# r958 April a8. Conimi.~sioner of Ine<;ime-lax, Bo1nbay v. Af.fs. Amritlal Bhogilal ©- Co

- **Citation:** [1959] 1 S.C.R. 713
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Bench:** Venkatarama Aiyar, Gajendra<Mdkar, A. K. Sarkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/r958-april-a8-conimi-sioner-of-ine-ime-lax-bo1nbay-v-af-fs-amritlal-bhogilal-co-1540
- **Pages:** 17

## Headnote

Income Tax-Registration and assess'ment ~) firm by Income
Tax Officer-Appeal against
orders . of assessment-Power . of
Appellgie Assistant Commissioner in appeal_cCancellation of order
of registration by Commissioner of Income Tax in revision pending
such .appeat-Validity.c....Indian Income-tax Act, I922 (KI of I92:!~, •
.ss •. 26A, JI .and 33B(I).
• . ·
· . ·
;
r958
April a8.
Conimi.~sioner
of Ine<;ime-lax,
Bo1nbay
v.
Af.fs. Amritlal
Bhogilal ©- Co.
714
SUPREME COURT REPORTS
[1959]
The respondent firm was assessed to income-tax for the
assessment years 1947-48, 1948-49 and 1949-50 under s. 23(3).
The Income-tax Officer renewed the registration of the firm
under s. 26A of the Income-tax Act and passed an order under
s. 23(6) allocating the shares of the various partners. The respondent preferred appeals against the orders of assessment to the
Appellate Assistant Commissioner. On November 4, 1950, the
Appellate Assistant Commissioner partly accepted the appeals in
respect of the assessment years 1947-48 and 1948-49 but the
appeal in respect of the assessment year 1949-50 was still
pending.
Meanwhile after issuing notice to the parties and
hearing them the Commissioner, acting under s. 33B(1), passed
an order on June •5, 1952, cancelling the registration granted
under s. 26A on the ground that one of the partners of the firm
was a minor, and directed the Income-tax Officer to make fresh
assessments for the three years. The respondent preferred appeals
to the Appellate Tribunal which were allowed. On the application
of the appellant the Tribunal referred, under s. 66(1) of.the Act,
three questions to the High Court of Bombay. In regard to the
assessment years 1947-48 and 1948-49 the High Court helcHhat
the orders of the Income-tax Officer granting registration had
merged in the appellate orders of the Assistant Appellate Commissioner and the revisional power of the Commissioner under
s. 33B(1) could not be exercised in respect of them. With regard
to .the renewal of registration for the year 1949-50 the High
Court held that the Commissioner could not exercise his revisional pO\ver as the propriety of this order was open to consideration by the Appellate Assistant Commissioner in the respondent's
appeal pending before him.
The appellant obtained special
leave and appealed:
Held, that the Commissioner had the authority under
s. 33B(1) to set aside the orders of registration made by the
Income-tax Officer.
An order of the Income-tax Officer granting
registration was not appealable before the Appellate Assistant
Commissioner. Such an order could be cancelled by the Commissioner in exercise of his revisional powers under s. 33B(1);
but it could not be cancelled by the Appellate Assistant Commissioner even in the exercise of his appellate jurisdiction when
dealing with an appeal by an assessee.
The theory that the
order of a tribupal merges in the order of the appellate authority
did not apply to the order of registration passed by the Incometax Officer.
•
Commissioner of Income-tax, Bompay North v. Tejaji Farasram
Kharawala, [1953] 23 l.T.R. 412, referred to.
Durgabaii and Narmadabala Gupta v. Commissioner of Incometax, [1956] 30 I.T.R. 101, disapproved.
•
But the Commissioner has no power while exercising his
revisional jurisdiction under s. 33B(1) of the Act to set aside the
• assessment orders. The Commissioner, in the pr"esent case, did
/
-
•
..
..
•
.S.C.R.
SUPREME COURT REPORTS
715
not really intend to set aside 'the assessment orders but merely
to direct the Income-tax· Officer to make suitable consequential
amendments in regard to the machinery or procedure to be
adopted to recover the tax payable by the respondent.
The
registration or non-registration of a firm does not at all affect
the· computation of taxable income; it merely governs the procedure to be adopted in recovering the tax found due.
Shapurji Pallonji v. Commissioner of Income-tax, Bombay,
[1945] 13 I.T.R. IIJ, referred to.
CIVIL APPELLATE JumsmcTION: Civil Appe

## Text

s.c.R.
SUPREME COURT REPORTS
had been made in stating that no super-tax was
r95'8
1eviable. This decision clearly shows that the sub- v k-h 1
sequent cancellation of the assessees' registration was
en a~'~ ~.am
held by Their Lordships of the Privy Council to form Bombay nyeing &..
part of the record retrospectively in the light of the Mfg. co., Ltd.
said subsequent event, and the order was deemed to
. ·-· - ·.
suffer from a mistake apparent from the record SO as Ga;enliragaflkar ].
to justify the exercise of the rectification powers under
s. 35 of the Act. It is because Their Lordships thought
thats. 35 would have been clearly applicable that they
did not decide the question as to whe'ther s. 34 could
also have beeninvoked. This decision lends considerable support to the view which we are disposed to
take about the true meaning and scope of the expression ''-the inistake apparent from the record"
occur~
ring in s. 35.
