Orissa H.C : The order of assessment being covered by the directions given by the IAC could not be revised by the CIT under s. 263

Counsel Appeared

Amal Ray, for the Revenue : A.Patnaik, N.C. Patnaik & Pangari, for the Assessee

S. C. MOHAPATRA ,J.:

This is a reference under s. 256(1) of the IT Act, 1961, at the instance of the Revenue. The statement of facts has been made on the following two questions for answer :

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the order of assessment being covered by the directions given by the IAC could not be revised by the CIT under s. 263 of the Act ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the entire assessment order merged with the appellate order of the CIT (A) irrespective of any point not appealed against and as such the CIT had no jurisdiction to revise the assessment order under section 263 of the Act?”

The assessee is a company. It was being assessed by the ITO for the asst. yr. 1976-77. As required under s. 144B of the Act, before finalising the assessment, the draft assessment order was to be referred to the IAC when directed to by the assessee and assessment is to be completed thereafter. Against the assessment order so passed, an appeal lies to the CIT (A) who is the first appellate authority.

After the order of assessment was made under s. 144B, the assessee preferred an appeal to the first appellate authority who allowed the appeal in part. Thereafter, the CIT exercised his power under s. 263(1) of the Act revising the order of the ITO. An appeal was preferred against the order of the CIT in revision. In the appellate order, the Tribunal held that the CIT has no jurisdiction to revise the order. The revenue filed an application for making a reference on the basis of which the Tribunal has stated a case on the aforesaid two questions. Sec. 263 (1) as it stood at the relevant time read as follows : “The CIT may call for and examine the record 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 inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify . . . “

Mr. Amal Ray, learned standing counsel for the Department, submitted on behalf of the Revenue that the order of the ITO can always be revised and, therefore, the CIT was justified in revising the same in exercise of his power under s. 263(1) of the Act. Mr. A. Patnaik, learned counsel for the assessee, on the other hand, submitted that there was no order of the ITO available to be revised since such order had merged in the first appellate order of the CIT (A).

Mr. Ray is justified in commenting on the appellate order of the Tribunal in so far as the first question is concerned. Approval of the draft assessment order of the AAC is not an assessment order which is to be passed by the ITO finally after receipt of approval. The CIT has power to revise the order of the ITO and, while so revising, may also examine the correctness of approval. But, where an appeal has been filed against the order of assessment,such order merges with the appellate order and there is no scope for the CIT to revise the order of assessment made by the ITO. The Tribunal is correct in its finding in this respect.

The doctrine of merger as laid down by the Supreme Court in S. S. Rathore vs. State of Madhya Pradesh, (1989) 75 FJR 425 ; AIR 1990 SC 10, overruling the earlier decision of the Supreme Court in Sita Ram Goel vs. Municipal Board, Kanpur 1958 AIR 1958 SC 1036, on this question supports our view.

In the result, the questions are answered against the Revenue.

No costs.

S. K. MOHANTY ,J.:

I agree.

[Citation: 193 ITR 183]