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TMI Blog1984 (10) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... tly allowed and against that part of the appellate order which went against the assessee, the latter first preferred an appeal to the Tribunal, but later withdrew the appeal and invoked the revisional jurisdiction of the Commissioner under section 264. In the meanwhile, the Department preferred an appeal to the Tribunal against that part of the Appellate Assistant Commissioner's order by which some relief was given to the assessee. The assessee, inter alia, relied upon a circular of the Central Board of Direct Taxes issued under section 119 of the Act, which according to him, enabled such a revision against the appellate order even where another part of the same order was subjected to an appeal before the Tribunal at the instance of the Department. The Commissioner did not accept this view and held that, in the circumstances, he had no jurisdiction. In the writ petition of the assessee, the learned single judge has held that the Commissioner had jurisdiction and has directed him to dispose of the revision petition on merits and in accordance with law. The Revenue has now come up in appeal. Relying upon a decision of this court in Addl. CIT v . Vijayalakshmi Lorry Service (I.T.R.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er part of the same order where the subject-matter of the appellate and revisional proceedings are not the same but relates to distinct matters ? " The material facts leading to the question are as follows Hindustan Aeronautics Ltd., the respondent herein, is the assessee under the Income-tax Act, 1961 (hereinafter referred to as " the Act "). For the assessment year 1970-71 relating to the previous year ending March 31, 1969, the assessee filed an appeal before the Appellate Assistant Commissioner against the assessment order passed by the Income-tax Officer. The appeal came to be partly allowed by the Appellate Assistant Commissioner by his order dated October 27, 1976. The assessee filed second appeal before the Income-tax Appellate Tribunal (" the Tribunal ") against the said order of the Appellate Assistant Commissioner to the extent of its appeal having been disallowed. However, on May 9, 1977, the assessee withdrew the said appeal with the leave of the Tribunal. On May 17, 1977, the assessee filed a revision application under section 264 of the Act before the Commissioner of Income-tax against that part of the order of the Appellate Assistant Commissioner by which the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred the writ appeal in which the said question of law has been formulated and referred to the Full Bench. It is now necessary to refer to the decision of this court in Vijayalakshmi Lorry Service's case . It was a reference under section 256(1) of the Act raising the question as to the jurisdiction of the Commissioner under section 263 of the Act. There, the Commissioner interfered with an order of assessment made by the Income-tax Officer which was modified in an appeal by the Appellate Assistant Commissioner. The assessee challenged that order of the Commissioner before the Tribunal on the ground among others, that since the order of assessment passed by the Income-tax Officer was merged in the order of the Appellate Assistant Commissioner, the Commissioner was precluded from taking proceedings under section 263 of the Act. The Tribunal upheld that contention and set aside the order of the Commissioner. The Tribunal referred the following question tinder section 256(1) of the Act for the opinion of this court: " Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the Additional Commissioner of Income-tax was precluded from directin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, if an appeal is provided against an order passed by a Tribunal, the decision of the appellate authority is the operative decision in law. If the appellate authority modifies or reverses the decision of the Tribunal, it is obvious that it is the appellate decision that is effective and can be enforced. In law, the position would be just the, same even if the appellate decision merely confirms the decision of the Tribunal. As a result of the confirmation or affirmance of the decision of the Tribunal by the appellate authority, the original decision merges in the appellate decision and it is the appellate decision alone which subsists and is operative and capable of enforcement. " In Madurai Mills' case [1967] 19 STC 144, the Supreme Court held that the order of assessment had not merged in the revisional order passed by the Deputy Commissioner of Commercial Taxes " because, the question of exemption on the value of yarn purchased from outside the State of Madras was not the subject-matter of revision. " After referring to the observations in Amritlal Bhogilal's case [1958] 34 ITR 130, the Supreme Court held (19 STC pp. 149 150): " But the doctrine of merger is not a doctrine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions conferring the appellate or revisional jurisdiction. The controversy is in relation to such issues which could have been dealt with by the appellate authority within its jurisdiction but in fact have not been dealt with by the said authority. It is also in relation to such issues which were in fact raised before the appellate or revisional authority but not dealt with by the said authority. With these principles in mind, we shall now examine the scope of the appellate powers of the Appellate Assistant Commissioner. The Supreme Court in CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 and CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443, has explained the content and scope of the appellate powers under section 31 of the Indian Income-tax Act, 1922. In the former case, it was held that the Appellate Assistant Commissioner's power is restricted to the subject-matter of the assessment or the sources of income which are considered expressly by the Income-tax Officer and he cannot go outside the record and so he cannot assess new sources of income which are not disclosed either in the return of the assessee or in the assessment order. Barring this limitation, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 108 ITR 407 and the Madhya Pradesh High Court in CIT v. Narpat Singh Malkhan Singh [1981] 128 ITR 77 and CIT v. Mandsaur Electric Supply Company Ltd. [1983] 140 ITR 677 [FB]. The contrary view taken by the other High Courts depends upon the subject-matter of the appellate order. It has been held that that part of the order of assessment which relates to items not forming the subjectmatter of the appellate order, or which is left untouched, does not merge in the order of the Appellate Assistant Commissioner. This view has been shared by the Gujarat High Court in Karsandas Bhagwandas Patel v. Shah (G.V.), ITO [1975] 98 ITR 255, the Bombay High Court in CIT v. Sakseria Cotton Mills Ltd. [1980] 124 ITR 570, the Calcutta High Court in Singho Mica Mining Co. Ltd. v. CIT [1978] 111 ITR 231, the Madras High Court in Puthuthotam Estates Ltd. v. State of Tamil Nadu [1980] 125 ITR 41 and the Punjab and Haryana Court in New Diwan Oil Mills v. CIT [1981] 129 ITR 224. Amid this diversity of opinions, this High Court in Vijayalakshmi Lorry Service's case without much fuss over the matter has held that the entire order merges when the order was taken in appeal and was modified by the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal or irrespective of the party who has preferred the appeal before the Tribunal. The order referred to is an order of the lower authority against which an appeal has been preferred no matter whether by the assessee or by the Revenue. That clause does not envisage that the appellant before the Tribunal and the petitioner before the Commissioner should be the same. The Commissioner's jurisdiction to revise an order is barred if that order has been appealed to the Tribunal. This is also the view taken by Sreenivasa Iyengar J. of this court in Mysore Tobacco Company Ltd. v. CIT [1981] 128 ITR 655. Our view finds support from the decision of the Madras High Court in Gnana Sundara Nayagar v . CIT [1961] 41 ITR 375. There, the assessee filed an appeal before the Appellate Tribunal under the Indian Income-tax Act, 1922, but shortly before filing the said appeal, the assessee filed revision before the Commissioner claiming a deduction in respect of rents received by him from two houses. That was a claim which he did not make either before the Income-tax Officer or before the appellate authority. The Commissioner dismissed the revision on the ground that the deduction claimed was inadmi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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