Commissioner Of Income-Tax v. Hindustan Aeronautics Ltd.

CASES REFERRED: 1. ITRC No. 37 of 1973 DD. 17-9-1975 - Additional Commissioner Of Income-Tax v. Vijayalakshmi Lorry Service) 2. AIR 1958 SC 868 - I.T Commissioner v. Amritlal (Foll) 3. AIR 1967 SC 681 : (1967) 19 STC 144 - State of Madras v. Madurai Mills Co. -do- 4. (1974) 2 SCC 453 : AIR 1974 SC 1380 - Gojer Bros. (Pvt.) Ltd. v. Ratan Lal Singh (Shri). -do- 5. 44 ITR 891 - C.I.T v. Shapoorji Pallonji -do- 6. 66 ITR 443 - C.I.T v. Rai Bahadur Hardotroy (Ref) 7. 105 ITR 344 - J.K Synthetics v. Addl. C.I.T -do- 8. 34 STC 296 - C.C.T v. Rameshwar Das -do- 9. 108 ITR 407 - Jeewanlal Ltd. v. Additional C.I.T -do- 10. 128 ITR 77 - C.I.T v. Narpath Singh -do- 11. 140 ITR 677 (FB) - C.I.T v. Mandsaur Elec. Supply Co. -do- 12. 98 ITR 255 - Karsandas v. ITO -do- 13. 124 ITR 570 - C.I.T v. Soksena Cotton Mills -do- 14. 111 ITR 231 - Singho Mica Mining Co. v. C.I.T -do- 15. 125 ITR 41 - Puthuthotam Estates v. State of Tamil Nadu -do- 16. 129 ITR 224 - New Diwan Oil Mills v. C.I.T -do- 17. 128 ITR 655 - Mysore Tobacco Co. v. C.I.T -do- 18. 41 ITR 375 - Gnana Sundara Nayagar v. C.I.T (Foll) 19. 1973 TLR 645 - Md. Haneef v. I.T.O -do- 20. 56 ITR 198 - Navanitlal C. Jhaveri v. Sen (Dist) 21. 82 ITR 913 - Ellerman Lines Ltd. v. C.I.T -do- 22. 131 ITR 597 - K.P Varghese v. ITO -do-

Messrs K. Srinivasan & H. Raghavendra Rao—Standing Counsel for Income-Tax Dept, for Appellant,

Mr. G. Sarangan for Respondent.

JUDGMENT

ORDER OF REFERENCE

Venkatachaliah & Rama Jois, JJ.

Dated 14th June 1982

Venkatachaliah, J.:—

This appeal raises a short but interesting question as to the scope of the revisional jurisdiction of the Commissioner of Income-tax to entertain a Revision Petition under Section 264 of the Income-tax Act, 1961 at the instance of the assessee against that part of the appellate order of the Appellate Assistant Commissioner against which he is aggrieved in a case where the Revenue itself has preferred a second appeal to the Income-Tax Appellate Tribunal from another part of the same first-appellate order in respect of which the revenue is dissatisfied.

2. The question arises this way: The assessee is Hindustan Aeronautics Limited, Respondent in this appeal. The assessment year is 1970-1971. Against the order of the Income Tax Officer the assessee preferred an appeal before the Appellate Assistant Commissioner on several grounds. The appeal was partly allowed and against that part of the appellate order which went against the assessee, the latter, first, preferred an appeal to the Tribunal; but later withdrew the appeal and invoked the revisional jurisdiction of the Commissioner under Section 264. In the meanwhile, the department preferred an appeal to the Tribunal against that part of the Appellate Assistant Commissioner's order by which some relief was given to the Assessee. The assessee, inter-alia, relied upon a Circular of the Central Board of Direct Taxes issued under Section 119 of the Act, which according to him, enabled such a revision against the appellate order even where another part of the same order was subject to an appeal before the Tribunal at the instance of the Department. The Commissioner did not accept this view and held that, in the circumstances, he had no jurisdiction. In the Writ Petition of the assessee, the Learned Single Judge has held that the Commissioner had jurisdiction and has directed him to dispose of the Revision Petition on merits and in accordance with law. The revenue has now come-up in appeal.

