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TMI Blog1993 (9) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... t appeal was partly allowed. Against that order passed by the Appellate Assistant Commissioner, the petitioner-assessee preferred further appeal to the Tribunal. The Income-tax Officer also aggrieved by that order had preferred an appeal to the Tribunal. The appeal filed by the Income-tax Officer was dismissed and that of the petitioner was partly allowed on November 15, 1978. Ultimately, the petitioner on coming to know of the correct position of law in view of the various decisions of different Benches of the Tribunal that the assessee cannot be denied the benefit of section 35B merely because the expenditure may be incurred in India, made a revision application on March 18, 1977, under section 264 to the Commissioner of Income-tax claiming weighted deduction under section 35B on expenses of Rs. 41,46,009. The expenses which the assessee claimed were in addition to the expenses which the assessee had earlier claimed during the assessment proceedings. The Commissioner, by his order dated February 13, 1979, dismissed that application on the ground that the assessment order for the assessment year 1973-74 was made the subject of an appeal to the Appellate Assistant Commissioner and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the Appellate Assistant Commissioner or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired or, in the case of an appeal to the Appellate Tribunal, the assessee has not waived his right of appeal ; or (b) where the order is pending on an appeal before the Appellate Assistant Commissioner ; or (c) where the order has been made the subject of an appeal to the Appellate Tribunal. (5) Every application by an assessee for revision under this section shall be accompanied by a fee of twenty-five rupees. Explanation 1.--An order by the Commissioner declining to interfere shall, for the purposes of this section, be deemed not to be an order prejudicial to the assessee. Explanation 2.--For the purposes of this section, the Appellate Assistant Commissioner shall be deemed to be an authority subordinate to the Commissioner. " This section empowers the Commissioner, either on his own motion or on an application made by the assessee to call for the record of any proceeding under the Act and pass such order thereon not being an order prejudicial to the assessee. This power has been conferred upon the Commissioner in or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat meaning is assigned to the word " order " occurring in clause (c). It was submitted that what could have been made the subject of an appeal to the Appellate Tribunal was the order passed by the Appellate Assistant Commissioner, meaning thereby the points or issues decided by the Appellate Assistant Commissioner either expressly or impliedly which were the subject-matter of appeal before the Appellate Tribunal and not the points or issues which were not at all raised nor considered by the Appellate Assistant Commissioner. In support of this contention, learned counsel relied upon three decisions of this court, viz., (1) CIT v. Karamchand Premchand Pvt. Ltd. [1969] 74 ITR 254 ; (2) CIT v. Steel Cast Corporation [1977] 107 ITR 683 and (3) CIT v. Cellulose Products of India Ltd. [1985] 151 ITR 499 [FB]. In order to decide the scope and ambit of the jurisdiction of the Tribunal, this court in Karamchand Premchand's case [1969] 74 ITR 254 examined the true nature of an order of the Appellate Assistant Commissioner against which an appeal may be preferred to the Tribunal. While doing so, it examined the powers of the Appellate Assistant Commissioner when an appeal is preferred to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment passed by the Income-tax Officer gets merged in the order of the Appellate Assistant Commissioner, observed that " even so, we fail to see how it can be said that there was any decision of the Appellate Assistant Commissioner in regard to the disallowance of the third claim when that was admittedly not a matter considered and decided by him ". This court then made the following pertinent observations : " Moreover, it is difficult to imagine how an assessee can be heard to say that, though he did not claim any particular relief in the appeal preferred before the Appellate Assistant Commissioner, and the Appellate Assistant Commissioner had therefore no occasion to decide whether such relief should be granted or not, he is still aggrieved by the decision of the Appellate Assistant Commissioner in not granting such relief to him. How can an assessee complain that an order does not grant him a particular relief, when such relief is not claimed by him in the appeal ? How can it be said by an assessee that the Appellate Assistant Commissioner erred in deciding a particular matter against him when no opportunity was given by him to the Appellate Assistant Commissioner even to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, modified or even confirmed by the appellate authority. The decision of the inferior authority in such a case is superseded by or merged in the decision of the appellate authority. But this principle has no application where a decision of an inferior authority does not come in for consideration by the appellate authority and there is no decision of the appellate authority either by way of affirmance or by way of reversal or modification on the point decided by the inferior authority. The decision of the inferior authority in such a case stands intact for there is no decision of the appellate authority on the point in which the decision of the inferior authority can be regarded as having merged." It is then observed (at page 267) : " . . . . for the purpose of determining the applicability of the principle of merger in a case like the present, the test which has to be applied 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 the subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red that it had inadvertently omitted to claim certain deductions to which it was entitled to under section 35B. Therefore, the