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TMI Blog1992 (9) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Calcutta High Court in the case of CIT v. Bharat General Textile Industries Ltd. [1986] 157 ITR 158 wherein the High Court had held that the provision of the type made by the assessee cannot be allowed as a deduction since it was a mere contingent liability. By letter dated 13-4-1988 the assessee objected to the notice under section 154. 3. The assessee had earlier filed an appeal against the assessment order dated 20-1-1987 and the CIT (Appeals)-IV. Calcutta, had also passed an order on 31-7-1987. 4. While so, on 5-1-1989 the CIT issued notice under section 263 proposing to revise the assessment on the ground that the allowance of the provision of Rs. 36,28,000 in the assessment was erroneous and prejudicial to the interests of revenue. By letter dated 3-2-1989 the assessee objected to the revision on two grounds. It was pointed out that the order of assessment had merged in the order of the CIT (Appeals) and, therefore, the CIT had no jurisdiction to revise the assessment under section 263. It was further pointed out that the ITO himself had issued notice for rectification under section 154 and, therefore, the finality of the assessment had been disturbed and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Calcutta High Court in Hamilton Co. (P.) Ltd. v. CIT [1991] 187 ITR 568 the matter was no longer open to question and the doctrine of total merger was not applicable to orders passed under section 263. He pointed out that the question regarding allowance of the provision for encashment of leave of the assessee's employees was not the subject-matter of appeal before the CIT (Appeals), as it could never have been and, therefore, there was no merger of the order of assessment with the appellate order. He also relied on the provisions of section (1A) of section 154 which according to him, meant that even after an order of rectification under section 154 is passed the finality of the assessment is not disturbed and it is only that the assessment was modified and it is the assessment order as modified which held the field. Reliance was placed in support of this contention on the decision of the Calcutta High Court in Jeewanlal (1929) Ltd. v. Addl. CIT [1977] 108 ITR 407. On merits the Ld. D.R. submitted that the decision of the Hon'ble Calcutta High Court in Bharat General Textile Industries Ltd.'s case was directly against the assessee. He further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner under section 263 will defeat the purpose for which the provision was enacted. It was held that the order of the ITO would merge with the order of the appellate authority only with regard to that part of the order of the ITR which relates to the matters considered and decided by the appellate authority. It was held that there will be only a partial merger and not a merger of the entire order of assessment. It is significant to note that the Court arrived at this conclusion without referring to the earlier decision of the Ld. single Judge of the Calcutta High Court in the decision in Hindustan Aluminium Corpn. Ltd.'s case. Their Lordships, after reviewing the entire case law with regard to the principles of merger vis-a-vis section 263 of the Act, at page 578 (187 ITR) held as follows: " In our view, the question is not whether the question involved before the Commissioner of Income-tax could be the subject-matter of appeal before the appellate authority or whether the Commissioner directed the inclusion of certain income originally omitted from the assessment. Where the assessee is not aggrieved by a part of the order of the Income-tax Officer, such determination would not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier case in General Beopar Co. (P.) Ltd.'s case, it was really not necessary for the Court to examine the scope of the doctrine of merger. The Ld. single Judge further observed that the attention of the Court had not been drawn to the Judgment of the Supreme Court in the case of Madurai Mills Co. Ltd. The Ld. single Judge held that the principle enunciated by the Supreme Court in this case left no room for doubt that what merges in the appellate or revisional order is not the entire appealable order of the lower authority but only that part of the order of the lower authority which was under consideration of the higher authority in appeal or revision. 10. The decision of the Hon'ble Calcutta High Court in General Beopar Co. (P.) Ltd.'s case was also considered by the Calcutta High Court in Hamilton Co. (P.) Ltd.'s case. After referring to the said decision it was held by the Court that though there was an apparent conflict between the decision of the Calcutta High Court in an earlier decision in Singho Mica Mining Co. Ltd. v. CIT [1978] 111 ITR 231 and the decision in General Beopar Co. (P.) Ltd.'s case, in fact there was no such conflict and that even in the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver an order of assessment is carried in appeal, the same merges with the appellate order only in respect of matters that have been considered and decided in appeal and as far as the matters which are not taken in appeal are concerned, there is no question of merger and it would be open for the CIT to initiate proceedings under section 263 in respect of matters untouched by the appellate authority. In other words, the Hon'ble Calcutta High Court, in all the decisions cited above, has not accepted the theory of total merger. The contention of the assessee must, therefore, fail. 13. Even the decision of the Bombay High Court in Ritz Ltd. v. Union of India [1990] 184 ITR 599 has held that in cases where action under section 263 is taken after 1-6-1988, the merger of the assessment order with the appellate order will be treated as confined to the issues actually considered and decided in appeal in terms of Explanation (c) to section 263(1). In the present case, the action under section 263 was initiated by issue of notice on 5-1-1989. This clearly falls beyond 1-6-1988. Therefore, even on the basis of the decision of the Bombay High Court cited above the contention of the assessee mu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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