3. Relying upon a decision of this Court in I.T.R.C 37 of 1973 disposed of on 17-9-19751, it is contended that the Commissioner would cease to have jurisdiction, once the order of the Appellate Assistant Commissioner becomes the subject of an appeal, even if it be on one aspect alone, before the Income-Tax Appellate Tribunal and in any event after the latter disposes of the appeal. The principle of merger of the original order in the appellate order is relied upon.

This appeal involves a question of some importance which requires to be settled by pronouncement of a Full Bench. The Bench decision of this Court in I.T.R.C 37 of 1973 on which the Revenue relies was, apparently, not cited before the Learned Single Judge. That decision, in our opinion, might require reconsideration in the light of the pronouncements of the Supreme Court in I.T Commissioner v. Amritlal Bhogilal & Co. . AIR 1958 SC 868. and State Of Madras v. Madurai Mills Co., Ltd. . 1967 19 STC 144.

We, therefore, refer the following question of law for the opinion of the Full Bench:

“Can the Commissioner of Income-tax entertain assessee's Revision Petition under Section 264 of the Income-tax Act, 1961, preferred from a part of the appellate order of the Appellate Assistant Commissioner against which the assessee is aggrieved during the pendency or after the disposal, as the case may be, of the Department's second appeal before the Income-tax Appellate Tribunal preferred against another part of the same order where the subject matters of the appellate and revisional proceedings are not the same but relate to distinct matters.”

OPINION OF THE FULL BENCH

Hakeem, J.:—

A Division Bench doubting the correctness of the Bench decision of this Court in The Addl. Commissioner of Income-Tax, Mysore, Bangalore v. Vijayalakshmi Lorry Service, Bangalore (I.T.R.C No. 37 of 1973) has referred the following question of law for opinion of the Full Bench:

“Can the Commissioner of Income-tax entertain assessee's Revision Petition under Section 264 of the Income-tax Act, 1961, preferred from a part of the Appellate order of the Appellate Assistant Commissioner against which the assessee is aggrieved during the pendency or after the disposal, as the case may be, of the Department's second appeal before the Income Tax Appellate Tribunal preferred against another part of the same order where the subject matter of the appellate and revisional proceedings are not the same but relate to distinct matters.”

2. The material facts leading to the question are as follows:

Hindustan Aeronautics Ltd., the respondent herein is the assessee under the Income-tax Act, 1961 (hereinafter referred to as “the Act”). For the assessment year 1970-1971 relating to the previous year ending 31st March 1969 the assessee filed an appeal before the Appellate Assistant Commissioner (‘AAC’) against the assessment order passed by the Income-tax Officer. The appeal came to be partly allowed by the AAC by his order dated 27th October 1976. The assessee filed a second appeal before the Income-tax Appellate Tribunal (the ‘Tribunal’) against the said order of the AAC to the extent of its appeal having been disallowed. However, on 9th May 1977 the assessee withdrew the said appeal with the leave of the Tribunal. On 17th May 1977 the assessee filed a revision application under Section 264 of the Act before the Commissioner of Income-tax against that part of the order of the AAC by which the assessee was dissatisfied and in respect of which it had earlier filed an appeal before the Tribunal which was withdrawn as aforesaid.

3. In the meanwhile the Department preferred an appeal before the Tribunal against that part of the order of the AAC by which some relief was given to the assessee. The Appeal of the Department was heard and dismissed by the Tribunal on 28th March 1978.

4. Before the Commissioner, the assessee, in support of the maintainability of the Revision Petition relied upon a Circular of the Central Board of Direct Taxes issued under Section 119 of the Act. That Circular according to the assessee confers a right to maintain a revision against the appellate order even when another part of the same order was subject to an appeal before the Tribunal at the instance of the Department. The Commissioner, however, did not accept that contention and he held that, in the circumstances, he had no jurisdiction to entertain the Revision Petition. So he dismissed the same as not maintainable by his order dated 22nd December 1978.

