that the order of the Income-tax Officer has merged in the order of the appellate authority, section 263 cannot operate. The scope of sections 33B and 33A of the Indian Income-tax Act, 1922 (the " old Act "), which, in scope, are identical respectively to sections 263 and 264 of the present Act was considered by the Supreme Court in CIT v. Amritlal Bhogilal Co. [1958] 34 ITR 130. The Supreme Court stated (pp. 139 and 140): " The Commissioner's revisional power under section 33A cannot be exercised to the prejudice of the assessee in any case. It can be exercised in respect of orders passed by any authority subordinate to the Commissioner; but in no case can the revisional order prejudiciall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal was preferred from the order of the Income-tax Officer and an order was passed in that appeal, the order of the Incometax Officer became merged in the order of the Appellate Assistant Commissioner ... " Following that decision, the same Division Bench held in CIT v. Amritlal Bhogilal Co. [1953] 23 ITR 420 (Bom) that even when a composite order of the Income-tax Officer dealt with the assessment and also the grant of registration of a firm and that order was the subject matter of an appeal, which was disposed of, the entire order became merged in the order of the appellate authority. Overruling that decision, the Supreme Court in CIT v. Amritlal Bhogilal Co. [1958] 34 ITR 130, stated (p. 136): " There can be no doubt that, if an appeal is provided against an order passed by a Tribunal, the decision of the appellate authority is the operative decision in law. If the appellate authority modifies or reverses the decision of the Tribunal, it is obvious that it is the appellate decision that is effective and can be enforced. In law the position would be just the same even if the appellate decision merely confirms the decision of the Tribunal. As a result of the confirmati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Deputy Commissioner of Commercial Taxes dated the 21 st August, 1954, because the question of exemption of the value of yarn purchased from outside the State of Madras was not the subject-matter of revision before the Deputy Commissioner of Commercial Taxes. The only point that was urged before the Deputy Commissioner was that the sum of Rs. 6,57,971-4-9 collected by the respondent by way of tax should not be included in the taxable turnover. This was the only point raised before the Deputy Commissioner and was rejected by him in the revision proceedings. On the contrary, the question before the Board of Revenue was whether the Deputy Commercial Tax Officer, Madurai, was right in excluding from the net taxable turnover of the respondent the sum of Rs. 7,74,62,706-1-6 which was the value of the cotton purchased by the respondent from outside the State of Madras. We are, therefore, of opinion that the doctrine of merger cannot be invoked in the circumstances of the present case. " Dealing with the contention of the State with reference to the observation of Gajendragadkar J. in CIT v. Amritlal Bhogilal and Co. [1958] 34 ITR 130, 139 (SC), as regards the doctrine of merger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... das Bhagwandas Patel v. G. V. Shah, ITO [1975] 98 ITR 255 (Guj). This view of the Gujarat High Court was followed by various other High Courts in a number of decisions. See CIT v. Sakseria Cotton Mills Ltd. [1980] 124 ITR 570 (Bom), Jeewanlal (1929) Ltd. v. CIT [1977] 106 ITR 33 (Cal), Singho Mica Mining Co. Ltd. v. CIT[1978] 111 ITR 231 (Cal), CIT v. City Palayacot Co. [1980] 122 ITR 430 (Mad), Puthuthotam Estates v. State of Tamil Nadu [1980] 125 ITR 41 (Mad), Jaora Sugar Mills Ltd. v. Union of India [1982] 134 ITR 385 (MP), Alok Paper Industries v. CIT [1983] 139 ITR 1064 (MP), CIT v. R. S. Banwarilal [1983] 140 ITR 3 (MP) [FB], CIT v. Mandsaur Electric Supply Co. [1983] 140 ITR 677 (MP) [FB], CIT v. Rajput (K. L.) [1987] 164 ITR 197 (MP) [FB] and Ganga Devi v. CWT [1987] 166 ITR 325 (Raj). In Jeewanlal (1929) Ltd. v. Addl. CIT [1977] 108 ITR 407 (Cal), Sabyasachi Mukharji J. (as he then was) adopted a line of reasoning which, we respectfully think, was in conformity with the view expressed by the Gujarat High Court. The learned judge stated that even when an appeal had been disposed of without the appellant urging a point that had been conceded by the Income-tax Officer by rect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire subject-matter of the assessment order was within the jurisdiction of the Appellate Assistant Commissioner. That being so, the entire assessment order will merge in the appellate order, irrespective of the points urged by the parties or decided by the appellate authority." If this were the correct view, the result would be that once an appeal is filed by the assessee, the entire order of the Income-tax Officer, notwithstanding the ambit of the appeal or the matters considered and decided in appeal, is deemed to have merged in the order of the appellate authority. The Commissioner is thus divested of his power under section 263 even in regard to matters not appealed against or decided by the appellate authority. The result would be the divestiture or dilution of an effective power conferred under section 263 to bring to assessment what had escaped assessment. As stated by the Supreme Court in CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443, 448, the power under section 33B of the 1922 Act (section 263 of the present Act) is, like the power under section 34 of that Act (sections 147 and 148 of the present Act), conferred with a view to bringing to tax inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its wisdom provided an easier and more efficacious procedure under section 263, and that the assessee, if truly aggrieved, is not without remedy by way of appeal to the Tribunal. See the principle stated by Beaumont C.J. in CIT v. Naik (D.R.) [1939] 7 ITR 362, 367 (Bom). If section 263 confers a certain power on the Commissioner, which it does, the fact that the Revenue has recourse also to other provisions of the Act for correcting the errors of the Income-tax Officer does not in any way lessen the efficacy of the power under section 263. With great respect, we do not accept the narrower construction of section 263 as adopted by the Allahabad High Court in J. K. Synthetics Ltd. v. Addl. CIT [1976] 105 ITR 344, and we gratefully adopt the construction of that provision as suggested by the Gujarat High Court in Karsandas Bhagwandas Patel v. G. V. Shah, ITO [1975] 98 ITR 255. In our view, therefore, the power of the Commissioner under section 263 remains in full force, notwithstanding the order of the appellate authority, in respect of matters not considered and decided in appeal. Accordingly, we answer the question in the negative, that is, in favour of the Revenue and against t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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