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TMI Blog1980 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... : "The capital employed for the purpose of deduction u/s. 80J has not been properly computed by the ITO. It appears that the ITO computed the capital assuming that the entire income was derived by the appellant from a newly established undertaking. The appellant-company also executed contract works. This part of the business will not come within the purview of a newly established undertaking. The ITO has not given any basis for computing the quantum of deductions u/s. 80-I of the Income-tax Act. From the foregoing it will appear that the assessment has not Proceeded on correct lines. The order of the ITO, is accordingly, set aside with direction to make fresh assessment in accordance with law. " It is thus seen that the AAC held, (1) that the claim for deduction, u/s. 80G(1) could not be completely disallowed; (2) that the capital employed for deduction u/s. 80J had not been properly computed; (2a) that the contract works executed by the assessee could not come within the purview of " newly established undertakings " as contemplated u/s. 80J of the Act; (3) that the ITO had not given any basis for computing deduction u/s. 80-I ; (4) that " the assessment had not proceeded on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified in setting aside the assessment. We, therefore, uphold the order of the Appellate Assistant Commissioner. " The Tribunal upheld the order dated January 4, 1973, passed by the AAC commandering the ITO to follow the directions of the previous appellate authority and forbearing him not to enter into any question other than the specific direction made by the previous AAC. At the instance of the revenue, the Tribunal has referred the following question under s. 256(1) of the I.T. Act, 1961: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the Appellate Assitant-commissioner was justified in setting aside the assessment by his order dated January 4th, 1973, relating to the assessment year 1969-70?" We have alluded the cognate and intrinsic facts necessary to decide the precise questions of law involved in the reference. The sum and substance of the orders rendered by the AAC as well as the Tribunal is that the fresh assessment has not been made according to the direction given by the appellate authority or, in other words, the ITO has disregarded the directions of the previous AAC. There is no wrangle that the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STC 87 (SC). However, their Lordships held that the principles enunciated could not be applied to the case with reasons, which resulted in a solid rule, which runs (p. 94): " To attract the principles thus enunciated, it is necessary that there should be an order of a superior tribunal clear, certain and definite in its terms and without any ambiguity, to which the subordinate authority or officer to whom it is addressed could give effect. We are clearly of the opinion that the decision referred to cannot apply to the situation in the present case." Therefore, when a subordinate authority is directed to carry out certain directions by a superior authority, the tenor and colour of the order of the superior authority must be firm, clear, certain, definite and without any ambiguity. Upon reading the entire order of the appellate authority in its entirety and in its proper context, we do not find that there is any firm order of the nature and character set forth above amounting to direction commandeering the ITO to allow any deduction, partially or otherwise, u/ss. 80-I and 80J. There were two directions which were faithfully followed by the ITO. We notice that there is a positive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educes, enhances or annuls the assessment, his order becomes final, subject to appeal and the order of the ITO merges in the appellate order. However, this may not be considered as our final opinion, as we are not called upon to answer it. In the instant case, the precise question is the consequence of an appellate order, when the appellate authority sets aside an assessment in respect of some deductions and refers the case back to the ITO for making a fresh assessment in accordance with law. When the order of assessment is set aside, the original order, at least in so far as the matters considered, decided and set aside by the AAC no longer remain in force, as it renders the matters decided in the original order non est. What remain alive and active are the directions and matters considered and decided by the appellate authority. The juristic justification of the doctrine of fusion or merger is based on the principle that there cannot be, at one and the same time, more than one operative order governing the matter. The order of a subordinate authority, if subjected to consideration and decision by a superior authority, vanishes in the eye of law and stands superseded. The identity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coupled with reasons therefor : vide s. 250(6) of the Act; these are conspicuously absent in the appellate orders. On appeal, an item of assessment may come up for consideration or may not come up for consideration. If a matter comes up for consideration and is decided by the appellate authority, it is the final order and supersedes the order of the ITO in respect of the matter. The ITO cannot rectify the same even u/s. 154(1A) of the Act because he can rectify only his own order and not that of a higher authority. The emphasis in s. 154(1A) is on " consideration and decision ". When a matter is merely taken into consideration but no final decision is rendered by the appellate authority, the ITO is competent to rectify any mistake u/s. 154(1A), as there exists no final decision of the appellate authority which prohibits rectification by the ITO. It follows, therefore, that in the absence of a final decision by the appellate authority, even mistakes can be rectified by the ITO. In the instant case, the matters in respect of the deductions u/ss. 80-I and 80J were considered but never decided finally by the appellate authority. Instead, it set aside and remitted the matters to the I ..... 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