5. The assessee filed Writ Petition No. 4803 of 1979 under Article 226 of the Constitution for quashing the order of the Commissioner and for a direction to dispose of the Revision Petition on merits. The Learned Single Judge allowed the Writ Petition relying upon the said Circular of the Board. He held that the Board and the Law Ministry have understood the scope of Section 264 of the Act in a manner different from the view taken by some of the High Courts. The Learned Judge observed:

“But having regard to the mandatory nature of the language of Section 119 of the Act and the instant case not being covered by the exceptions in the proviso to sub-section (1) of Section 119, the Respondent-Commissioner was bound to entertain the revision application of the petitioner notwithstanding the decision of the Kerala High Court on the subject as he was not bound by it. Thus there is failure on the part of the Respondent to exercise jurisdiction vested in him in passing the impugned order and therefore that order is liable to be set aside.”

So stating, he directed the Commissioner to dispose of the matter on merits and in accordance with law. Being aggrieved by the order of the Learned Single Judge, the Commissioner has preferred the writ appeal in which the said question of law has been formulated and referred to the Full Bench.

6. It is now necessary to refer to the decision of this Court in Vijayalakshmi Lorry Service case. It was a reference under Section 256(1) of the Act raising the question as to jurisdiction of the Commissioner under Section 263 of the Act. There the Commissioner interfered with an order of assessment made by the ITO, which was modified in an appeal by the AAC. The assessee challenged that order of the Commissioner, before the Tribunal on the ground among others, that since the order of assessment passed by the ITO was merged in the order of the AAC, the Commissioner was precluded from taking proceedings under Section 263 of the Act. The Tribunal upheld that contention and set aside the order of the Commissioner. The Tribunal referred the following question under Section 256(1) of the Act for the opinion of this Court:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Additional Commissioner of Income-tax was precluded from directing the Income-tax Officer under Section 263 of the Act to levy interest under Section 139(1)(iii)?”

This Court answered the question in the affirmative after reaching the following conclusion:

“In the instant case, as stated earlier, the Appellate Assistant Commissioner reduced the assessable income by Rs. 12,000/-. If any interest had to be levied, then the same could be only on the amount of tax as determined by the Appellate Assistant Commissioner. The order of assessment that has become final is the order of the Appellate Assistant Commissioner. That being the case, the additional Commissioner had no jurisdiction to take proceedings under Section 263 of the Act. The Tribunal, therefore, was right in the view it has taken.”

7. The Division Bench while referring the question in this case for opinion of the Full Bench has observed that the view taken in Vijayaalkshmi Lorry Service case I.T.R.C No. 37 of 1973 may require reconsideration in the light of the pronouncement of the Supreme Court in Commissioner Of Income Tax, Bombay v. Amritlal Bhogilal & Co. and in the State Of Madras v. Madurai Mills Co., Ltd. .

8. We shall, therefore, straightaway consider whether the decision of this Court in Vijayalakshmi Lorry Service Case requires reconsideration in the light of the above said decisions of the Supreme Court.

9. In C.I.T, Bombay v. Amritlal Bhogilal & Co., the question which arose for decision was whether the order passed by the ITO allowing registration of a firm merged in the order passed by the AAC in the appeal filed by the firm against the order of assessment. If it did, the Commissioner of Income-tax could not in the exercise of his revisional powers under Section 33-B(1) of the I.T Act, 1922, set aside the order of registration passed by the ITO. The Supreme Court held on the merits of the matter that though the appellate order of the AAC was the only order which was valid and enforceable in law, what merged in the appellate order was the Income-tax Officer's order under appeal and not his order of registration which was not and could not have become the subject matter of an appeal before the Appellate authority. The position in regard to the doctrine of merger was stated thus by the Supreme Court:

“There can be no doubt, that, if an appeal is provided against an order passed by a tribunal, the decision of 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.”

