The Judgment of the Court was delivered by

Ramanujam, J.:— The petitioner herein is carrying on business in paints, steel, perforated sheets, etc., in Madras and speculation and commission trade in Calcutta. In respect of assessment year 1970–71, he did not file any return on the ground that he did not have taxable income. But the Income-tax Officer completed the assessment ex parte under section 144 and estimated the total income at Rs. 40,000 for the said assessment year. The petitioner as against the said order of assessment, filed an appeal before the Appellate Assistant Commissioner. The said appeal was rejected on the ground that it is time-barred by 28 days. Thereafter, the petitioner filed an appeal before the Appellate Tribunal as against the said appellate order. In preferring the appeal before the Tribunal there was also a delay. The Tribunal chose to condone the delay but ultimately upheld the order of the Appellate Assistant Commissioner rejecting the appeal as time-barred, after holding that the petitioner had not made out sufficient cause for the condonation of delay of 28 days. The Tribunal had not gone into the merits of the assessment in view of its order confirming the order of the Appellate Assistant Commissioner rejecting the appeal as out of time. Thereafter, the petitioner approached the Commissioner of Income-tax by filing a revision under section 264 of the Income-tax Act, 1961. That revision petition has been rejected by the Commissioner on the ground that the petitioner had gone on appeal before the Appellate Assistant Commissioner as well as before the Tribunal and, therefore, the petitioner's revision cannot be maintained. As against the said order of the Commissioner of Income-tax rejecting his revision petition, the petitioner has preferred the above writ petition.

2. Before us learned counsel for the petitioner contends that the fact that he has gone in appeal before the Appellate Assistant Commissioner and thereafter before the Tribunal will not disable him from approaching the Commissioner by way of revision, as the appellate authorities have not dealt with the assessment on merits and they had rejected the appeals only on the ground of delay.

3. Therefore, the only question that arises for consideration is whether the view of the Commissioner that the petitioner is not entitled to invoke the revisional jurisdiction under section 264 as he had already filed appeals before the appellate authorities could be sustained.

4. section 264 of the Income-tax Act, 1961, reads as follows:

“264. (1) In the case of any order other than an order to which section 263 applies passed by an authority subordinate to him, the Commissioner may, either of his own motion or on an application by the assessee for revision, call for the record of any proceeding under this Act in which any such order has been passed and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit………

(4) The Commissioner shall not revise any order under this section in the following cases—

(a) where an appeal against the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal to the Appellate Tribunal, the assessee has not waived his right of appeal; or

(b) where the order is pending on an appeal before the Appellate Assistant Commissioner; or

(c) where the order has been made the subject of an appeal to the Appellate Tribunal.”

5. Sub-section (4) imposes certain restrictions on the power of the Commissioner to entertain the revision petitions. One of the restrictions is where an appeal against the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal but has not been made and the time within which such appeal could be made has not expired or in the case of an appeal to the Appellate Tribunal the assessee has not waived his right of appeal. The other restriction is where the order sought to be revised has been made the subject-matter of an appeal to the Appellate Tribunal. The Commissioner while rejecting the revision petition filed by the petitioner seems to have relied on sub-section (4) of section 264.

6. In one of the earliest decisions in Sreenivasalu Naidu v. Commissioner of Income-tax, [1948] 16 ITR 341 (Mad), in construing section 33A of the Indian Income-tax Act, 1922, which corresponds to section 264 of the Income-tax Act, 1961, this court had expressed the view that an order is made the subject of an appeal within the meaning of clause (c) of the first proviso to sub-section (2) of section 33A only when it is the subject-matter of an effective appeal, and that if an appeal to the Appellate Tribunal under section 33 is not admitted and is disposed of on the ground that it was filed after the prescribed time the order cannot be said to be the subject of an appeal. A similar view was taken in Erode Yarn Stores v. State of Madras, [1963] 14 STC 724 (Mad), while construing an analogous provision in the Madras General Sales Tax Act, wherein it has been held that the Board of Revenue was not prevented from exercising its power of revision under section 34 of the Madras General Sales Tax Act, 1959, solely for the reason that a belated appeal had been filed to the Appellate Tribunal, that when section 34(2)(b) speaks of an order having been made the subject of an appeal to the Appellate Tribunal, it was an effective appeal that was contemplated and that where a petition to condone the delay in filing an appeal to the Appellate Tribunal was rejected and as a result thereof the appeal petition was also rejected in limine, it could not be said that the order had been made the subject of an appeal to the Appellate Tribunal. In Krishna Flour Mills Ltd. v. Commissioner of Income-tax, [1965] 55 ITR 259, the Mysore High Court has taken the same view. In that case, the decision in Sreenivasalu Naidu v. Commissioner of Income-tax, [1948] 16 ITR 341 (Mad) was quoted with approval, as laying down the correct view and as having stood the test of time. In Swadeshi Cotton Mills Co. Ltd. v. Commissioner Of Income-Tax, Kanpur., [1975] 101 ITR 621 a Division Bench of the Allahabad High Court has held that where an appeal to the Appellate Assistant Commissioner or the Appellate Tribunal was not provided for by the Act, and an assessee files an appeal before the said authorities which is dismissed as not maintainable, he can approach the Commissioner in revision under section 33A and the Commissioner is not barred from exercising his powers of revision even though an incompetent appeal might have been preferred by the assessee. Thus, the above decisions clearly lay down that filing of an ineffective or incompetent appeal before the Appellate Assistant Commissioner or Appellate Tribunal will not deprive an assessee of the right of revision under section 264. Therefore, we have to necessarily uphold the contention of the petitioner that the revision filed by him before the first respondent is maintainable and that it has to be disposed of on merits by him.

