Paripoornan, J.:— At the instance of the Revenue, the Income tax Appellate Tribunal has referred the following two questions of law, for the decision of this Court:
“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the notification dated 29-3-1979 is effective from 3-4-1979 only?
2. Whether, on the facts and in the circumstances of the rase, and also in view of the fact that the point under consideration was not the subject matter of appeal before the first appellate authority, the Tribunal was right in invoking the theory of merger and in holding that the order of the Commissioner under S. 263 of the Incometax Act is without jurisdiction?”
2. The respondent is an assessee to Income tax. He is engaged in the export of prawns to foreign countries. We are concerned with the assessment year 1979-80, for which the accounting period ended on 31-3-1979. The assessee was claiming deduction on account of his liability towards payment of purchase tax under the K.G.S.T Act every year. Such deductions were allowed for the assessment years 1977-78 and 1978-79 (Year ending 31-3-1977 and 31-3-1978). The Government of Kerala, by notification dated 29-3-1979, granted exemption in respect of the tax payable on purchase of marine products during the period 1-4-1977 to 31-3-1979. This will cover the assessment years 1977-78, 1978-79 and 1979-80. The notification was one passed under section 10 of the Kerala General Sales Tax Act. The total liability claimed by the assessee and allowed as deduction as purchase tax, for the assessment year 1978-79, amounted to Rs. 3,53,398/-. The Income Tax Officer did not consider the applicability of S. 41(1) of the Income tax Act in respect of the remission of this liability. So, the Commissioner of Income tax took the view that the assessment order dated 7-9-1982, passed by the Income tax Officer for the assessment year 1979-80, was erroneous and prejudicial to the interests of the Revenue. He issued notice to the assessee under S. 263 of the Income tax Act and passed an order, dated 18-8-1984, holding that in view of S. 41(1) of the Income tax Act the deduction allowed to the assessee as purchase tax for the assessment year 1978-79 is erroneous and the sum of Rs. 3,53,398/- should be added to the income in the assessment year 1979-80. It was so ordered since the notification issued by the Government granting exemption is dated 29-3-1979, which is admittedly within the accounting period relevant for the assessment year 1979-80. The assesses submitted before the Commissioner of Income tax that the Government notification or order dated 29-3-1979 granting the exemption was published and made available to the public only in April, 1979 and so the amount could be considered only for the assessment year 1980-81. This plea was negatived holding that the benefit accrued to the assessee as soon as the Government passed the order (notification) dated 29-3-1979 and so it was rightly taxable for the assessment year 1979-80, by invoking S. 41(1) of the Act. Against the aforesaid order passed by the Commissioner of Income tax, the assessee filed an appeal before the Appellate Tribunal and assailed the same. Two points were raised: (1) The Government notification No. G.O.M.S 54/79.TD dated 29-3-1979 granting exemption was published and made available to the public only on 3-4-1979. So, the notification became effective only from 3-4-1979. It fell within the accounting year 1979-80 relevant to the assessment year 1980-81. In this view, the amount could be brought to tax under S. 41(1) of the Act only for the assessment year 1980-81. The view taken by the Commissioner to the contrary is illegal. (2) The Commissioner was incompetent to pass the order under S. 263 of the Act. The assessment order, for the assessment year 1979-80, dated 7-9-1982 was the subject matter of appeal before the C.I.T (Appeals) on some other issues. The assessment order got merged in the order of the CIT (A) dated 20-10-1983. Thereafter, the Commissioner of Income tax has no jurisdiction to invoke S. 263 of the Act and to pass the order appealed against. The Income tax Appellate Tribunal, after referring to the relevant provisions of the statute and the case law, by order dated 4-12-1986, held in favour of the assessee on both counts. It is thereafter, at the instance of the Revenue, the two questions of law formulated herein above have been referred for the decision of this Court. We heard counsel for the Revenue, Mr. P.K.R Menon as also counsel for the respondent/assessee Mr. Roy Chacko. Counsel for the Revenue stressed two aspects:
i) The notification granting exemption of purchase tax for the period 1-4-1977 to 31-3-1979 is dated 29-3-1979. What is relevant is the date of the notification and not when the notification was made available to the public or the assessee came to know of it. Counsel for the Revenue submitted that the notification dated 29-3-1979 should have been held to be published on the same day when it was published in Gazette extraordinary and it took effect instantaneously. The benefit accrued to the assessee as soon as the Government passed the notificaton and so the amount was rightly includable by invoking S. 41(1) of the Act for the asessment year 1979-80, for which the accounting period ended on 31-3-1979. In stressing the above point, counsel referred to the decisions in Municipal Board v. S. TA. Rajasthan (AIR 1965 SC 458) at page 465; CIT v. Shilaben Kanchanlal Rana [(1980) 124 ITR 420] (Gujarat); Girnar Builders P. Ltd. v. I.A.C [(1985) 156 ITR 403-Karnataka] and E.D Sassoon & Co. Ltd. v. Commr. of Income tax [(1954) 26 I.T.R 27 at p. 51-S.C.]. Counsel for the Revenue submitted that on the date of the notification rights accrued to the assessee. The State owed the amounts to him.
