9911796707
TMI Blog1982 (5) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... ommr. set aside the assessment and directed the ITO to re-do the same as per law. It is pertinent that the Commr.'s view on two of the five issues was right and had, therefore, no objection to the modification of assessment in regard thereto. The other three issues, it contended, had been correctly decided by the ITO. However, the CIT rejected the assessee's contentions. 3. This appeal along with the appeals by the assessee and the ITO against the order of the CIT (A) came up for hearing before a Division Bench, originally. The Deptl. Rep. pointed out that in identical circumstances, the Tribunal had by an order dt. 20th Nov., 1980 in the assessee's own case for asst. yr. 1974-75 confirmed the order of the ITO under s. 263 and dismissed the assessee's and the departmental appeals against the order of the CIT (A) observing that when the assessment had been set aside by the CIT under s. 263, there was no scope for grievance against the order of assessment by the assessee or the ITO or against the order of the CIT (A). However, the Bench felt that the matter was not that simple and it was desirable that it should be heard by larger Bench. Reference was made to the President for cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Anand Municipality vs. Union of India AIR 1960 (Guj) 40 and stated that the decisions of the Bombay High Court rendered prior to 1st May, 1960, i.e., before the establishment of the Gujarat High Court, are binding even on the Gujarat High Court. He urged that the Bombay High Court's decision in the case of CIT vs. Tejaji Farasram Kharawala having been delivered on 5th March, 1953, i.e., before the establishment of the Gujarat High Court, the decision will have, therefore, to be treated as if it is a decision of the Gujarat High Court itself. As regards the contention of the Deptl. Rep. that the Gujarat High Court, has propounded the theory of partial merger of the assessment order, the ld. counsel pointed out that that has been in the context of rectification proceedings and not proceedings under s. 263 of the IT Act, 1961. There is not a single Gujarat High Court's decision on the question of merger vis-a-vis the powers of the CIT under s. 263. Sri Shah, thus, submitted that the Special Bench order of the Bombay Tribunal has to and should be followed in this case. 7. Before proceeding to consider the rival contentions on merits, it is desirable to refer to the Hon'ble Guja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and directing a fresh assessment." (2)........... (3)..........." The section is in pari materia with s. 33B of the Indian IT Act 1922, which reads us: "33B. Power of Commissioner to revise ITO 's orders —(1) The Commissioner may call for and examine the records of any proceeding under this Act and if he considers that any order passed therein by the ITO is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. * * * " An identical question, it may be stated had come up before the Tribunal long back in the case of Tejaji Farasram Kharawala. 9.2 The facts were that the assessee, an HUF was sole setting agent of dyes and chemicals manufactured by Ciba (India) Limited and Imperial Chemical Industries (I) Ltd. The agencies were transferred to Tejaji Farasram Kharawala Limited for a consideration of Rs. 50,000. The ITO computed ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made. It is not disputed by Sri Nusserwanji that once an appeal is referred by the assessee it is open to the Commr. to raise before the AAC any matter dealing with the assessment of the assessee. It is not as if the power of the AAC is confined to only those questions which have been raised by the assessee. Since this is conceded, it is difficult to understand why the Commr. would not be precluded form making an order under s.33B once an order has been passed by the AAC even though the AAC does not deal with the matter with which the Commr. has dealt. The principle underlying s. 33B is that it is only the order of the ITO that can be revised by the Commr. Once the assessment is confirmed by the AAC or any order with regard to the assessment has been made by the AAC that becomes a final order of assessment and the only right that the Department has is the right to appeal to the Tribunal. The right of the Commr. continues so long as the order of the ITO is not merged in the order of the AAC but once the order is merged, the Commr. cannot deal with the assessment of the assessee at all. On appeal, the powers to deal with the assessment is given to the AAC and further the power is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts of revenue. (ii) The Supreme Court's decision in the case of Amritlal Bhogilal (1958) 34 ITR 130 (SC) has since been explained by the Supreme Court itself in its late decision in the case of Madurai Mills Co Ltd. AIR 1967 SC 681 where observing: "In support of this argument reliance was placed upon the observation of Gajendragadkar, J., as he then was, in CIT vs. Amritlal Bhogilal & Co. (1958) 34 ITR 130 at p. 136 : AIR 1958 SC 868 at p. 871. But