TMI Blog1979 (8) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Assistant Commissioner ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of section 154(1A) would not apply to the assessee's case ? 3. Whether the Appellate Tribunal was right in upholding the order of the Appellate Assistant Commissioner on a ground not raised or argued before it ? 4. Whether the Appellate Tribunal was right in dismissing the departmental appeal without going into the main question raised before it ? The assessee is a firm and it filed its return of income for the assessment year 1968-69 on January 22,1969. The return was due in August, 1968. There was thus a delay in the filing of the return. The ITO was of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal, the order of the ITO under s. 154 of the Act was obviously incompetent because the original order of penalty was the subject-matter of an appeal before the AAC and had subsequently merged in the order of the AAC dated May 28, 1969. In the view of the Tribunal, the proper authority to rectify any error in the matter of levy of penalty could only be the AAC. Before the Tribunal, s. 154(1A) of the Act was relied on for the department. But the Tribunal's view was that the ITO's power to rectify was not available in respect of matters which had been considered and decided by the appellate authority. The result was that the department's appeal came to be dismissed. It is against this order that the questions extracted already have been ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduce the penalty. " In the order that the AAC passed on May 28, 1969, in the appeal against the levy of penalty, the AAC held " I must hold, therefore, that reasonable cause for the failure to comply with the terms of the notice under section 139(2) has not been proved in the case, and the penalty was hence rightly levied. The Income-tax Officer's order is accordingly confirmed and the appeal dismissed." The point to be considered at this stage is whether the quantum of penalty is one which had been considered and decided by the AAC. Unfortunately, we do not have before us the grounds of appeal filed before the AAC against the order of levying penalty. However, the terms of the order are clear to show that he considered the existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Gujarat High Court in Karsandas Bhagwandas Patel v. G. V. Shah, ITO [1975] 98 ITR 255, as follows: "The principle of this decision is that the doctrine of merger will have to be taken into account in the light of what was in controversy before the appellate authority or what could have been considered by the appellate authority ". In the present case, the AAC could have gone into the question of the quantum of penalty that was levied. The quantum of penalty was involved in the appeal. He could have examined the quantum of penalty in the light of the provisions contained in s. 271(2) of the Act. He has confirmed the penalty. In such a case, we consider that the question of the amount of penalty leviable is a matter which has been con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt with the matter relating to the assessment where a particular matter which was considered for rectification by the ITO had not been the subject-matter of appeal before the AAC. That decision has, therefore, no scope for application. Learned counsel for the revenue drew our attention to a decision in L. K. Shaik Mohammed Brothers v. CIT [1978] 112 ITR 622 (Mad). In that case, this court had no occasion to go into the question of applicability of the doctrine of merger or the scope of s. 15 4(1A) of the Act. We do not, therefore, think it necessary to go into this decision any further. The result is that the first and the second question referred to this court are answered in the affirmative and in favour of the assessee. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X
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