810/CBDT. - Income Tax - 810/CBDT

INSTRUCTION NO. 810/CBDT Dated : December 9, 1974 Section(s) Referred: 263 Statute: Income - Tax Act, 1961 In para 2.214 of their 87th Report (1972-73), the Public Accounts Committee have observed as under:- " The Committee learn that at the time when the Audit objection was raised the Commissioner could have taken action to rectify the mistake under section 263 within two years of the assessment but he could not do so as in the meanwhile the Appellate Assistant Commissioner had decided an appeal. According to the Ministry the legal position based on a Supreme Court decision in 1958 is that the Commissioner cannot exercise the power under section 263 once the Appellate Assistant Commissioner gives a decision. Further the Committee have been informed that even though a particular point has not been dealt with by the Appellate Assistant Commissioner the Commissioner cannot interfere as the Income-tax Officer's order merges with the Appellate Assistant Commissioner's order. As the position is admittedly detrimental to the interest of revenue, the Committee are at a loss to understand why the issue had not been examined in the past 15 years with a view to amending the law, if necessary. After all the Appellate Assistant Commissioner is a lower authority and the Commissioner should be able to act under section 263 even when a case has been decided by the Appellate Assistant Commissioner." 2. The above recommendation of the Public Accounts Committee has been examined in consultation with the Ministry of law, Justice and Company Affairs. On a careful consideration of certain pronouncements made by the Supreme Court and some of the High Courts on the doctrine of merger, the Ministry of law are of the considered view that points which have been dealt with in the order of the Income-tax Officer but have not been covered by the order of the Appellate Assistant Commissioner, either expressly or impliedly, can be revised by the Commissioner of Income-tax in exercise of his power under section 263 of the IT Act, 1961. The power of revision will, no doubt, be limited to that part of the ITOs order which is not only not dealt with in the Appellate Assistant Commissioner's order but which is also severable from the part dealt with in his order. Therefore, in order to exercise his powers under section 263, the Commissioners will have to very carefully scrutinise the order of the Appellate Assistant Commissioner and ensure that the Appellate Assistant Commissioner has not wholly affirmed the ITOs order because if that be so, the ITOs order will be deemed to have merged in the order of the Appellate Assistant Commissioner and the Commissioner will have no power to revise it. A copy of the note dated 28.10.74 recorded by the Ministry of Law on the subject is enclosed. 3. The Commissioners of Income-tax are requested to take note of the position in law as clarified by the Ministry of Law and take necessary action accordingly.