the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior Tribunal and the other by a superior Tribunal, passed in an appeal or revision, there is a fusion or merger ot two orders irrespective of the subject matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the appellate revisional jurisdiction. For example in Amritlal Bhogilal & Co.'s case (1958) 34 ITR 130 (SC) : AIR 1958 SC 868, it was observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO merges in the order of the AAC only in so far as it relates to items considered and decided by the AAC. That part of the order of assessment which relates to items not forming the subject matter of the appellate order is left untouched and does not merge in the order of the AAC. Even after an appeal from an order of assessment is decided by the AAC a mistake in that part of the order of assessment which was not the subject matter of review by the AAC and was left untouched by him can be rectified by the ITO under s. 35 of the Indian IT Act, 1922 because the mistake would be his own mistake which he can always correct under s. 35(1)." The earlier decision of the Bombay High Court (1953) 23 ITR 412 (Bom) was not noticed in any of the aforesaid five decisions (2 Gujarat decisions, 1 Supreme Court decision and the two Bombay decisions). 12. We have carefully gone through all these and other decisions to which we will be making reference later. The Bombay High Court has in (1953) 23 ITR 412 (Bom) affirmed the Tribunal's decision and in that sense one may say that the High Court's jurisdiction being advisory, the Court could and has actually agreed with the Tribunal, so much so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k him to do so is hardly materiel for the purpose of this appeal so long as the AAC has a power to see that the assessee does not escape assessment or is not under assessed on issues considered and decided, by the ITO. 13.2. No doubt their Lordships of Gujarat High Court have observed in (1975) 98 ITR 255 (Guj) at page 262 that the obligation to revise the order is quite different from the power to revise the order suo motu and that unless there was an obligation to do so, there could be no scope for application of the doctrine of implied decision. Since, however, having regard to the discussion in paragraph 8 of the order, we have to make an attempt to reconcile the Bombay High Court's decision in (1953) 23 ITR 412 (Bom) and the Gujarat High Court's decision hereinabove, we are inclined to hold, with respect, that these observations have been made in the context of 'merger' in rectification proceedings. In this connection, it may not be out of place to mention that there can be no scope for the application of the doctrine of "implied decision" the correctness of which, in view of the following other observations of the Supreme Court, is open to doubt. The Supreme Court quoted wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on carefully going through the same, it is clear that it is not so. The basis of the Supreme Court's earlier decision was powers of the AAC once an appeal was filed, which were more or less co-terminus with that of the ITO submitted to limits in terms of (1967) 66 ITR 443 (SC). On the same analogy, the orders of the AAC may not completely merge with the Tribunal's order, as the Tribunal has no such power. In the Madurai Mill's Co.'s case where an appeal was provided for, no appeal was filed by the assessee against the order of the CTO. The assessee only filed a revision petition and it is evident from the provision of s. 12(2) of the Madras ST Act, under which the petition was disposed of by the Dy. Commr., that he could either reject or allow the petition but cold not have examined other items not objected to by the assessee in those proceedings. No doubt s.12(2) has another separate and independent limb which empowered the Dy. Commr. to revise the order of the CTO suo motto to the prejudice of the assessee but that contemplated a separate proceeding similar to s. 264 of the IT Act, 1961. In this connection, the following observations of the Madras High Court in that case may usef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions of Tejaji Farasram Kharawala and Amritlal Bhogilal were given by their Lordships of the Bombay High Court on the same date i.e. 5th March, 1953, and both are reported in (1953) 23 ITR 412 (Bom) and (1953) 23 ITR 420 (Bom) respectively. While the Department accepted the decision in the case of Tejaji Farasram Kharawala, it went to the Supreme Court in the case of Amritlal Bhogilal & Co. only and if the arguments advanced on behalf of the assessee before their Lordships of the Supreme Court are read carefully, it would be abundantly clear that the basis of attack was that registration order constituted a separate and independent order which was separately appealable and in an appeal file by the assessee against the assessment, it was not open to the AAC to revise the order of the ITO granting registration under s. 26A. 14. Indirect support for the view is also found in the Supreme Court's decision in the case of ITO vs. Seghu Buchiah Chetty (1964) 52 ITR 538 (SC), where it was held by majority at page 545 that: "The order of reduction must, in my opinion, necessarily have the effect of setting aside the original order as a whole. It does not simply strike out a few ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation started from the date of the WTO's order. In fact, Hon'ble justice Bhagwati (Chief Justice of the Gujarat High Court, as he then was) had taken note of the fact that this principle is now given statutory effect by sub-s.