·
We must accordingly hold that the High Court. of
Bombay was in error in coming .to the conch,1sion that
the notice issued by the Income-tax Officer calling
upon the respondent to pay the sum of Rs. 29,446-9-0
was not warranted by law. · The result is the order
passed by the High Court issuing a writ against the
appellant is set aside and the appeal is allowed with
costs throughout.
Appeal allowed.
COMMISSIONER OF INCOME-TAX, BOMBAY
v.
M/S. AMRITLAL BHOG ILAL & CO.
(VENKATARAMA AIYAR, GAJENDRA<MDKAR and
A. K. SARKAR JJ.)
Income Tax-Registration and assess'ment ~) firm by Income
Tax Officer-Appeal against
orders . of assessment-Power . of
Appellgie Assistant Commissioner in appeal_cCancellation of order
of registration by Commissioner of Income Tax in revision pending
such .appeat-Validity.c....Indian Income-tax Act, I922 (KI of I92:!~, •
.ss •. 26A, JI .and 33B(I).
• . ·
· . ·
;
r958
April a8.
Conimi.~sioner
of Ine<;ime-lax,
Bo1nbay
v.
Af.fs. Amritlal
Bhogilal ©- Co.
714
SUPREME COURT REPORTS
[1959]
The respondent firm was assessed to income-tax for the
assessment years 1947-48, 1948-49 and 1949-50 under s. 23(3).
The Income-tax Officer renewed the registration of the firm
under s. 26A of the Income-tax Act and passed an order under
s. 23(6) allocating the shares of the various partners. The respondent preferred appeals against the orders of assessment to the
Appellate Assistant Commissioner. On November 4, 1950, the
Appellate Assistant Commissioner partly accepted the appeals in
respect of the assessment years 1947-48 and 1948-49 but the
appeal in respect of the assessment year 1949-50 was still
pending.
Meanwhile after issuing notice to the parties and
hearing them the Commissioner, acting under s. 33B(1), passed
an order on June •5, 1952, cancelling the registration granted
under s. 26A on the ground that one of the partners of the firm
was a minor, and directed the Income-tax Officer to make fresh
assessments for the three years. The respondent preferred appeals
to the Appellate Tribunal which were allowed. On the application
of the appellant the Tribunal referred, under s. 66(1) of.the Act,
three questions to the High Court of Bombay. In regard to the
assessment years 1947-48 and 1948-49 the High Court helcHhat
the orders of the Income-tax Officer granting registration had
merged in the appellate orders of the Assistant Appellate Commissioner and the revisional power of the Commissioner under
s. 33B(1) could not be exercised in respect of them. With regard
to .the renewal of registration for the year 1949-50 the High
Court held that the Commissioner could not exercise his revisional pO\ver as the propriety of this order was open to consideration by the Appellate Assistant Commissioner in the respondent's
appeal pending before him.
The appellant obtained special
leave and appealed:
Held, that the Commissioner had the authority under
s. 33B(1) to set aside the orders of registration made by the
Income-tax Officer.
An order of the Income-tax Officer granting
registration was not appealable before the Appellate Assistant
Commissioner. Such an order could be cancelled by the Commissioner in exercise of his revisional powers under s. 33B(1);
but it could not be cancelled by the Appellate Assistant Commissioner even in the exercise of his appellate jurisdiction when
dealing with an appeal by an assessee.
The theory that the
order of a tribupal merges in the order of the appellate authority
did not apply to the order of registration passed by the Incometax Officer.
•
Commissioner of Income-tax, Bompay North v. Tejaji Farasram
Kharawala, [1953] 23 l.T.R. 412, referred to.
Durgabaii and Narmadabala Gupta v. Commissioner of Incometax, [1956] 30 I.T.R. 101, disapproved.
•
But the Commissioner has no power while exercising his
revisional jurisdiction under s. 33B(1) of the Act to set aside the
• assessment orders. The Commissioner, in the pr"esent case, did
/
-
•
..
..
•
.S.C.R.
SUPREME COURT REPORTS
715
not really intend to set aside 'the assessment orders but merely
to direct the Income-tax· Officer to make suitable consequential
amendments in regard to the machinery or procedure to be
adopted to recover the tax payable by the respondent.
The
registration or non-registration of a firm does not at all affect
the· computation of taxable income; it merely governs the procedure to be adopted in recovering the tax found due.
Shapurji Pallonji v. Commissioner of Income-tax, Bombay,
[1945] 13 I.T.R. IIJ, referred to.
CIVIL APPELLATE JumsmcTION: Civil Appeal No.
128 of 1955 .
Appeal by special leave from the judgment and
order dated March 5, 1953, of the Bombay High Court
in I. T. R. No. 40 of 1952.
H. N. Sanyal, Additional Solicitor-General of India,
K. N. Rajagopala Sastri and R. H. Dhebar, for the
appeliant.