In Madurai Mill's case, the Supreme Court held that the order of assessment had not merged in the revisional order passed by the Deputy Commissioner of Commercial taxes “because, the question of exemption on the value of yarn purchased from outside the State of Madras was not the subject-matter of revision.” After referring to the observations in Amritlal Bhogilal's Case the Supreme Court held:

“But the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior tribunal and the other by a superior Tribunal, passed in an appeal or revision, there is a fusion or merger of two orders irrespective of the subject-matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the appellate or revisional jurisdiction”.

In Amritlal Bhogilal's Case the question of registration of assessee's firm was not and could not also be before the appellate authority and therefore, it was held that there could be no merger of the order of the ITO in that appellate order. In the Madurai Mill's Case the reason was slightly different. It was held that there could be no merger of the assessment order in the revisional order as the question regarding exclusion of the value of yarn purchased from outside the Madras State was not the subject matter of revision before the Deputy Commissioner of Commercial Taxes.

10. The above two decisions have been considered by the Supreme Court in Gojer Bros. (Pvt.) Ltd. v. Ratan Lal Singh (Shri). . 1974 2 SCC 453 with some more reasons assigned to the doctrine of merger. It was held that the doctrine was based on the principle that there cannot be, at one and the same time, more than one operative order governing the same subject matter. If the subject matter of the suit and the subject matter of the appeal are identical and the entire decree of the Trial Court was taken in appeal to the first Appellate Court and to the High Court, then the decree of the Trial Court gets merged in the decree of the High Court.

11. From these decisions it will be clear, that when an appellate authority has, in fact, dealt with an issue in its order, such matters are covered by the doctrine of merger. Similarly, if an appellate authority does not have the jurisdiction under the law to deal with an issue, the doctrine of merger does not operate in respect of that issue. These are now undisputed propositions. The controversy, however, is in relation to the application of the doctrine in each case depending upon the scope of the statutory provisions conferring the appellate or revisional jurisdiction. The controversy is in relation to such issues which could have been dealt with by the appellate authority within its jurisdiction but in fact have not been dealt with by the said authority. It is also in relation to such issues which were in fact raised before the appellate or revisional authority but not dealt with by the said authority.

12. With these principles in mind, we shall now examine the scope of the appellate powers of the AAC. The Supreme Court in Commissioner of Income Tax, Bombay v. Shapoorji Pallonji Mistry . 44 ITR 891. and C.T.T (Central) Calcutta v. Rai Bhadur Hardotroy Motilal Chamaria . 66 ITR 443. has explained the content and scope of the appellate powers under Section 31 of the I.T Act, 1922. In the former case it was held that the AAC's power is restricted to the subject matter of the assessment or the sources of income which are considered expressly by the ITO and he cannot go outside the record and so he cannot assess new sources of income which are not disclosed either in the return of the assessee or in the assessment order. Barring this limitation the appellate powers are as wide as and co-extensive with the assessing officer. In the latter case the Supreme Court held at page-449:

“It would be wholly erroneous to compare the powers of the Appellate Assistant Commissioner with the powers possessed by a Court of Appeal, under the Civil Procedure Code. The Appellate Assistant Commissioner is not an ordinary Court of Appeal. It is impossible to talk of a Court of Appeal when only one party to the original decision is entitled to appeal and not the other party, and in view of this peculiar position the statute has conferred very wide powers upon the Appellate Assistant Commissioner once an appeal is preferred to him by the assessee. It is necessary also to emphasise that the statute provides that, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee; his competence ranges over the whole assessment and it is open to him to correct the Income-tax Officer not only with regard to a matter raised by the assessee but also with regard to a matter which has been considered by the Income tax Officer and determined in the course of the assessment.”