(1A) introduced by way of amendment in s. 154 of the IT Act, 1961, by the Direct Taxes(Amendment)Act, 1964. In our view, this shows that all that is said or observed in the two Gujarat High Court decisions is on 'merger' vis-a-vis rectification proceedings. 16. No High Court has, to out knowledge, held that what is good regarding merger in the context of proceedings under s. 263. On the other hand, s. 154 specifically provides for the power of rectification and all officers who have anything to do with the orders to be passed under the IT Act, 1961. The section opens as under: "154(1) With a view to rectifying any mistake apparent from the record— (a) the ITO may amend any order of assessment or of refund or any other order passed by him; (b) the AAC may amend any order passed by him under s. 250 or s. 271; (c) the IAC may amend any order passed by him in any s. 250 proceeding under sub-s.(2) of s. 274; (d) The Commissioner may amend any orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court's decision in (1953) 23 ITR 412 (Bom) has been overruled directly or by implication by the Gujarat or even Bombay High Courts in their later decisions or by the Supreme Court. The concepts of orders in the two sections materially differ and, in our view, all the decisions cited before us are reconcilable and can be considered correct on their own facts. Accordingly, we hold that for the purpose of jurisdiction under s. 263, the order of the ITO merges in that of the AAC not only to the extent to which the AAC, as a matter of fact, dealt with but all to the extent to which he had power to look into with a view to enhance, within the limits prescribed by the Supreme Court in its decision in the case of Rai Bahadur Hardutroy Motilal Chamaria. In that view of the matter, we have to hold that the CIT had no jurisdiction under s. 263 to revise the order of assessment, as after the order of the AAC, the order of assessment had ceased to exist. 19. There is yet another aspect which requires consideration. Assuming the AAC has no obligation to enhance, he has certainly a discretion to exercise all powers in view of Explanation to s. 251 including the power of enhancement in appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the orders of the ITO." This decision, in our view, is an authority for the proposition that where an authority has power or discretion to do something for which appropriate circumstances exist, whether or not that authority has, as a matter of fact, exercised that power, such an authority should be deemed to have exercised that power. 21. Moreover, as distinct from s. 263, s. 264 authorises the CIT to exercise his powers of revision, at the instance of the assessee, the only limit being that in such proceedings the CIT cannot pass an order to the prejudice of the assessee. Again, as distinct from the proceedings under s. 263, a revision under s. 264 can be made even after the order of the ITO has merged in that of the AAC. However, the power of revision under s. 264 cannot be exercised where: (a) an appeal against the order lies to the AAC or to the 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 Tribunal, the assessee has not waived his right of appeal; or (b) the order is pending on an appeal before the AAC; or (c) the order has been made the subject of an appeal to the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 154, depending upon the circumstances of each case to reconsider those issues. 23. Even if we approach the question without reference to any authorities on the point, it appears to us that under the provisions of the IT Act an order of assessment is one, single and indivisible composite order of the ITO which involves determination of the various issues or points that arise in the course of assessment for the determination of the income or tax and is not an amalgam of a number of orders of the ITO in which different issues are determined. The provisions of s. 143 clearly contemplate that the ITO shall, after hearing the evidence of the assessee and other evidence required by him on specific points and taking the relevant materials into account, by an order in writing make an assessment of total income or loss of the assessee determine the sum payable by him or refundable to him. The provisions of s. 246, cl.(c)providing for an appeal contemplate that the right of the assessee to prefer an appeal would arise on account of him being aggrieved by any order of assessment under s. 143(3) and such a right is against such an order, that is to say, the order of assessment. The provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