7. However, learned counsel for the revenue relied on the observations in Mercantile Tobacco Corporation v. Commissioner of Income-tax, [1965] 57 ITR 483 (AP) and submitted that the proper test to find out whether the order has been made the subject of an appeal is to see the petitioner's memorandum of grounds of appeal and that in this case since the memorandum of grounds of appeal filed before the Tribunal also challenged the merits of the assessment, the order passed by the Tribunal on such an appeal should be taken to be conclusive on this question. It is true in this case, the memorandum of grounds of appeal not only dealt with the question of delay but on the merits of the assessment. However, having regard to the fact that a party going before the Tribunal has to challenge the assessment order on merits in anticipation that the question of delay will be decided in his favour, as otherwise there is no purpose in filing the appeal. Therefore, we are not inclined to agree with the learned counsel for the revenue that merely because the petitioner has challenged the assessment as well in the memorandum of grounds, the order passed by the Tribunal upholding the order of rejection of the appeal as out of time, should be taken to cover the entire subject-matter of the appeal. In Mercantile Tobacco Corporation v. Commissioner of Income-tax, [1965] 57 ITR 483 it was held by the Andhra Pradesh High Court that if an assessee has made the order of the Appellate Assistant Commissioner the subject of an appeal to the Income-tax Tribunal, he cannot thereafter make an application for revision to the Commissioner of Income-tax against the same order, either under section 33 or section 33A of the Indian Income-tax Act, 1922. On the facts of that case it has been found that the entire assessment order was under challenge before the Tribunal and the Tribunal while disposing of the appeal dismissed the appeal on the ground that it was barred by time. In the case before us, the order under appeal before the Tribunal was the order by the Appellate Assistant Commissioner rejecting the appeal filed by the petitioner on the ground of delay and the Appellate Assistant Commissioner's order did not deal with the assessment on merits. Therefore, even though the petitioner has questioned the assessment in the grounds of appeal before the Tribunal which he is bound to do, the order of the Tribunal which only related to the question of delay, cannot be treated as one on merits. Therefore, the principle of that decision cannot apply to the facts of the case on hand. Reference was also invited to the decision in C. Gnanasundara Nayagar v. Commissioner Of Income-Tax, Madras., [1961] 41 ITR 375 (Mad). In that case, Rajagopalan and Srinivasan JJ. held that an order of assessment cannot be revised by the Commissioner on an application under section 33A of the Indian Income-tax Act, 1922, if an appeal has been preferred against that order to the Appellate Tribunal, that the bar against such revision remains unaffected by the scope of the appeal preferred to the Tribunal, whether it is restricted by the assessee of his own choice or whether it is restricted by the Tribunal, and that the relief claimed in the application for revision under section 33A(2) was not the subject-matter of the appeal to the Tribunal does not alter the position that the order of assessment was the subject of the appeal. In that case, the Tribunal disposed of the appeal filed by the assessee on merits in respect of certain reliefs claimed by the assessee. Not satisfied with the reliefs granted by the Tribunal the assessee went before the Commissioner seeking some further relief. In those circumstances, the court took the view that once the order of assessment has been made the subject of an appeal before the Tribunal, the fact that the relief claimed in the application for revision was not the subject-matter of the appeal to the Tribunal does not alter the position that the order of assessment was the subject-matter of the appeal. Therefore, that decision cannot be of any assistance to the revenue.

8. In this view, the writ petition has to be allowed with a direction to the first respondent to take the revision on file and dispose of the same on merits. There will be no order as to costs.