1989 (5) TMI 17 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of Commissioner of Income-tax u/s 263 of the Income-tax Act, 1961.
2. Doctrine of merger concerning orders of the Income-tax Officer and the Appellate Assistant Commissioner.
3. Applicability of the Finance Act amendments to section 263.

Summary:

1. Jurisdiction of Commissioner of Income-tax u/s 263:
The primary issue was whether the Commissioner of Income-tax had jurisdiction to initiate proceedings u/s 263 of the Income-tax Act, 1961. The Tribunal held that the Commissioner retained jurisdiction as the order of the Income-tax Officer had not fully merged with the order of the Appellate Assistant Commissioner. The Commissioner observed that the Income-tax Officer had not included certain incomes and had wrongly allowed deductions, making the original assessment erroneous and prejudicial to the interests of the Revenue. Consequently, the Commissioner issued a notice u/s 263 to revise the assessment.

2. Doctrine of Merger:
The assessee contended that the order of the Income-tax Officer merged with the order of the Appellate Assistant Commissioner, thus the Commissioner had no jurisdiction to revise it. However, the Tribunal and the High Court referred to various precedents, including CIT v. Mandsaur Electric Supply Co. Ltd. and General Beopar Co. (Pvt.) Ltd. v. CIT, to conclude that the doctrine of merger applies only to matters expressly considered and decided by the appellate authority. The court highlighted that the Commissioner could revise parts of the assessment not subject to appeal, thereby preserving his jurisdiction for those aspects.

3. Applicability of the Finance Act Amendments:
The court noted the amendments to section 263 by the Finance Act, 1988, and further clarification by the Finance Act, 1989, which stated that the Commissioner could revise any part of the assessment not considered and decided in appeal. These amendments were deemed to have always been in existence, supporting the Tribunal's decision that the Commissioner had jurisdiction to initiate proceedings u/s 263.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that the Commissioner of Income-tax had jurisdiction to initiate proceedings u/s 263, as there was only a partial merger of the assessment order. The revision pertained only to matters not considered and decided by the Appellate Assistant Commissioner. The question was answered in the affirmative and in favor of the Revenue, with no order as to costs.