TMI Blog1986 (9) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee was calculated at Rs. 94,808 and income from dividend was calculated to be Rs. 34,508 aggregating to Rs. 1,34,316. Business losses suffered by the assessee in the earlier assessment years 1960-70 and 1970-71 were carried forward to the said assessment year for set off against the total income of the assessee, in the year involved, and the taxable income after such set off was computed as nil. The assessee preferred an appeal against this assessment before the Appellate Assistant Commissioner. It was contended that the Income-tax Officer had disallowed deduction under section 80M of the Income-tax Act, 1961, in respect of the dividend earned by the assessee. The Appellate Assistant Commissioner accepted the contention of the assessee and by his order dated May 26, 1975, directed the Income-tax Officer to allow deduction under section 80M as claimed. It was also pointed out to the Appellate Assistant Commissioner that in computing the income arising from dividend and house rent, the Income-tax Officer had made a typographical mistake and had arrived at a total of Rs. 1,34,316 whereas the correct figure would be Rs. 1,29,316. The Appellate Assistant Commissioner fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77. The assessee contended that inasmuch as the assessment in question had been reopened under a notice issued under section 148 of the Act dated November 11, 1976, pursuant whereto the assessee had filed a fresh return of income, there was no order of assessment which could be modified under section 263 of the Act. The assessee contended further that one of the objects for which the assessee had been constituted was to purchase or take on lease land, buildings and other immovable properties and the same were amongst the business activities to be carried on by the assessee. It was contended that the rent received from the sub-lease was in fact profit earned in the business activities of the assessee even if the same was assessed under the head " Other sources " The assessee contended further that similar contentions had been accepted in the assessment of the assessee in an earlier assessment year 1969-70 where expenditure incurred by the assessee in purchasing and selling lands and buildings were allowed as revenue expenditure. The assessee also appeared before the Commissioner and reiterated the submissions. The Commissioner came to the conclusion that there was no finding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was proper that the Commissioner instead of making enquiries himself in the matter had directed the Income-tax Officer to decide the matter afresh. It was also contended before the Tribunal on behalf of the assessee that as at the date of the order of the Commissioner passed under section 263 of the Income-tax Act, 1961, viz., January 25, 1977, the assessment order of the Income-tax Officer had merged in the order of the Appellate Assistant Commissioner, the only effective order which was in force at the relevant time and the Commissioner had no jurisdiction under section 263 to revise the order of the Appellate Assistant Commissioner and, therefore, the order of the Commissioner passed under section 263 was void and without jurisdiction. It was contended on behalf of the Revenue before the Tribunal that the order of the Income-tax Officer had merged in the order of the Appellate Assistant Commissioner only to the extent of the subject-matter of the appeal. The matter relating to the set off of the business losses of the earlier years against the different items of income of the assessee was neither raised by the assessee in the appeal nor considered by the Appellate Assista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and as such the Commissioner had no jurisdiction to revise the order of assessment. Learned advocate submitted further that, in any event, the assessment having been reopened under sections 147 and 148 of the Income-tax Act, 1961, the entire matter was at large, there was no effective order of assessment and the Commissioner had no jurisdiction to revise the assessment orders. Learned advocate also contended, though somewhat faintly, that in the impugned order of the Commissioner passed under section 263 of the Act, there was no definite finding that the order was prejudicial to the interests of the Revenue. In support of his contentions, learned advocate for the assessee cited the following decisions : (a) CIT v. Tejaji Farasram Kharawala [1953] 23 ITR 412 (Bom). This decision of a Division Bench of the Bombay High Court was cited for the following observations in the judgment of Chagla C.J. (at pages 419 and 420): "...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. It is not as if the power of the Appellate Assistant Commissioner is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer while making the assessment orders had also granted to the asses see, a firm, renewal of its registration, under the Indian Income-tax Act, 1922. Appeals were preferred from the assessment orders and pending the appeal, the Commissioner of Income-tax, exercising his revisional powers under section 33B of the Act of 1922, cancelled the registration of the firm and directed the Income-tax Officer to make a fresh assessment of the assessee as an unregistered firm. It was held by the Supreme Court that no appeal lay from an order granting registration to a firm and such orders were outside the jurisdiction of the Appellate Assistant Commissioner. It was held further that when an appeal from an order of assessment was decided by the Appellate Assistant Commissioner, what merged in the appellate order was the order of assessment under appeal and not the order of registration which could not have been the subject-matter of the appeal. (c) Gopal Chandra Sen v. ITO [1963] 50 ITR 87 (Cal). In this case, a learned judge of this court, following the decision of the Supreme Court in Amritlal Bhogilal and Co. [1958] 34 ITR 130, held that where an appeal had been preferred f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s