It is thus apparent that the AAC can look into and adjudicate upon findings recorded by the ITO not only against the assessee which may expressly be the subject matter of the appeal but also a matter which has been considered and determined by the ITO in the course of the assessment. In other words, the entire subject matter of the assessment would be within the jurisdiction of the AAC.

13. Since the entire subject matter of the assessment is within the jurisdiction of the AAC, some High Courts, in the light of the observations made by the Supreme Court in Madurai Mills' Case, have held that the entire assessment order will merge in the appellate order irrespective of the points urged by the parties or decided by the AAC. This view was taken by the Allahabad High Court in J.K Synthetics Ltd. v. Additional C.I.T, U.P . 105 ITR 344.; Patna High Court in Commissioner of Commercial Taxes, Bihar v. Rameshwar Das Pannalal . 34 STC 296.; Calcutta High Court in Jeewanlal Ltd. v. Additional C.I.T . 108 ITR 407.; and Madhya Pradesh High Court in C.I.T v. Narpath Singh Malkan Singh . 128 ITR 77. and C.I.T, Bhopal v. Mandsaur Electric Supply Co. Ltd. . 140 ITR 677 FB.

14. The contrary view taken by the other High Courts depends upon the subject matter of the appellate order. It has been held that part of the order of assessment which relates to items not forming the subject matter of the appellate order, or which is left untouched does not merge in the order of the AAC. This view has been shared by the Gujarat High Court in Karsandas Bhagwandas Patel v. I.T.O . 98 ITR 255.; Bombay High Court in Commissioner of Income-Tax, Bombay City-II v. Saksena Cotton Mills Ltd. . 124 ITR 570.; Calcutta High Court in Singbo Mica Mining Co. Ltd. v. C.I.T (Central) Calcutta . 111 ITR 231.; Madras High Court in Puthuthotam Estates (1943) Ltd. v. State Of Tamil Nadu. . 125 ITR 41. and Punjab and Haryana High Court in New Diwan Oil Mills v. C.I.T, Patiala . 129 ITR 224..

15. Amid this diversity of opinions, this High Court in Vijayalakshmi Lorry Service case without much fuss over the matter has held that the entire order merges when the order was taken in appeal and was modified by the AAC. Such an order becomes final and the Commissioner was precluded from taking proceeding under Section 263 of the Act to revise the order of the ITO on another ground. That decision was rendered on September 17, 1975 and is being followed by the authorities in this State. The view taken in that decision is neither unreasonable nor erroneous. Similar view has been taken as earlier noticed, by the High Courts of Allahabad, Calcutta, Madhya Pradesh etc. There is, therefore, no compelling reason to review that decision. It is not proper for us to reverse that decision, merely because another view is also possible Consistency in law should be the hall mark in the administration of Justice.

In the view that we have taken the question referred to the Full Bench must be answered in the negative.

16. There is yet another hurdle for the Commissioner to entertain the Revision Petition under Section 264 of the Act. It may be recalled that the order of the AAC has been the subject matter of the appeal before the Tribunal at the instance of the Department. Section 264(4) is an express bar for the Commissioner to entertain the Revision Petition. The relevant portion of Section 264(4) reads:

“264(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 Commissioner (Appeals) 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 Commissioner (Appeals) or 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 Commissioner (Appeals) or to the appellate Tribunal.”

Section 264(4) provides that the Commissioner shall not revise any order referred to under clauses (a), (b) and (c) thereof. Clause (c) of Section 264(4) provides that the Commissioner shall not revise any order which has been made the subject of an appeal to the Tribunal. It is in the nature of an injunction against the Commissioner. The bar imposed by this provision is express and absolute irrespective of the relief claimed in such an appeal or irrespective of the party who has preferred the appeal before the Tribunal. The order referred to is an order of the lower authority against which an appeal has been preferred; no matter whether by the assessee or by the Revenue. That clause does not envisage that the appellant before the Tribunal and the petitioner before the Commissioner should be the same. The Commissioner's jurisdiction to revise an order is barred if that order has been appealed to the Tribunal. This is also the view taken by Sreenivasa Iyengar, J. of this Court in Mysore Tobacco Company Ltd. v. C.I.T Karnataka . 128 ITR 655.