B. R. L. Aiyangar, for the respondent.
1958.
April 28.
The Judgment of the Court was
delivered by
Co1nmission81
of .Jncome-tax;
Bombay
"·
M fs. A mritlal
Bhogilal & Co.
GAJENDRAGADKAR J.-This is an appeal by the Gajendragadkar ].
Commissioner of Income-tax, Bombay, by special
lea'Ml and it raises a short question of law under s. 33B
of the Income-tax Act. The respondent assessee had
been registered as a firm under s. 26A of the Act for
the year 1946-47. For the assessment years 1947-48,
1948-49 and 1949-50, the Income-tax Officer made
the assessment. on the respondent on June 7, 1949,
June 7, 1949, and September 23, 1949, respectively
under s. 23(3) of the Act.
The Income-tax Officer
made an estimate about the profits of the respondent
under the proviso to s. 13 and computed the total
income of the respondent at Rs. 95,053, Rs. 93,430 and
Rs. 83,752 for the said years respectively.
The respondent had applied for and obtained• renewal of
registration of the firm.
The Income-tax Officer had
also passed an order under s. 23(6) of the Act and
allocated the shares of the various parties.
Agaiust the said assessment orders the respondent
preferred an appeal to the Appellate Assistal}-t Com- .
missioner. On November 4,
1950, the Appellate
•
Ill
716
SUPREME COURT REPORTS
[1959]
r958
Assistant Commissioner reduced the respondent's
estimated profit by Rs. 28,250 in the assessment
C ommissionel'
d
Year 1947-48 an
by Rs. 19,000 in the assessment
of Inco1ne-lax,
Bombay
year 1948-49. The respondent's appeal in regard to
v.
the assessment year 1949-50 was pending before the
M/s. Amritlal Appellate Assistant Commissioner.
Bhogilal & Co.
Meanwhile it had come to the notice of the ComG . d-d'
1 missioner of Income-tax that the respondent firm
•J•n ralla •ar
· h · h h d b
d
1 f
.
·
b
h
w 1c
a
een grante renewa o reg1strat10n y t e
Income-tax Officer was not a firm which could be
registered under the Act as one of the partners of the
firm was a minor. The Commissioner then took action
under s. 33B( 1) of the Act and issued notice to the respondent to show cause why the assessments· made
under s. 23(3) of the Act and the registration granted
under s. 26A should not be cancelled. After hearing
the parties, the Commissioner passed an order under
s. 33B(l) on June 5, 1951 by which he cancelled the
registration of the firm under s. 26A and directed the
Income-tax Officer to make fresh assessments against
the respondent as an unregistered firm for all the three
years. As a result of this revisional order passed by
the Commissioner of Income-tax, the Income-tax
Officer passed fresh orders.
·
The respondent preferred five appeals to the tribunal; two of these were !1gainst the orders passed by
the Appellate Assistant Commissioner under s. 31
and related to the asstjssment years 1947-48 and 194849; while the remaining three challenged the orders
passed by the Commissioner of Income-tax under
s. 33B(l) of the Act and related to the assessment years
1947-48, 1948-49 and 1949-50. In these three appeals,
with which we are concerned, the respondent had
urged that the Commissioner was not competent in law
to pass an order setting aside an assessment which had
been confirmed or modified by the Appellate Assistant
Commissioner; that the orders passed by the Commissioner under s. 33B(l) were bad in law as they directed
the Income-tax Officer to pass an order in a particular
manner and that the orders passed by the Income-tax
• -Officer subsequent to the cancellation of the respondent's
registratio~ wer~ bad in law as they were passed with.
..
..
S.C.R.
SUPREME COURT REPORTS
717
out giving notice to, or hearing, the respondent. On
r958
January 2, 1952, the tribunal upheld the contentions
Commissioner
raised by the respondent and allowed the appeals.
of Income-tu,
The appellant then moved the tribunal under s. 66(1)
Bombay
of the Act for referring the questions specified in its
v.
application for the opinion of the High Court. The M/s. Amritlal
tribunal accordingly framed the following three
Bhogilal & Co.
questions and referred them to the High Court ofG . d -a
dk
1
B
b
a;en r ga ar
,
om ay:
" I. Whether on the facts and circumstances of
•
the case the Commissioner of Income-tax acting under
s. 33B(l) can set aside the orders passed by the Appellate Assistant Commissioner, for the assessment years
1947-48 and 1948-49?
2.
Whether on the facts and circumstances of
the case the order passed by the Commissioner of
Income-tax dated 5th June, 1951, is bad in law as it
directs the Income-tax Officer to pass an order in a
particular manner ?
3.
Whether on the facts and circumstances of
the case orders passed by the Income-tax Officer
dated 21-6-52 are bad in law, as fresh notices as
required by Sections 22 and 23 of the Income-tax Act
were not given by the Income-tax Officer to the
assessee ? "
This matter was heard by the High Court on March
5, 1953. In regard to the assessments made for the
years 1947-48 and 1948-49 the High Court held that the
•
question raised by the appellant was concluded by the
judgment already delivered by it in the Commissioner
of Income-Tax, Bombay North v. Tejaji Farasram
Kharawala (1).