assessee made an application to the Income-tax Officer for rectification of the assessment by granting further deductions under section 35B. That claim was neither made in the return nor at the time of hearing before the Income-tax Officer or the appellate authority. As the assessee's request for rectification was rejected, the assessee preferred a revision application under section 264 of the Act. That application was rejected on the ground that " it cannot be said that the quasi-judicial powers of the Commissioner of Income-tax under section 264 are so wide that it is open to him for the first time to entertain a claim for relief of this kind when the assessee, on account of its negligence, had omitted to make the claim before the lower authorities ". The Kerala High Court held that the scope of the appellate powers specified in section 251 of the Income-tax Act and the scope of the revisional power vested in the Commissioner under section 264 of the Income-tax Act are entirely different. It further held that the revisional jurisdiction may be a part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich were against the assessee. Therefore, only that part of the order of the Appellate Assistant Commissioner which went against the assessee was made the subject of an appeal before the Tribunal. Whether the assessee was entitled to weighted deduction on the expenditure of Rs. 41,46,009 was not decided either expressly or impliedly by the Appellate Assistant Commissioner and, therefore, it was not the subject-matter of an appeal either by the assessee or by the Income-tax Officer before the Tribunal. Therefore, it cannot be said that this was a case where the order was subjected to an appeal before the Tribunal. On the other hand, learned counsel for the Revenue submitted that the bar of section 264(4)(c) will not apply only in those cases where no appeal is filed against an order of the Income-tax Officer. If against the order of assessment passed by the Income-tax Officer, an appeal was filed and if the matter was further carried in appeal before the Tribunal, then it can be said that the order which is sought to be revised was subjected to an appeal before the Tribunal, He submitted that what the assessee in this case sought to challenge in the revision application was the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposive interpretation. The Madras High Court has put a narrow interpretation on the word " order " and that interpretation obviously would not achieve the purpose for which such provision was made, viz., to give relief to the assessee in a case of overassessment even in a case where initially no claim was made before the Income-tax Officer. He next relied upon a decision of the Kerala High Court in the case of H. A. Mohammed Haneef v. ITO [1973] Tax LR 645. In that case, the Kerala High Court has held that " The principle underlying the prohibition seems to be that an order of the Appellate Assistant Commissioner merges in the order of the Appellate Tribunal ; and in such a case the order of the Appellate Assistant Commissioner would not be there for being revised by the Commissioner ; and he should not be permitted directly or indirectly to interfere with the order of the Appellate Tribunal under the colour that he is revising the order of the Appellate Assistant Commissioner ". The point which arises in the present petition did not really arise before that court and, therefore, that judgment is not applicable. The contention which was raised in that case was that the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the order of the Income-tax Officer. This High Court has taken a different view, viz., that that part of the order of the assessment which relates to items not forming the subject-matter of the appellate order which is left untouched does not merge in the order of the Appellate Assistant Commissioner. Therefore, with due respect to the Karnataka High Court, we cannot follow the decision in the case of Hindustan Aeronautics Ltd. [1986] 157 ITR 315 [FB]. Learned counsel for the Revenue also relied upon the decision of the Supreme Court in the case of CWT v. Mrs. Kasturbai Walchand [1989] 177 ITR 188, wherein the Supreme Court has held that (headnote) " Where an appeal is filed before the Appellate Tribunal against an order of the Appellate Assistant Commissioner, the impugned order merges in the order of the Appellate Tribunal when the appeal is disposed of on the merits. If, meanwhile, a revision application is filed before the Commissioner against the same order of the Appellate Assistant Commissioner, it will not be open to the Commissioner to pass any order in revision against the order of the Appellate Assistant Commissioner. It is immaterial that the appeal and the revision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar contained in section 264(4)(c), we cannot proceed on the basis that that part of the order of the Income-tax Officer remains intact if against that part, the assessee has not appealed nor was it considered and modified by the Appellate Assistant Commissioner in appeal of his own. In our opinion, this contention is rather misconceived as what we have to find out is whether the order against which a revision application is preferred was the subject of an appeal before the Tribunal. As we have pointed out above, the order of the Income-tax Officer which remains intact meaning thereby that it was not the subject-matter of appeal, could never have been made the subject of an appeal to the Tribunal because such appeal would not be maintainable. Therefore, in our opinion, what clause (c) contemplates is that the order or that part of the order which was made the subject of an appeal to the Tribunal and that would obviously mean an order that could have been made the subject of an appeal and certainly not that part of the order against which no appeal could have been filed. In this case, it is an admitted fact that the assessee had not made any claim before the Income-tax Officer in res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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