17. Our view finds support from the decision of the Madras High Court in C. Gnana Sundara Nayayar v. C.I.T, Madras . 41 ITR 375.. There the assessee filed an appeal before the Appellate Tribunal under the I.T Act, 1922, but shortly before filing the said appeal the assessee filed revision before the Commissioner claiming a deduction in respect of rents received by him from two houses. That was a claim which he did not make either before the ITO or before the appellate authority. The Commissioner dismissed the revision on the ground that the deduction claimed was inadmissible. The assessee moved the High Court in Writ Petition under Article 227 of the Constitution. The High Court dismissed the Writ Petition on the ground that Section 33A(2)(c) of the I.T Act, 1922 was a bar for the Commissioner to exercise the revisional jurisdiction since that order was the subject matter of an appeal before the Appellate Tribunal. The High Court at page-379 observed:

“That the relief claimed in the application preferred 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. To put it differently, the fact that the jurisdiction of the Tribunal was limited to the disposal of the claims preferred in the appeal did not alter the position that the order of assessment was the subject of the appeal. Even if only a portion of an order of assessment is the subject of the appeal to the Tribunal, still the position is that the subject of the appeal to the Tribunal is the order of assessment.”

The same view was expressed by the Kerala High Court in H.A Mohammed Haneef v. I.T.O, Quilon,19 wherein at page-646 it was observed:

“On a careful reading of the section in the light of the subject underlying it, it is difficult for me to accept the above argument. If what sub-section (4) enacts is a bar against a remedy the argument is good. But in my view, it is not so. It contains a prohibition against the exercise of the revisional jurisdiction of the Commissioner in the cases mentioned therein. It is, therefore, irrelevant whether the jurisdiction is sought to be invoked by the assessee or the Revenue. Clause-(c) of sub-section (4) is attracted if the order sought to be revised has been made the subject of an appeal to the Appellate Tribunal; whether it may be by the assessee or by the Revenue.”

In the circumstances of the case since the Revenue has taken the order of the AAC in appeal before the Tribunal, the question referred must be answered in the negative. The Commissioner has no jurisdiction to entertain the Revision Petition of the assessee under Section 264 of the Act since that order sought to be revised was already the subject matter of an appeal to the Tribunal.

18. We, however, express no opinion on the Commissioner's power to entertain the Revision Petition under the Circular issued by the Central Board of Direct Taxes under Section 119 of the Act.

JUDGMENT OF DIVISION BENCH

Puttaswamy and Hakeem, JJ.

Dated 24th July, 1985

Puttaswamy, J.:—

This appeal is by the appellant who was the respondent and is directed against the order dated 6-1-1981 of Chandrakantaraj Urs, J. allowing W.P No. 4803 of 1979 filed by the respondent/petitioner since reported in 132 I.T.R 461.

2. Hindustan Aeronautics Ltd., Bangalore, a wholly owned Central Government Company, engaged in the manufacture of aeroplanes and its parts, who is the respondent before us and was the petitioner before the Learned Judge, is an assessee on the file of the Income-tax Officer, Company Circle, Bangalore (I.T.O). For the assessment year 1970-1971, relevant to the accounting year ending 31-3-1970, the assessee filed its return before the I.T.O who on 15th March, 1973, completed his assessment disallowing certain allowances claimed by it on certain grounds that are not necessary to notice. Against the assessment order of the I.T.O, the assessee filed an appeal before the Appellate Assistant Commissioner (A.A.C) who by his order dated 27th October, 1976, partly allowed the same.

