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TMI Blog1982 (2) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order of the ITO ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that when the assessment-order, which had been the subject-matter of an appeal to the AAC and the Tribunal, had not merged in the order of the appellate authorities on points which were, not canvassed and agitated in the appeal and, therefore, could be revised by the CIT u/s. 263 of the I.T. Act, 1961 ? The material facts giving rise to this reference briefly are as follows: The assessee, a limited company, carried on the business of supplying electrical energy at Mandsaur. The undertaking of the assessee was, however, taken over by the Madhya Pradesh Electricity Board on March 5, 1973, and compensation under the provisions of the Indian Electricity Act, 1910, became payable to the assessee. While making an assessment for the assessment year 1973-74, the ITO did not examine the chargeability of profits and capital gains. The ITO, while making assessment, did not allow certain deductions claimed by the assessee and, hence, aggrieved by the order of assessment, the assessee preferred an appeal before the AAC. The Commissioner also issued a notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, raised a preliminary objection that the Tribunal had no jurisdiction to refer question No. 3 at the instance of the assessee, because the assessee had not filed any application for reference under s. 256(1) of the Act, but had only made an application at the time of finalisation of the statement of the case by the Tribunal, praying that question No. 3 be also referred to this court for its opinion. This objection was raised by the Department before the Tribunal but the Tribunal overruled it and the aforesaid question No. 3 was referred to this court. The objections raised by Shri Mukati on behalf of the Department that the Tribunal was not competent to refer to this court question No. 3 for its opinion, is not well founded. In CIT v. V. Damodaran [1980] 121 ITR 572, the Supreme Court has held as follows (pp.578,579): " In this connection, two categories of cases can be envisaged. One consists of cases where the order of the Tribunal under s. 254 has decided the appeal partly against one party and partly against the other. This may be so whether the appeal consists of a single subject-matter or there are more than one independent claim in the appeal. In the former, one party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order was within the jurisdiction of the AAC and that being so, the entire assessment order merged in the appellate order irrespective of the points urged by the parties or decided by the appellate authority. It was, therefore, contended that the Commissioner had no jurisdiction under s. 263 of the Act to revise the order of assessment passed by the ITO as that order had ceased to exist and had merged in the order passed by the appellate authority. Reliance was placed on the decisions in CIT v. Amritlal Bhogilal Co. [1958] 34 ITR 130 (SC), 1. K. Synthetics Ltd. v. Addl. CIT [1976] 105 ITR 344 (All) and CIT v. Narpat Singh Malkhan Singh [1981] 128 ITR 77 (MP). The learned counsel for the assessee further contended that the decision of a Division Bench of this court in CIT v. Narpat Singh Malkhan Singh, laid down the correct law and that the decisions in Miscellaneous Civil Case No. 142 of 1978 (Alok Paper Industries v. CIT [1983] 139 ITR 1064 (MP)) and Misc. Petition No. 55 of 1978 (Jaora Sugar Mills Ltd. v. Union of India [1982] 134 ITR 385 (MP)), to the contrary deserve to be overruled. In reply, Shri Mukati, learned counsel for the Department, placed reliance on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside the order of assessment passed by the ITO, when that order was the subject-matter in appeal preferred by the assessee before the Appellate Assistant Commissioner ?" On the question as to whether the entire order of assessment passed by the ITO merges with the order of AAC or the merger is only with respect to that part of the order of the ITO, which relates to items considered and decided by the AAC, there are conflicting decisions. In Karsandas Bhagwandas Patel v. G. V. Shah, ITO [1975] 98 ITR 255 the Gujarat High Court, in Singho Mica Mining Co. Ltd. v. CIT [1978] 111 ITR 231 the Calcutta High Court, in Puthuthotam Estates (1943) Ltd. v. State of Tamil Nadu [1980] 125 ITR 41 the Madras High Court and in New Diwan Oil Mills v. CIT [1981] 129 ITR 224 the Punjab and Haryana High Court, have taken the view that the doctrine of merger would operate only on matters which were the subject-matter of decisions by the appellate authority and has no application to matters which have not been touched by the appellate authority. The Allahabad High Court, on the other hand, has in J. K. Synthetics v. Addl. CIT [1976] 105 ITR 344, held that the entire assessment order passed by the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries v. CIT [1983] 139 ITR 1064 (MP) ). Therefore, it is not necessary for us in this case to decide as to whether the decision in Misc. Civil Case No. 142 of 1978, which takes the same view as has been taken in Karsandas Bhagwandas Patel v. G. V. Shah, ITO [1975] 98 ITR 255 (Guj), Singho Mica Mining Co. Ltd. v. CIT [1978] III ITR 231 (Cal), Puthuthotam Estates (1943) Ltd. v. State of Tamil Nadu [1980] 125 ITR 41 (Mad) and New Diwan Oil Mills v. CIT [1981] 129 ITR 224 (P H), is or is not the correct view. The question, which has arisen in this case, directly arose for consideration in CIT v. Narpat Singh Malkhan Singh [1981] 128 ITR 77 (MP). In that case, though the AAC had dealt with the order of the, ITO on a limited point, the Commissioner, in exercise of the revisional powers, set aside the order of assessment passed by the ITO. The effect of the order of the Commissioner, as rightly observed in CIT v. Narpat Singh Malkhan Singh, was to set aside the order of AAC, even though the Commissioner had no jurisdiction to set aside the order of AAC. We may usefully refer to the following observations of the Division Bench (p. 80): " Setting aside of the order of assessment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of assessment passed by the ITO. The appeal preferred by the assessee before the Tribunal against the order of the Commissioner was dismissed. Instead of filing an application before the Tribunal for making a reference under s. 256(1) of the Act, the assessee filed a petition under art. 226 of the Constitution. In that petition, the assessee made a false averment that no alternative remedy was available to the petitioner. The petition was, therefore, dismissed on the ground of averment of alternative remedy. During the course of hearing before us, a reference was made to the decision of the Supreme Court in L. Hirday Narain v. ITO [1970] 78 ITR 26, to show that the Division Bench erred in dismissing Misc. Petition No. 55 of 1978 (Jaora Sugar Mills Ltd. v. Union of India [1982] 134 ITR 385 (MP)), on the ground of availability of alternative remedy. Now in L. Hirday Narain v. ITO, the Supreme Court observed that if the High Court had not entertained the petition, the petitioner could have moved the Commissioner in revision because at the date on which the petition was moved, the period prescribed for filing a revision petition had not expired. In Misc. Petition No. 55 of 1978 (Jaor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision in Misc. Petition No. 55 of 1978 (Jaora Sugar Mills Ltd. v. Union of India [1982] 134 ITR 385 (MP)), does not lay down correct law. As already observed, in' such a case, the result of setting aside by the Commissioner of the order of assessment passed by the ITO is to set aside the order of the AAC as well, which the Commissioner has no jurisdiction to set aside under s. 263 of the Act. We, therefore, affirm the decision of the Division Bench of this court in that behalf in CIT v. Narpat Singh Malkhan Singh [1981] 128 ITR 77. For all these reasons, our answer to question No. 3, as framed by us, is that on the facts and in the circumstances of the case, the Tribunal was not justified in holding that the Commissioner had jurisdiction under s. 263 of the Act to set aside the order of assessment passed by the ITO. Our answer is in favour of the assessee and against the Department. In view of our answer to question No. 3, as already observed, it is not necessary to answer the first two questions referred to this court by the Tribunal. In the circumstances of the case, parties shall bear their own costs of this reference. Reference answered accordingly. MISHRA J.-I have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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