ii) The assessment order, for the assessment year 1979-80, dated 7-9-1982, was the subject matter of appeal before the Commissioner of Income tax (Appeals) who rendered the decision on 20-10-1983 on issues other than the one considered by the Commissioner of Income tax in suo motu revision proceedings under S. 263 of the Act. The matter considered by the Commissioner of Income tax in suo motu revision proceedings was not the subject matter of the appeal it was neither urged by the assessee nor considered or examined or decided by the Commissioner of Income tax. So, there is no merger of the assessment order in the order passed in appeal by the Commissioner of Income tax (Appeals). In such circumstaces, the Appellate Tribunal was in error in holding that the Commissioner of Income tax had no jurisdiction, under S. 263 of the Act, to revise the assessment order in the instant case. The assessment order was untouched and was not the subject matter of consideration by C.I.T (Appeals). S. 263 of the Income tax Act is not a bar, in such circumstances, to revise the assessment order passed by the Income tax Officer.
3. On the other hand, counsel for the assessee, Mr. Roy Chacko submitted that the Government notification No. G.O.M.S 54/79.Td dated 29-3-1979 was published and made available to the public only on 3-4-1979 though it was printed in a Gazette extraordinary dtd. 29-3-79. The certificate issued by the Assistant Superintendent, Government Press, Trivandrum dated 27-11-1986 will substantiate this. The Appellate Tribunal relied on the said certificate to hold that the relevant notification was published and made available to the public only on 3-4-1979 and became effective only from that date which fell in the accounting year 1979-80 relevant to the assessment year 1980-81. The notification granting exemption is a piece of subordinate legislation. It will take effect only if it is published or made known to the public. To substantiate the above proposition, counsel placed reliance on the Full Bench decision of this Court in R.K.V Motors & Timbers v. R.T.O (1982 KLT 166-FB), the decision of the Madras High Court in Asia Tobacco Company Ltd. v. Union of India [(1985) 155 ITR 568] and the decision of the Supreme Court in B.K Srinivasan v. State of Karnataka ((1987) 1 SCC 658 : AIR 1987 S.C 1059) at p. 1067, para. 15. So, it was argued that the Commissioner of Income tax was in error in holding that the benefit accrued to the assessee as per the notification during the assessment year 1979-80.
4. On the second point, regarding merger, assessee's counsel submitted that the entire assessment order passed by the Income tax Officer dated 7-9-1982, for the assessment year 1979-80, merged in the order passed by the Commissioner of Income tax dated 20-10-1983 and no part of the assessment order can be subjected to an order in revision under S. 263 of the Act irrespective of the points or questions appealed against by the party or considered and decided by the appellate authority. In other words, when once an assessment order passed by an assessing authority is the subject matter of first appeal before the C.I.T (A), the entire assessment is before such authority and even if part of the assessment order was not appealed against by the assessee nor examined or decided by the first appellate authority, the jurisdiction of Commissioner of Income tax under S. 263 of the Act is barred. There is a complete merger. The doctrine of merger will apply irrespective of the issues raised by the party or considered or decided by the appellate authority. Counsel for the assessee submitted that this aspect of the matter has been exhaustively dealt with in a series of decisions ofwhich the decision of the Full Bench of the Karnataka High Court in C.I.T v. Hindustan Aeronautics Ltd. [(1986) 157 I.T.R 315-FB] can be relied on, as a representative decision. Counsel submitted that the wide power of the first appellate authority under the Act should be reckoned in evaluating this submission and the Bench decision of this Court to the contrary in C.I.T v. Travancore Tea Estates Co. Ltd. [(1988) 172 ITR 733] requires reconsideration.
