TMI Blog1974 (5) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was partly allowed by the Appellate Assistant Commissioner on 14th December, 1972, with the result that the assessment was modified. On 20th December, 1973, the Additional Commissioner of Income-tax served a notice upon the assessee intimating that it intended to revise the order of the Income-tax Officer for the assessment year 1967-68, on the ground that the said order was prejudicial to the interest of the revenue inasmuch as it granted development rebate at the rate of 35 per cent. instead of 20 per cent. and depreciation under section 80E was also wrongly allowed. According to the Commissioner the petitioner-company was not a priority industry. At the hearing before the Commissioner the assessee took a preliminary objection that since the Income-tax Officer's order had merged in the appellate order of the Appellate Assistant Commissioner, the Commissioner had no jurisdiction under section 263(1) of the Act to revise the same. The Commissioner overruled this objection, primarily on the strength of the decision given by the Gujarat High Court in Karsandas Bhagwandas Patel v. Income-tax Officer. Proceeding on the merits, the Commissioner held that the petitioner-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial to the interest of revenue he can revise it. Under this provision the Commissioner has no power to modify or to touch an appellate order. It is equally clear that if the order of the Income-tax Officer has merged in the appellate order, it in law ceases to exist and will be outside the purview of section 263 of the Act. The question for consideration is whether the assessment order merged in the appellate order in its entirety ? For the department Dr. Misra urged that since the points decided by the Income-tax Officer in favour of the assessee were not the subject-matter of appeal by the assessee and since those points had not been agitated before the Appellate Assistant Commissioner by the department, the decision of the Income-tax Officer on those points was not the subject-matter of any appeal, and hence, the order in relation to those points would not merge in the appellate order. Dr. Misra relied on State of Madras v. Madurai Mills Company Limited where the Supreme Court held that: "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 an inferior tribunal and the other by a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his limitation the appellate powers are as wide and as extensive as those of the assessing officer. It quoted with approval the observations of Chagla C.J. in Narrondas Manordass v. Commissioner of Income-tax to the following effect: "It is clear that the Appellate Assistant Commissioner has been constituted a revising authority against the decisions of the Income-tax Officer; a revising authority not in the narrow sense of revising what is the subject-matter of the appeal, nor in the sense of revising those matters about which the assessee makes a grievance, but a revising authority in the sense that once the appeal is before him he can revise not only the ultimate computation arrived at by the Income-tax Officer but he can revise every process which led to the ultimate computation or assessment. In other words, what he can revise is not merely the ultimate amount which is liable to tax, but he is entitled to revise the various decisions given by the Income-tax Officer in the course of the assessment and also the various incomes or deductions which came in for consideration of the Income-tax Officer." The scope of the appellate powers was also considered by the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided by the appellate authority. The decision of the Gujarat High Court referred to by the Commissioner holds that for the purposes of determining the applicability of the principle of merger the test is whether the decision of the Income-tax Officer on a particular point is the subject-matter of appeal before the Appellate Assistant Commissioner. It may not be the subject-matter of appeal for two reasons, either because the Appellate Assistant Commissioner has no jurisdiction to consider that subject-matter, or because the Appellate Assistant Commissioner though having jurisdiction to examine that subject-matter does not do so. In either case there being no decision of the Appellate Assistant Commissioner on the point, the decision of the Income-tax Officer remains untouched and it is open to the Commissioner in exercise of powers under section 33B to revise it or to the Income-tax Officer in exercise of the power under section 35, sub-section (1), to rectify it if there is a mistake apparent from the record of the assessment. With respect, we are unable to agree with the distinction drawn by the Gujarat High Court or with the view that if the Appellate Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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