Commissioner of Income Tax vs Universal Agencies

On an application u/s 256(1) of the income tax Act, 1961 (''the Act''), the Tribunal has referred the following question for our opinion: Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order of the ITO stood merged in the order of the Commissioner (Appeals) dated 30-4-1981 and, consequently, in holding that the Commissioner was not competent to exercise jurisdiction u/s 263 of the income tax Act, 1961 ?

Assessment order u/s 143(3) of the Act was passed on 17-11-1980. The order of the Commissioner (Appeals) is dated 13-4-1981. A show-cause notice was issued on 22-10-1982 by the Commissioner as why the assessment order should not be revised on the issue of non-disallowing the amount of Rs. 16,225 invoking the provisions of section 37(3A)(iii). The order of the Commissioner u/s 263 of the Act was challenged before the Tribunal on the ground that the assessment order has merged in the order of the Commissioner (Appeals) dated 13-4-1981. Therefore, the Commissioner cannot revise that assessment order u/s 263.

The Tribunal has allowed the appeal on the ground that the assessment order merges with the order of the Commissioner (Appeals) and, therefore, the Commissioner is not competent to revise the order u/s 263.

None appeared for the assessee. We have heard Mr. Singhi, the learned counsel for the revenue. The learned counsel for the revenue brought to our notice that now the issue has been covered by the decision of the Apex Court in the case of COMMISSIONER OF Income Tax Vs. SHRI ARBUDA MILLS LTD., .

Considering the submissions of Mr. Singhi and perusal of record, the facts are not in dispute that after the assessment, the assessee has challenged the assessment order only on the ground that the Assessing Officer has erred in disallowing Rs. 1,000 out of miscellaneous expenses. The issue regarding disallowance u/s 37(3A)(iii) was not before the Commissioner (Appeals). In Shri Arbuda Mills Ltd.''s case (supra), their Lordships have considered the concept of merger or provincial merger as under:

The consequence of the said amendment made with retrospective effect is that the powers u/s 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner u/s 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred. (p. 52)

Following the view taken by their Lordships, we answer the question in the affirmative, i.e., in favour of the revenue and against the assessee. The reference, so made, is disposed of accordingly.