In Tejaji's case the High Court had
held that when an appeal is provided from a decision
of the tribunal and the appeal court, after hearing the
appeal, passes an order, the order of the original court
ceases to exist and is merged in the order of the appeal
court; and although the appeal court may merely
confirm the order of the trial court, the order that
stands and is operative is not the order of the trial
court l:rut the order of the appeal court. In th11.t view
of the matter, since the Income-tax Offic&'s order.
(1) [1953] 23 I.T.R. 4I2.
118
SUPREME COURT REPORTS
[1959]
r958
granting registration to the respondent was assumed
to have merged in the appellate order, the revisional
Commissioner
of Income-tax, power of the Commissioner could uot be exercised in
Bombay
respect of it.
The same view has been taken in the
v,
majority decision of the Patna High Court in
MJs. Amrittal Durgabati and Narmadabal,a Gupta v. Commissioner of
Bhogilal & Co. Incomectax (1).
In respect of the Income-tax Officer's
Gajendragadkor J. order renewing registration to the respondent for the
year 1949-50, the High Court took the view that the
revisional power of the Commissioner could not be
exercised even in respect of this order be ca use the
propriety or the correctness of this order was open to
consideration by the Appellate Assistant Commissioner
in the respondent's appeal then pending before him,
Commissioner of Income-tax v. Amritlal Bhogilal (subnom) ('). In respect of this order the High Court had
framed an additional question. It was in these terms :
" Whether the order of the Commissioner acting under
s. 33B(l) setting aside the order of the Income-tax
Officer where an appeal againstthat order was pending
before the Appellate Assistant Commissioner was
valid? " The High Court answered this additional
question also in favour of the assessee. In the result
the High Court held that the Commissioner's order
cancelling the respondent's registration for all the
three years in question· was invalid. That is why
the High Court did not think it necesssary to answer
the remaining two questions framed by the tribunal.
•
The application subsequently made by the appellant to the High Court for a certificate under s. 66A (2)
was rejected by the High Court.
Thereupon the
appellant applied for and obtained special leave from
this Court on March 22, 1954. The appellant's contention is that the view taken by the High Court that
the Commissioner of Income-tax could not have exercised his revfsional power in respect of the Income-tax
Officer's order granting registration to the respondent
with regard to all the three years in question is based
on a misconstruction of the relevant provisions of
s. 33B of the Act.
•
Section. 33B (1) which confers revisional power on
(1) [1956) 30 1.;.R. IOI.
(2) [1953] 23 I.T.R. 420.
•
..
"'
'S.C.R.
SUPREME COURT REPORTS
719
the Commissioner provides that the Commissioner
r95a
may. call for and examine the rec_ord of any proceedCommissioner
ing under the Act and if he considers that any order of Income-tax,
passed therein by the Income-tax Officer is erroneous
Bombay
in so far as it is prejudicial to the interests of the
v.
revenue, he may, after giving the assessee an opportuMfs .. Amritlal
nity of being heard and, after making and causing to
Bhog'.lal & Co.
be ma.de such enquiry as h: deems necessary, pass Gajendr-;;;,;dkar J.
such order thereon as the circumstances of the case
justify including an order enhancing or modifying the
assessment or cancelling the assessment or directing a
fresh assessment. Sub-section (2) provides that orders
of re-assessment made under $. 34 cannot be revised
under s. 33B (1) and adds that the said revisional
power cannot be exercised after the lapse of two years
from the date of the order sought to be revised. Sub-
. section (3) gives the assessee the right to prefer an
appeal to the appellate tribunal against the Commissioner's revisional order within the prescribed
period; and sub-s. (4) provides for the procedure for
filing such an appeal.
A
In the present appeal two short questions fall to be
decided under s. 33B (1).
Does the order passed by
the Income-tax Officer granting registration to the
assessee firm continue to be an order passed by the
Income-tax Officer even after the assessee's appeal
against the assessment made by the Income-tax
Officer on the basis that the assessee was a registered
firm has been disposed of by the Appellate Assistant
Commissioner? In other words, where the appeal preferred by an assessee against his assessment has been
considered and decided by the Appellate Assistant
Commissioner, does the order of registration along
with the subsequent order of assessment merge in the
appellate order? If, in law, the order of registration
can be said to merge in the final appellate· order, then
clearly the Commissioner's revisional power cannot be
exercised in respect of it. This question arises in
respect of the registration order in regard to the two
assessd':l.ent years 1947-48 and 1948-49.
The other
question which also falls to be decided is whether the· •
order of registration in respect of the ~ssess!llent year
720
SUPREME COURT REPORTS
[1959]
z95&
1949-50 can be made the subject-matter of the exercise
Commissioner
of the Commissioner's revisional power even though the
of Income-tax, assessee's appeal against the assessment for the said
Bombay
year is pending before the Appellate Assistant Comv.
missioner at the material time.
