1979 (3) TMI 50 - HC - Income Tax

Capital Employed, Capital Work In Progress, Income Tax Concession, Industrial Undertaking, Office Appliance

Summary

Issues:
1. Validity of cancellation of registration of the assessee-firm for assessment years 1967-68, 1968-69, and 1969-70.
2. Jurisdiction of the Commissioner to revise orders passed by the ITO and AAC under sections 263(1) of the Income Tax Act, 1961.
3. Application of the doctrine of merger in appellate decisions.

Detailed Analysis:
Issue 1: The High Court addressed the validity of the cancellation of registration of the assessee-firm for the assessment years 1967-68, 1968-69, and 1969-70. The Income Tax Appellate Tribunal referred the question of whether the cancellation was lawful to the High Court. The firm's registration was initially granted by the ITO but later revoked due to discrepancies in the application date and partnership deed. The AAC subsequently restored the registration. The Commissioner, using revisional powers, canceled the registration granted by the ITO. The Tribunal held that the Commissioner lacked jurisdiction to revise the AAC's order, which effectively restored the registration. The High Court upheld the Tribunal's decision, emphasizing the doctrine of merger, where the appellate decision supersedes the original decision. The High Court concluded that the Commissioner's order was a revision of the AAC's decision, not the ITO's, and therefore, lacked jurisdiction.

Issue 2: The High Court examined the jurisdiction of the Commissioner to revise orders passed by the ITO and AAC under section 263(1) of the Income Tax Act, 1961. The Commissioner, through revisional powers, canceled the registration granted by the ITO after the AAC had restored it. The Tribunal ruled that the Commissioner could only revise prejudicial orders by the ITO, not those modified or reversed by the AAC. The High Court agreed with the Tribunal, stating that the Commissioner exceeded his jurisdiction by revising the AAC's decision. The Court emphasized that the Commissioner's revisional powers were limited to orders passed by the ITO, not appellate authorities like the AAC.

Issue 3: The High Court applied the doctrine of merger in appellate decisions to resolve the case. Citing the Supreme Court's decision in CIT v. Amritlal Bhogilal & Co., the Court explained that when an appellate authority modifies or reverses a Tribunal's decision, the appellate decision prevails. In this case, the AAC's order restoring the registration merged the ITO's orders granting and canceling registration. Therefore, the Commissioner's subsequent order revising the registration effectively revised the AAC's decision, not the ITO's. The High Court concluded that the doctrine of merger supported the Tribunal's decision and guided the resolution of the case.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the application of the doctrine of merger in appellate decisions and the limited jurisdiction of the Commissioner to revise orders under section 263(1) of the Income Tax Act, 1961. The Court directed the Tribunal to proceed in accordance with its opinion and ordered the department to pay the costs of the reference.