3. Aggrieved by the said orders of the A.A.C and the I.T.O, the assessee and the Revenue filed second appeals before the Income-tax Appellate Tribunal, Bangalore (Tribunal) to the extent they were aggrieved by them. On 9th May, 1977, the assessee withdrew its appeal before the Tribunal with liberty reserved to approach the Commissioner of Income-tax (Commissioner) in a revision under Section 264 of the Income-tax Act, 1961 (the Act). On 28th May, 1978, the Tribunal, however, dismissed the appeal filed by the Revenue on merits.

4. On 19-5-1977, the assessee filed a revision under Section 264 of the Act before the Commissioner to the extent it was aggrieved by the order of the A.A.C and the I.T.O for the aforesaid assessment year. On 22-12-1978, the Commissioner dismissed the said Revision Petition filed by the assessee in limine as not maintainable on the view that the orders of the A.A.C and the I.T.O had merged in the order of the Tribunal and that it was not open to him to interfere with the same under Section 264 of the Act.

5. In W.P No. 4803 of 1979, the assessee challenged the said order of the Commissioner before this Court. On 6th March, 1981, Chandrakantaraj Urs, J. allowed the said Writ Petition and directed the Commissioner to entertain the Revision petition filed by the assessee in terms of Circular No. XVI/11/69 issued by the Central Board of Direct Taxes (the Board) and examine its case on merits. Aggrieved by this order of Chandrakantaraj Urs, J. the Commissioner has filed this appeal before us.

6. On an earlier occasion, this appeal was heard by a Division Bench consisting of Venkatachaliah and Rama Jois, JJ. who by their order made on 14-6-1982, doubting the correctness of a Division Bench ruling of this Court in I.T.R.C No. 37 of 1973 decided on 17-9-1975 (Vijayalakshmi Lorry Service case), relied on by the appellant, referred the following question of law as arising in the appeal for the opinion of a Full Bench of this Court.

“Can the Commissioner of Income-tax entertain assessee's Revision Petition under Section 264 of the Income-tax Act, 1961, preferred from a part of the Appellate order of the Appellate Assistant Commissioner against which the assessee is aggrieved during the pendency or after the disposal, as the case may be, of the Department's second appeal before the Income Tax Appellate Tribunal preferred against another part of the same order where the subject matter of the appellate and revisional proceedings are not the same but relate to distinct matters.”

On 26th October, 1984, a Full Bench of this Court has furnished its opinion to the said question in the negative or in favour of the appellant.

7. Sri K. Srinivasan, learned Senior Standing Counsel for the Income-tax Department, appearing for the appellant contends that in view of the opinion furnished by the Full Bench, the order made by the learned Judge cannot be allowed to stand and the Writ Petition filed by the respondent requires to be dismissed.

8. Sri G. Sarangan, Learned Counsel appearing for the respondent, refuting the contention of Sri Srinivasan, sought to sustain the order of the learned Judge in terms of the observations made by the Full Bench at para 18 of its opinion. Sri Sarangan contends that notwithstanding the opinion of the Full Bench in the case, the Circular issued by the Board under Section 119 of the Act was binding on the Commissioner in terms of which he was bound to examine the Revision of the respondent on merits and the order of the learned Judge had done no more than that. In support of his contention Sri Sarangan strongly relies on the rulings of the Supreme Court in Navnitlal C. Javeri v. K.K Sen, A.A.C of Income Tax,20 Ellerman Lines Ltd. v. C.I.T . 82 ITR 913. and K.P Varghese v. I.T.O . 131 ITR 597.