M/s. Amritlal
There can be no doubt that, if an appeal is provided
Bhogilal & Co. against an order passed by a tribunal, the decision of
Gajendragadkar J. the appellate authority is the operative decision in
law. If the appellate authority modifies or reverses
the decision of the tribunal, it is obvious that it is the
appellate decision that is effective and can be enforced.
In law the position would be just the same even if the .
appellate decision merely confirms the decision of the
tribunal. As a result of the confirmation or affirmance
of the decision of the tribunal by the appellate authority the original decision merges in the appellate
decision and it is the appellate decision alone which
subsists and is operative and capable of enforcement;
but the question is whether this principle can apply
to the Income-tax Officer's order granting registration
to the respondent.
In dealing with this question it would be necessary
first to refer to the relevant provisions of the Act in
regard.to the granting of registration. Section 26A of
the Act lays down the procedure for the registration
of firms.
An application has to be made by the firm
in that behalf specifying the particulars prescribed by
the said section and by the material rules framed
under the Act. If registration is granted by the
Income-tax Officer it enables the Income-tax Officer to
adopt the procedure prescribed by s. 23 (5) (a) for making assessment orders in respect of the registered firm.
If a firm is not registered the Income-tax Officer is required to follow the procedure prescribed bys. 23 (5) (b)
in making a~sessment orders in re8pect of unregistered
firms.
A firm is an assessee under s. 2 (2) whether it
is registered under s. 26A or not. The Act does not
impose an obligation on firms to apply for and obtain
registration. The Act in terms does not purport to
define the effect of registrntion nor does it emfmerate
• ·the righls of parties on registration of firms.
Section 23 ( 5) ~a) a!ld (b) provide for the machinery for
•
•
..
r
S.C.R.
SUPREME COURT REPORTS
721
collecting or recovering the tax and in no sense can
z958
they be treated as charging: sections.
Broadly stated,
'-'
Commissioner
even if a firm is registered in pursuance of an applicaof Income-tax,
tion made under s. 26A, no difference arises in the
Bombay
liability of the firm or its individual partners to be
v.
taxed for the total income as may be determined by M/s. Amritlal
the Income-tax Officer under ss. 3 and 4 of the Act.
Bhogilal .s. Co.
The computation of taxable income is not at allGajendra:adkar J.
affected by the machinery provided by s. 23 (5).
The
decision in Shapurji Pallonji v. Commissioner of Income-Tax, Bombay (1) on which Mr. Ayyangar himself
relied clearly brings out and emphasizes this position.
It is true that the Income-tax Officer is empowered to
follow the two methods specified ins. 23 (5) (a) and (b)
in determining the tax payable by registered and
unregistered
firms
respectively
and making the
demahd for the tax so found due ; but this does
not affect the computation of taxable income.
It
is important to bear in mind that the order granting registration to an assessee firm is an independent
and separate order and it merely affects or governs
the procedure to be adopted in collecting or recovering the tax found due. It is not disputed that the
registration granted by the Income-tax Officer to an
assessee firm can be cancelled by him either under
s. 23 (4) or under r. 6B. It is also clear that the
Income-tax Officer's order granting registration can be
cancelled by the Commissioner under s. 33B (1).
The
argument for the respondent, however, is that, as a
result of the decision of the appeal preferred by him
against the Income-tax Officer's order of assessment,
the order of registration passed by the Income-tax
Officer in favour of the respondent has ceased to be
the order passed by the Income-tax Officer as such.
It is therefore necessary to inquire whether the
order of registration passed by the Income-tax Officer
can be challenged by the department before the
Appellate Assistant Commissioner where the assessee
· firm has preferred a.n appeal against the order of
assessment. The decision of this question would
obviously depend upon the relevant provisions of the •
(1) [1945] 13 I. T. R. II3·
•
722
SUPREME COURT REPORTS
[1959]
r958
Act in respect of appeals to· the Appellate Assistant
Commissioner and the powers of the Ap1)ella te AssisCommissioner
of Income-ta>. tant Commissioner. Section 30 (I) gives the assessec
Bombay
the right to prefer appeals against the orders specified
v.
in the said section.. The assessee firm can, for instance,
M/s. Amritlat object to the amount of income assessed under s. 23 or
Bhogilal &- Co.
s. 27.
The assessee firm can also object to the order
G . d-dk
1 passed by the Income-tax Officer refusing to register it
a;en raga
ar
. under s. 23 (4) or s. 26A. It can likewise object to the
cancellation by the Income-tax Officer of its registration under s. 23 ( 4). It is significant that, whereas ari
appeal is provided against orders passed by the Income-tax Officer under s. 23 (4) or s. 26A either refusing to register the firm or cancelling registration of
the firm, no appeal can be filed by the department
against the order granting registration. Indeed it is
patent that the scheme of the Act in respect. of appeals
to the Appellate Assistant Commissioner is that it is
only the assessee who is given a right to make an
appeal and not the department. Thus there can be no
doubt that the Income-tax Officer's order granting
registration to a firm cannot become the subjectmatter of an appeal before the Appellate Assistant
Commissioner.
