COMMISSIONER OF INCOME TAX vs MILL STORES (P) LTD.

R. Jayasimha Babu, J:

The question referred to us at the instance of the revenue is set out in p. 2 of the typed set and it reads as under :

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the entire subject of the assessment is open before the appellate authority and therefore, the assessment order has not merged with the order of the Commissioner (Appeals) even in respect of matters not agitated in appeal and consequently, the assessment order is no longer amenable to review, u/s 263 and accordingly cancelling the order of the Commissioner u/s 263 ?

The assessment year is 1981-82. The assessment order had been made on 9-2-1984 and the order in appeal on 23-3-1985. That part of the assessment order which was not the subject-matter of appeal was revised by the Commissioner by an order dated 17-3-1986. His order was set aside by the Tribunal on the ground that the revisional power was not available to the Commissioner, as in the view of the Tribunal the order of assessment had merged with the order is appeal.

Counsel for the revenue rightly invited our attention to the language of the Explanation below section 263(1) which after its insertion by the Finance Act, 1988 and the amendment thereto by the Finance Act, 1989 sets out a declaration by Parliament inter alia ""for the removal of doubts that an order passed ""on or before or after the 1-6-1988"" by the assessing officer, if it had been the subject-matter of appeal filed on or before or after the 1-6-1988, the powers of the Commissioner u/s 263(1) shall extend and shall be deemed always to have extended to such matters as had not been considered and deduction in such appeal.

Relying on that Explanation as also on the decisions of the Apex Court in the cases of COMMISSIONER OF Income Tax Vs. SHRI ARBUDA MILLS LTD., and CIT v. Shree Manjunathesware Packing Products & Camphor Works (1997) 231 ITR 53 it was submitted by counsel that the view taken by the Tribunal is patently erroneous.

Counsel for the assessee sought to support the order of the Tribunal by placing reliance on the decision of a learned single Judge of the Bombay High Court in the case of Ritz Ltd. and another Vs. Union of India and others, wherein the court held that even after the amendment by the Finance Act, 1989, section 263 could not be invoked in respect of the assessment orders against which appellate orders had been made prior to 1-6-

1988. We are wholly unable to subscribe to that view. The express language of the Explanation leaves no manner of doubt that all orders/passed in appeal whether on or before or after the 1-6-1988, did not result in the merger of the assessment order with the order in appeal in respect of matters which were not the subject-matter of appeal. To held otherwise is to do violance to the lucid language used in the Explanation.

Counsel for the assessee also sought to submit that in the decision of the Apex Court in the case of Shri Arbuda Mills Ltd. (supra) the court did not expressly advert to the scope of the Explanation though the same had been set out. We see no substance whatever in this submission of counsel.

The Apex Court dealt with the reference which is set out in the question, and which referred to the dates of the assessment order and the order in appeal both of which related to a period prior to 1988. The Explanation (c) u/s 263(1) was set out and the words used being plain and unambiguous did not require further discussion and it was held that in the respect of an appellate order passed in the year, 1979, there was no merger of the assessment order with the appellate order in respect of matters which were not the subject-matter of appeal. That decision was rendered by a Bench of three learned Judges of the Court.

In the case of Shree Manjunathesware Packing Products & Camphor Works (supra) the memorandum explaining the provisions in the Finance Bill, 1989 has been extracted. In that memorandum it was stated inter alia with reference to the Finance Act, 1988, that ""it was also clarified that the commissioner is competent to revise an order of assessment passed by an assessing officer on all matters except those which have been (sic considered and decided in an appeal. The above) Explanation was incorporated in the Finance Act, 1988, to clarify this legal position which is deemed always, to have been in existence. By the Finance Act, 1989, the Explanation (as u/s 263(1)) was amended to make the intention of Parliament crystal clear and the words, ""on or before or after Ist day of 1998 were substituted in section 263(1) Explanation (a) clause (i), which words are also applicable to clause (c) of the Explanation.

The assessee's contention that the commissioner had no power to exercise his revisional jurisdiction in view of the alleged merger of the assessment order with the appellate order, in respect of matters not considered in appeal is without any substance and it is required to be rejected and is accordingly rejected. The question referred to us is answered in favour of the revenue and against the assessee.