9. Earlier, we have noticed that the orders made by the A.A.G and the I.T.O had been subjected to an appeal before the Tribunal by the Revenue which had decided the same in a particular manner. In Vijayalakshmi Lorry Service case, a Division Bench of this Court had expressed that when an order had been subjected to an appeal that order in its entirety merges in the order of that appellate authority. In the reference made, the Division Bench expressed its doubt on that enunciation and therefore formulated the question of law noticed earlier and referred the same for the opinion of a Full Bench which has expressed that the same did not call for reconsideration and had even expressed its concurrence with the same speaking through one of us (Hakeem, J.) in these words.—

“Amid this diversify of opinions, this High Court in Vijayalakshmi Lorry service case without much fuss over the matter has held that the entire order merges when the order was taken in appeal and was modified by the AAC. Such an order becomes final and the Commissioner was precluded from taking proceedings under Section 263 of the Act to revise the order of the ITO on another ground. That decision was rendered on September 17, 1975 and is being followed by the authorities in this State. The view taken in that decision is neither unreasonable nor erroneous. Similar view has been taken as earlier noticed, by the High Courts of Allahabad, Calcutta, Madhya Pradesh etc. There is, therefore, no compelling reason to review that decision. It is not proper for us to reverse that decision, merely because another view is also possible. Consistency in law should be the hall mark in the administration of justice.

In the view that we have taken the question referred to the Full Bench must be answered in the negative.”

What emerges from this is that the order of the A.A.C in its entirety had merged in the order of the Tribunal and therefore it was not open to the Commissioner to revise the same. In other words, what the Commissioner had really done was to follow the enunciation made by a Division Bench of this Court in Vijayalakshmi Lorry Service case without, however, noticing the same which is now reiterated by a Full Bench of this Court in the case. Unfortunately the attention of the Learned Judge was not drawn to Vijayalakshmi Lorry Service case that was binding on him and if it had been so done, we have no doubt that the Learned Judge would not have interfered with the order of the Commissioner notwithstanding a contrary Circular of the Board in that behalf. After all, a Court cannot compel an authority to act in defiance of law declared by the Supreme Court or this Court. Any such attempt is plainly opposed to the Rules of law enshrined in our Constitution.

10. In the rulings relied on by Sri Sarangan, the Supreme Court was not dealing with the enforcement of a Circular issued by the Board contrary to its own declaration of law or by a High Court in the country. We are of the view that the ratio in those cases does not bear on the point.

11. On the above discussion, we hold that the order of the Learned Judge that is opposed to the enunciation made in Vijayalakshmi Lorry Service case reiterated in the case by the Full Bench, cannot be upheld by us.

12. In its opinion, the Full Bench at paras 16 and 17 had expressed that the revision filed by the assessee was not maintainable. On this enunciation also, which is binding on us, we cannot uphold the order of our Learned Brother.

13. In para 18, the Full Bench has observed thus—

“We, however, express no opinion on the Commissioner's power to entertain the Revision Petition under the circular issued by the Central Board of Direct Taxes under Section 119 of the Act.”

But this observation cannot be construed by us that we can sustain the order of the Learned Judge contrary to its own opinion. We see no merit in this contention of Sri Sarangan.

14. In the result, we allow this appeal, set aside the order dated 6th March 1981 of Chandrakantaraj Urs, J. and dismiss W.P 4803 of 1979 filed by the Respondent with no order as to costs both here and also before the Learned Judge.

Orders on the Oral Application made by the Respondent for a Certificate of fitness to appeal to the Supreme Court under Articles 133 & 134-A of the Constitution.

Immediately after we completed our dictation allowing the appeal filed before us, Sri G. Sarangan, Learned Counsel appearing for the Respondent, makes an oral application for a certificate of fitness to appeal to the Supreme Court of India against our said decision under Articles 133 and 134-A of the Constitution on the ground that the questions decided by us raise substantial questions of law of general importance which needs to be decided by the Supreme Court.

2. On the theory of merger, extent of merger, the true scope and ambit of Section 264 of the Income tax Act, 1961 that are involved in this case, there is diversity of opinions among the various High Courts in the Country which frequently arose and they have not so far been set at rest by the Supreme Court of India. We are therefore, of the opinion that the questions raised in this case are substantial questions of law of general importance and the same needs to be decided by the Supreme Court of India.

3. In the result, we allow the application made by the Respondent and grant a certificate of fitness to appeal to the Supreme Court under Articles 133(1) and 134-A of the Constitution.