The next question which must be considered is
whether the Income-tax Officer's order granting registration to a firm can be challenged by the department
during the hearing of the firm's appeal against the
final order of assessment made by the Income-tax
Officer? The powers .of the Appellate Assistant Commissioner are to be found in s. 31 of the Act. Section
31 (3) (a) authorises the Appellate Assistant Commissioner to confirm, reduce, enhance or annul the
assessment under appeal. Under s. 31 (3) (b), wide
powers are given to the appellate authority to set aside
the assessment or direct the Income-tax Officer to
make fresh assessment after making such further
enquiry as the Income-tax Officer may think fit or as
the Appellate Assistant Commissioner may dir<ict. The
Appellate Assistant Commissioner is also giv'en the
-authority, in the case of an order cancelling the
'
registration of the firm under su b-s. ( 4) of s. 23 or
..
•
•
..
•
•
•
S.C.R.
SUPREME COURT REPORTS
723
refusing to register a firm under sub-s. (4) of s. 23 or
z958
s. 26A or to make a fresh assessment under s. 27, to
confirm such order or cancel it and direct the IncomeCommissioner
.of .Income-tax,
tax Officer to register the firm or to make a fresh
Bombay
assessment as the case may be.
This section further
v.
lays down that, at the hearing of an appeal against
M/s. Amritlal
the order of an Income-tax Officer, the Income-tax
Bhogilal & Co.
Officer shall have the right to be heard either in person G . a -dk 1
or by his representative. It is thus clear that wide a;en raga ar
'
powers have been conferred on the Appellate Assistant
Commissioner under s. 31. It is also clear that, before
the appellate authority exercises his powers, he is
bound to hear the Income-tax Officer or his representative. It has been urged before us by Mr. Ayyangar
that these provisions indicate that, in exercise of his
wide .powers the Appellate Assistant Commissioner
can, in a proper case, after hearing the Income-tax
Officer or his representative, set aside the order of
registration passed by the Income-tax Officer. We are
not prepared to accept this argument. The powers of
the Appellate Assistant Commissioner, however wide,
have, we think, to be exercised in respect of the
matters which are specifically made appealable under
s. 30(1) of the Act. If any order has been deliberately
left out from the jurisdiction of the Appellate Assistant
Commissioner it would not be open to the appellate
authority to entertain a plea about the correctness,
propriety or validity of such an order. Indeed, if the
respondent's contention is accepted, it would virtually
give the department a right of appeal against the
order in question and there can be no doubt that the
scheme of the Act is not to give the department a
right of appeal to the Appellate Assistant Commissioner against any orders passed by the Income-tax
Officer. The order granting registration ca.ii be cancelled by the Income-tax Officer himself either under
r. 6B or under s. 23(4). It may be cancelled by the
Commissioner in exercise of his revisional power under
s. 33 B ; but it cannot be cancelled by the Appellate
Assistant Commissioner in exercise of his appellate
jurisdiction under s. 31 of the Act. It is trne that, •
92
•
724
SUPREME COURT REPORTS
[1959]
1958
in dealing with the assessee's appeal against the
order of assessment, the Appellate Assistant ComConimissioner
of Income-tox,
missioner may modify the assessment, reverse it or
Bombay
send it back for further enquiry; but any order that
v.
the Appellate Assistant Commissioner may make in
M/s. Amritlat
respect of any of the matters brought before him in
BhogUat & Co. appeal will not and cannot affect the order of registraG . d-dk
1 tion made by the Income-tax Officer. If that be the
a;en raga
ar
.
. .
h
d
f
·
·
d b
h
true pos1t10n, t e or er o reg1strat10n passe
y t e
Income-tax Officer stands outside the jurisdiction of
the Appellate Assistant Commissioner and does not
strictly form part of the proceedings before the
appellate authority. Even after the appeal is decided
and in consequence the appellate order is the only
order which is valid and enforceable in law, what
merges in the appellate order is the Incollle-tax
Officer's order under appeal and not his order of
registration which was not and could never become
the subject-matter of an appeal before the appellate
authority. The theory that the order of the tribunal
merges in the order of the appellate authority cannot
thE'refore apply to the order of registration passed by
the Income-tax Officer in the present case.
In this connection we may refer to the argument
which Mr. Ayyangar seriously pressed before us.
He
contended that, when the Appellate Assistant Commissioner hears the assessee's appeal, he is himself
computing the total taxable income of the assessee
and, in discharging his obligation in that beh:.lf, he
may be entitled to consider all relevant and incidental
questions. In support of this argument Mr. Ayyangar
referred us to the decision in Rex v. The Special Commissioner of Income-Tax (ex parte Elmhirst) (1).
The
point which arose before the King's Bench Division in
this case wa~ whether, when a notice of appeal has
been given, it was open to the assessee to withdraw
his appeal and the Court held that once notke of
appeal is given the appellate authority was entitled
and indeed bound to see that a true assessment of the
amount of the tax.payer's liability was arrived at. We
• •are unable to see how this decision can really help the
(1) [193~] w T.,x Cas. 381.
•
•
•
•
S.C.R.
SUPREME COURT REPORTS
725
respondent in the present case.