court that the application of the doctrine of merger would depend on the nature of the appellate or revisional order in each case and the scope of the statutory provision conferring the appellate or revisional jurisdiction. In case where interest had been charged under section 139(8) of the Incometax Act, 1961, no appeal could have been preferred before the Appellate Assistant Commissioner against charging of such interest. Therefore, the question whether the interest which could be charged had been properly waived or not was not and could not have been the subject-matter of an appeal before the Appellate Assistant Commissioner and there could be no question of merger of the order of the Income-tax Officer with the order of the Appellate Assistant Commissioner on this aspect of the matter. Therefore, the Commissioner retained his jurisdiction in such a case even where the Appellate Assistant Commissioner had passed an order in appeal in respect of other appealable issues. (g) Singho Mica Mining Co. Ltd. v. CIT [1978] 111 ITR 231 (Cal). In this case, it was held by a Division Bench of this court to which I was a party that where there was an appeal from an order of assessment an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 22(2) and may proceed to assess or reassess such income, profits or gains. It is, therefore, manifest that once assessment is reopened by issuing a notice under sub-section (2) of section 22, the previous underassessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under section 34(1)(b), the Income-tax Officer has not only the jurisdiction but it was his duty to levy tax on the entire income that bad escaped assessment during that year." (b) Sun Engineering Works (P.) Ltd. v. CIT [1978] 111 ITR 166 (Cal). In this case, a Division Bench of this court, to which I was a party, following the decision of the Supreme Court in V. Jaganmohan Rao's case [1970] 75 ITR 373, held that on reopening of an assessment, the previous underassessment stood set aside and the whole assessment proceedings started afresh and in the reassessment, the question of loss suffered could not be left undetermined and had to be recomputed even if only to determine to what extent income had escaped taxation. (c) CIT v. Assam Oil Co. Ltd. [1982] 133 ITR 204 (Cal). In this case, another Division Bench of this court, followed the decision of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred any appeal against the said order and, therefore, the said order dated October 1, 1975, was the effective order passed by the Income-tax Officer and the Commissioner had ample power to revise such order. Learned advocate further contended that the appeal of the assessee against the original order of assessment was confined to the assessee's claim under section 80M of the Income-tax Act, 1961. There was no appeal of the assessee and there could not have been one on the question of set off of the carried forward business loss. The Appellate Assistant Commissioner had no occasion to deal with the said question. Therefore, there was no question of merger of the original order of assessment with the appellate order so far as the set off of carried forward business loss was concerned an the Commissioner was not precluded from exercising revisional jurisdiction under section 263 of the Act. In support of his defence, learned advocate for the Revenue cited the following decisions: (a) CIT v. Amritlal Bhogilal Co. [1958] 34 ITR 130 (SC). This decision has been considered earlier. (b) Central Indian Insurance Co. Ltd. v. ITO [1963] 47 ITR 895 (MP). In this case, the Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner under section 263 of the Income-tax Act, 1961. (e) Sharda Trading Company v. CIT [1984] 149 ITR 19 (Delhi). In this case, a Division Bench of the Delhi High Court held that the mere issue of a notice of reassessment by the Income-tax Officer under sections 147 and 148 of the Income-tax Act, 1961, did not have the effect of cancelling or rendering non est the earlier order of assessment. Pending the notice and so long as an order of reassessment had not been made, the Commissioner had jurisdiction under section 263 of the Act to revise the earlier order of assessment, cancel it and direct the Income-tax Officer to make a fresh assessment in accordance with law. Once the Commissioner revised the order of assessment, the reassessment proceedings initiated by the Income-tax Officer would come to an end. It was, however, held that if an order of reassessment was passed before the Commissioner passed any order in revision, then on reassessment, the entire original assessment would stand set aside and ceased to exist and, therefore, the original order which the Commissioner intended to revise would become non est. (f) Orient Trading Company V. CIT [1985] 152 ITR 26 (Guj). In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessment was appealed against and an order was passed by the appellate authority, there was merger of the assessment order with the appellate order in all respects, including matters which were merely affirmed by the appellate authority. The law is also settled that in an appeal preferred from an order of assessment, the entire assessment is at large before the Appellate Assistant Commissioner who has jurisdiction and power also to go into the questions which are not the subject-matter of appeal. The exceptions which have been considered by this court are cases where the question involved cannot be the subject-matter of appeal before the appellate authority. From the facts in the instant case, the question of setting off of carried forward business losses of earlier years was considered in the assessment and, therefore, was a matter which was within the purview of the appellate authority when an appeal was preferred from the assessment order. To that extent, it appears on the view which has been taken and followed by this court that there has been merger in the instant case of the order of assessment with the order of the Appellate Assistant Commissioner. That being so, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