5. We heard arguments at length. The Appellate Tribunal has categorically found that the notification dated 29-3-1979 was published as an extraordinary gazette and made available to the public only on 3-4-1979 and the notification became effective only from then onwards. The Appellate Tribunal placed reliance on the certificate issued by the Assistant Superintendent, Government Press, Trivandrum dated 27-11-1986 to hold that the notification was published only on 3-4-1979. The date on which the notification was published and made known to the public fell during the accounting year 1979-80 relevant to the assessment year 1980-81. It will not fall within the assessment year 1979-80, the accounting period ending by 31-3-1979. In R.K.V Motors & Timbers case (1982 KLT 166-F.B.), this Court held as follows:—
“Thc necessity that the people affected by law should have sufficient knowledge of the law, had been accepted as a basic tenet and inextricable characteristic of law even by legal theoreticians and jurisprudentialists. Adequate publicity to those from whom law expects obedience thereto has been held as a basic requirement of the law itself. The State has an obligation to speak or to make known a rule, so that it could answer the description of law. “The idea that a person may be governed by a law that cannot be known by him because it is not published or promulgated is revolting to judicial conscience and civilised thought. It has with it a strong odour of totalitarianism and of the Gestapo. It is repugnant to the Principles of Justice, Freedom, Equality and Fraternity, cherished by all lovers of Democracy and enshrined in our Constitution”. It follows that mere making of a subordinate legislation is not sufficient to give validity to it: publication is necessary for bringing it into force or giving validity.……………………”.
6. The Full Bench has adverted to innumerable decisions on the subject, and in particular, the decision in Johnson v. Sargant [(1918) 1 K.B 101]; Harla v. The State of Rajasthan (AIR 1951 S.C 467) and the decision of the Andhra Pradesh High Court in R. Narayana Reddy v. The State of A.P [(1969) 1 An. W.R 77]. In Harla's case (AIR 1951 S.C 467), the Supreme court has held that before a law can become operative, it must be promulgated or published. It must be broadcasted in some recognizable way so that all men may know what it is. The above decision of the Supreme Court, the decision of the Andhra Pradesh High Court and the Full Bench decision of this Court, firmly establish the rule that any order or rule promulgated in exercise of delegated legislation does not take effect when made, but takes effect only when made “known”. The legislation should be made public in some form, in order to make it effective. Similarly, in B.K Srinivasan's case (AIR 1987 S.C 1959) at page 1067, paragraph 15, delivering the judgment of the Bench, Chinnappa Reddy, J. stated thus:—
“But unlike Parliamentary legislation which is publicly made, delegated or subordinate legislation is often made unobstrusively in the chambers of a Minister, a Secretary to the government or other official dignitary. It is, therefore, necessary that subordinate legislation, in order to take effect, must be published or promulgated in some suitable manner, whether such publication or promulgation is prescribed by the parent statute or not. It will then take effect from the date of such publication or promulgation. Where the parent statute prescribes the mode of publication or promulgation that mode must be followed. Where the parent statute is silent, but the subordinate legislation itself prescribes the manner of publication, such a mode of publication may be sufficient, if reasonable. If the subordinate legislation does not prescribe the mode of publication or if the subordinate legislation prescribes a plainly unreasonable mode of publication, it will take effect only when it is published through the customarily recognised official channel, namely, the Official Gazette or some other reasonable mode of publication. There may be subordinate legislation which is concerned with a few individuals or is confined to small local areas. In such cases publication or promulgation by other means may be sufficient. See Narayana Reddy v. State of Andhra Pradesh, 1969 (1) Andh WR 77).
7. There is a very informative article on the subject “Delegated Legislation and Publication” by Mr. D.J Lanham, published in 1974 (Vol. 37) Modern Law Review pages 510 to 524. The author has referred to innumerable decisions of the Common Wealth Courts and in particular the decision of the Court of England in Johnson v. Sargant, (1901) 1 K.B 673) and the decision of the Supreme Court of India in Harla v. State of Rajasthan (AIR 1951 S.C 467) and the view expressed by many academicians and has finally wound up the discussion by stating as follows:—
“A complex modern State like ours requires extensive legislation. Thai Parliament has to delegate many powers to subordinate legislators is now universally acknowledged. Part of the price the citizen has to pay for living in our society is the obligation to make himself acquainted with the mass of delegated legislation which applies to him. Part of the price the delegate legislator must pay for the privilege of making those laws is to make them available to the citizen. The common law, by requiring those laws to be published before they become effective, does much to exact that price”.
8. In this context, it is interesting to advert to the decision of the Judicial Committee of the Privy Council in Lim Chin Aik v. Reginam [(1963) 1 All. E.R 223], where it was held that the principle that ignorance of the law is no excuse, is inapplicable where, there is no legislative provision for the publication of the order or designed to enable the man concerned to find out by appropriate inquiry what the law affecting Mm in this respect is.