When an appeal is
r958
taken before -the Appellate Assistant Commissioner
Commissioner
undoubtedly he is bound to examine the case afresh
of Income-tax,
but that cannot bring within the purview of his appelBombay
late jurisdiction matters which are deliberately left out
v.
by the Act. Ifs. 30(1) does not provide for an appeal
M/s. Amritla/
against a particular order, legislature obviously intends
Bhogilal &- Co.
that the correctness of the said order cannot be G . d -dk
.
b "
h
ll
h .
Th
a;en raga
ar ].
impeached
e1ore
t e appe ate aut onty.
e
jurisdictinn and powers of the appellate authority must
inevitably be determined by the specific and relevant
provisions of the Act.
In this connection it may·be useful to compare the
relevant and material features of the revisional
powers conferred on the Commissioner by ss. 33A and
33B tespectively. The Commissioner's revisional power
under s. 33A cannot be exercised to the prejudice
of the assessee in any case. It can be exercised in
respect of orders passed by any authority subordinate
to the Commissioner; but in no case can the revisional
order prejudicially affect the assessee. It is significant that the explanation to s. 33A expressly provides
that the Appellate Assistant Commissioner shall
be deemed to be an authority subordinate to the
Commissioner. In other words, in exercise of this
revisional power the Commissioner may modify or
reverse in favour of the assessee even the orders passed
by the Appellate Assistant Commissioner.
The
position under s. 33B, however, is different. The
Commissioner's revisional power under s. 33B can be
exercised only in respect of orders passed by the
Income-tax Officer.
The appellate orders are outside
the purview of s. 33B. That is one important distinction between the two revisional powers. The other
important distinction is that, whereas under s. 33A the
revisional jurisdiction cannot be exercised to the
prejudice of the assessee, under s. 33B the Commissioner can, in exercise of his revisional power, make
orders ~o the prejudice of the assessee. It is not disputed that under s. 33B erroneous orders passed by
the Income-tax Officer which are prejudicia'l to the' •
revenue can be revised by the Conm:t,issio~er. Now1
726
SUPREME COURT REPORTS
[1959]
z958
the Income-tax Officer's order registering the firm is
not appealable and so it cannot become the subjectCommissioner
matter of an appeal before the Appellate Assistant
of lncome·tnx,
Bombay
Commissioner. Such an order can therefore be
v.
revised by the Commissioner under s. 33B whenever
M/s. Amritlal
he considers that it has been erroneously passed. In
Bhogilal ""co. the present case there is no doubt that the respondent
G . d -dk 1 firm cannot be validly registered in view of the fact
aien raga
ar
. th
f '
.
.
d
h
at one o its partners is a mmor an so, on t e
merits, the Commissioner's order is·clearly right. We
must accordingly hold that the High Court was in
error in taking the view that the Commissioner had no
authority to set aside the registration order passed by
the Income-tax Officer granting registration to the
respondent for the years 1947-48 and 1948-49.
The case in regard to the subsequent year 19.49-50
presents no difficulty.
The appeal preferred by the
respondent against the Income-tax Officer's assessment
order in respect of this year was pending at the
material time before the Appellate Assistant Commissioner ; and so no question of merger arose in respect
of the order granting renewal of registration for this
period. There can be no doubt that even on the theory
of merger the pendency of an appeal may put the order
under appeal in jeopardy but until the appeal is finally
disposed of the said order subsists and is effective in
law. It cannot be urged that the mere pendency of an
appeal has the effect of suspending the operation of
the order under appeal. The High Court, however,
appears to have taken the view that the revisional
power is an extraordinary power and can be exercised
only for unusual and extraordinary reasons. It was
also assumed by the High Court that, in the pending
appeal, the department would have an alternative
remedy beaause, according to the High Court,
the department· could have challenged the validity
or the propriety of the respondent's registration and
could have asked the Appellate Assistant Commissioner to cancel it. As we have already pointed out,
the department could not challenge the validity of the
• 'registration order in the assessee's appeal before the
appellate .authority and so the argument that the
s.c.R.
SUPREME COURT REPORTS
727
department had an alternative remedy is not correct.
x958
It is clear from the judgment of the High Court that
Commissioner
it is the assumption that the department had an alterof Income-tax,
_native remedy which weighed with the learned j:idges
Bombay
in reaching their final conclusion. Then the argument
v.
that the extraordinary revisional power must be exerMls._Amritlal
cised only for extraordinary reasons is really not very
Bhogilal & Co.
material. Whether or not the revisional power can Gajendragadkar J.
be exercised in a given case must be determined solely
by reference to the terms of s. 33B itself. Courts
would not be justified in imposing additional limitations on the exercise of the said power on hypothetical
considerations of policy or the extraordinary nature of
the power. We must, therefore, hold that the High
Court was also in error in holding that the Commissioner was not authorised in cancelling the order of
the respondent's registration for the year 1949-50.
The result is that the view taken by the High Court
must be reversed and the first question framed by the
tribunal as well as the additional question framed by
the High Court must be answered in favour of the
appellant.
Then there remain two other questions which were
framed by the tribunal but have not been considered
by the High Court. The learned counsel appearing
for both the parties agree that we neetl not remit these
two questions to the High Court with the direction
that the High Court should deal with them in accordance with law; it has been conceded before us that, if
the principal question about the Commissioner's power
under s. 33B(l) to cancel the respondent's registration
is answered in favour of the appellant, then the two
remaining questions would become academic and
answers to them would also have to be in favour of
the appellant. It is true, by his order .the Commissioner purported to set aside the assessment orders
made under s. 23(3) and s. 55 and directed the Incometax Officer to make fresh assessments according to law
for each of the years in question. If this part of the
order is literally construed it would clearly be open to
the objection raised by the respondent. The assess-· •
ment orders passed by the Income-tax; Officer for the
years 1947-48 and 1948-49 had been modified by the
728
SUPREME COURT REPORTS
[1959]
r958
Appellate Assistant Commissioner and in that sense
they had ceased to be the orders of assessment p(l,ssed
Commissioner
b Y the Income-tax Officer himself and so the Commisof Inco1ne-tax,
Bombay
sioner could not have exercised his revisional power
v.
under s. 33B(l) in respect of the said appellate orders
M/s. Am1illal
but we are inclined to think that the Commissioner did
Bhogilal & Co. not intend to set aside the assessments in this sense.
G . d-dk
1 It is clear from the order read as a whole that, having
a;en raga
ar
.
ll d h
d
,
.
.
h
C
.
canoe e t e respon ent s reg1strat10n, t e
omm1s-
•
sioner wanted to direct the Income-tax Officer to make
suitable consequential amendment in regard to the
machinery or procedure to be adopted to recover the
tax payable by the respondent. ln fact it is conceded
that, in his subsequent order, the Income-tax Officer
has accepted the figure of the taxable income of the
respondent as determined by the appellate autqority
for the relevant years and has proceeded to act under
s. 23(5)(b) on the basis that the respondent is an unregistered firm.
Therefore we cannot hold that the
order passed by the Commissioner is bad in law on the
ground that "he directed the Income-tax Officer to
pass the order in a particular manner ". The answer to
question No. 2 would accordingly be in the negative.
Then as regards que~tion No. 3, it is difficult to understand how this question can he said to arise from the
proceedings before the tribunal. This question challenges the validity of the procedure adopted by the
Income. tax Officer in passing fresh orders against the
respondent.
This proceeding is clearly subsequent to
the impugned order of the Commissioner under
s. 33B(l) and so we are unable to see how the tribunal
allowed the respondent to raise this contention in
appeals which had been filed by the respondent
against the Commissioner's order under s. 33B(l).
Besides, it hf!S been fairly conceded by Mr. Ayyangar
before us that, when the Income-tax Officer merely
proceeded to adopt a different machinery to recover
the tax due from the respondent in consequence of the
cancellation of the respondent's registration, there was
no occasion or need to issue another notice against
·the respondent.
We must accordingly answer question No. 3 also ~n the negative.
•
S.C.R.
SUPREME COURT REPORTS
729
In the result all the questions framed in this case
ate answered in favour of the appellant. The order
passed by the High .Court is set aside and the appeal
is allowed with costs throughout.
Appeal allowed.
Cmuniissioner
of Jncome-ta:r,
Bombay
v.
M fs. Amritlal
Bhogilal & Co.
Gajendragadkar ] .
M/S. DALMIA DADRI CEMENT CO. LTD.
v.
THE COMMISSIONER O.B' INCOME-TAX
•
(and connected petition)
(S. R. DAS c. J., VENKATARAMA AIYAR, s. K. DAS,
GAJENDRAGADKAR and VIVIAN BosE JJ.)
Act of State-Covenant between States for merger--Rights of
subjects of the Covenanting States-Enforcement in municipal courts
of the New State-Income-tax-Concessional rates granted by the
Covenanting State-Whether binding on the New State.
The appellant company which was incorporated in 1938 in
the erstwhile State of Jind obtained certain concessions from
the Ruler of the State under an agreement dated April l, 1938,
which, inter alia, provided that the State was to be allotted
certain shares in the company without any payment and as
regards income-tax the company was to be assessed at concessional rates. On May 5, 1948, the Ruler of Jind along with the
Rulers of seven other States entered into a Covenant for the
merger of their territories into one State. Article VI of the
Covenant provided, inter alia, that the Ruler of the Covenanting State shall make over the administration of his State to the
Rajpramukh of the new State and that all duties and obligations
of the Ruler of the Covenanting State shall devolve on the New
State and shall be discharged by it. In accordance with that
Article the Rajpramukh took over the administrii.tion of Jind on
August 20, 1948, and immediately after assumption of ofiice
promulgated Ordinance No. I of S. 2005, by s. 3 of which all
laws in force in the State of Patiala were made applicable
mutatis mutandis to the territories of the New State and that all
laws in. force in the Covenanting States stood repealed. On
November 24, 1949, the Rajpramukh issued a proclamation
accepting the Constitutiorr of India and on April 13,' 1950, the'
New State became a taxable territory of the Union of India.
April 28.
•