9. In the light of the above authorities on the subject, we have no hesitation to hold that the subordinate legislation in this case-notification dated 29-3-1979-was published and made available to the public only on 3-4-1979 and can be effective only from then onwards, which admittedly fell in the accounting year 1979-80 relevant to the assessment year 1980-81. The Appellate Tribunal was justified in holding so and in setting aside the order of the Commissioner of Income tax, on that aspect of the matter. The decisions relied on by the Revenue do not militate against the proposition aforesaid. All that follows from the decision of the Supreme Court, heavily relied on by counsel for the Revenue (AIR 1965 S.C 458) is only this: Delegated legislation does not take effect when made, but takes effect only when made known and the principle cannot be extended to require publication in a foreign country even if foreigners are likely to be affected. The principle that ignorance of law is not an excuse will apply even to a case where the law is published in some common form, though the accused does not know of it. The decision of the Gujarat High Court in Shilaben Kanchanlal Rana's case (124 ITR 420) turned on its own facts and does not militate against the decision of the Supreme Court in Harla's case (AIR 1951 S.C 467) or the decision of the Full Bench of this Court in R.K.V Motors & Timbers case (1982 KLT 166-FB). So, we hold that the decision of the Appellate Tribunal, on this aspect of the matter, is justified in law.
10. We answer question No. 1, referred to this Court, in the affirmative-against the Revenue and in favour of the assessee.
11. The second question is regarding merger of the assessment order in the appellate order passed by the Commissioner of Income tax (Appeals) dated 20-10-1983. Conflicting views are expressed by Courts on this vexed subject. One view is that doctrine of merger will operate only on matters which were the subject matter of decision by the first appellate authority and has no application to matters or issues which were not appealed against or touched by the first appellate authority, and suc:: untouched matters may be subjected to a revision under S. 263 of the Act. The other view is that when once an assessment order passed by the Income tax Officer is taken in appeal, the initial order merges in the first appellate order and no part of it can be subjected to revision under S. 263 of the Act irrespective of the points urged by the party or considered or decided by the first appellate authority. The conflicting views have been dealt with in Chaturvedi and Pithisaria's ‘Income tax Law’ Third Edition (Vol. 5) page 4594. Conflicting judicial opinion has been exhaustively dealt with therein. See also Chatuivedi and Pilhisaria's ‘Income tax Law’ Third Edition (Vol. 7) (Supplement) pages 6677 and 6678. A Bench of this Court in C.I.T v. Travancore Teat Estates Co. Ltd. [(1988) 172 ITR 733 : 1988 (1) KLT 787], after an exhaustive reference to the relevant case law, has stated the law thus:
“The doctrine of merger, whatever be its scope in general law, when considered in the context of the provisions of a taxing statute can have application only in respect of matters considered and decided by the appellate authority, and not matters falling outside his decision.
A narrow construction of the provisions of S. 263 of the Income-tax Act, 1961, limiting or diluting its scope would be a serious inroad into the object of the legislative conferment of power to subserve public interest in bringing to tax escaped income. The order under S. 263 is an appealable order as provided under S. 253. An assessee who is truly aggrieved by the exercise of power by the Commissioner under S. 263, is therefore, not without remedy.
The fact that the Revenue has, under the relevant provisions, a right to agitate matters in the assessee's appeal against the Income tax Officer's order, or that it has a further right of appeal to the Tribunal, is no answer to the contention of the Revenue that the assessee cannot legitimately complain if., apart from these provisions, the Legislature has, in its wisdom, provided an easier and more efficacious procedure under S. 263, and that the assessee, if truly aggrieved, is not without remedy by way of appeal to the Tribunal.
Therefore, the power of the Commissioner under S. 263 remains in full force, notwithstanding the order of the appellate authority, in respect of matters not considered and decided in appeal.” (Head note).
12. As at present advised, we do not think that the statement of the law by the Bench decision of this Court requires reconsideration.
13. In the light of the above Bench decision of this Court, we hold that the Appellate Tribunal was in error in holding that the doctrine of merger will apply and that the Commissioner of Income tax has no jurisdiction to pass the order, in the instant case, under S. 263 of the Income tax Act. We hasten to mention that the Appellate Tribunal itself has noticed in its appellate order dated 4-12-1986, that there was no decision of the Kerala High Court contrary to the view taken in the decisions referred to in its order. The Division Bench decision in Travancore Tea Estates Co. Ltd. case (172 I.T.R 733) is dated 2-2-1988 and it is a subsequent decision.
14. In the light of the Division Bench decision of this Court, we hold that. The Tribunal was in error in invoking the theory of merger and in holding that the order of the Commissioner under S. 263 of the Income tax Act is without jurisdiction, since the point considered by the Commissioner was not the subject matter of appeal before the first appellate authority. We answer question No. 2, in the negative-against the assessee and in favour of the Revenue. The Reference is disposed of as above.
15. A copy of this judgment under the seal of this Court and the signature of the Registrar shall be forwarded to the Income tax Appellate Tribunal, Cochin Bench.