Commissioner Of Commercial Taxes, Bihar, Patna v. M/S. Rameshwar Das Panna Lal Opp. Party.

S.N.P Singh, A.C.J:— At the instance of the Commissioner of Commercial Taxes, Bihar, Patna, the Commercial Taxes Tribunal, Bihar, has stated a case and made a reference under Section 25(1) of the Bihar Sales Tax Act, 1947 (Act XIX of 1947), hereinafter to be called “the Act”, for decision of the following question of law:

“Whether in the facts and circumstances of the case, the order of assessment dated 30-7-1962 had merged in the order dated 11-1-1964 passed by the Board of Revenue?”

2. Rameshwar Das Pannalal was a registered dealer under the Act and it submitted returns for the years 1957-1958 and 1958-1959. It claimed deductions for sales worth Rs. 12,37,268/- to three registered dealers, namely, Jamuna Stores, Kailash Stores and Ganesh Stores, during the year 1957-1958 and for sales worth Rs. 7,69,104/- to Kailash Stores during the year 1958-1959, on the basis of declarations furnished by them. The Assessing Officer passed orders dated the 30th of July, 1962, allowing the aforesaid claim of deductions of the assessee. The assessee, however, filed appeals against the orders of assessment and it challenged in those appeals certain enhancements made by the Assessing Officer as also the disallowance of certain other claims. The Deputy Commissioner of Commercial Taxes, who heard the appeals, modified the order of assessment by a common order dated the 3rd of May, 1963. The assessee thereupon filed two revisional applications before the Board of Revenue challenging the appellate order. The Board of Revenue by a common order dated the 11th of January, 1964, gave relief to the assessee by knocking off the enhancements made in the gross turnovers for both the years and remanded the cases for fresh examination of the claims of the assessee regarding certain deductions from the gross turnover.

3. It appears that the Board of Revenue in a different case viz., in the revisional application filed by Rohtas Industries Ltd., had on the 2nd of November, 1962, rejected similar claims for sales to the aforesaid three registered dealers, namely, Jamuna Stores, Kailash Stores and Ganesh Stores. It further appears that subsequently also the Commercial Taxes Tribunal in a different case viz., in Revision Case No. 12 of 1964, disposed of on the 11th of May, 1965, passed an order declaring the aforesaid three registered dealers as fictitious. The Commissioner of Commercial. Taxes, Bihar, thereafter issued notice to the assessee on the 17th of September, 1965, for suo motu revising the order of assessment dated the 30th of July, 1962. The assessee appeared before the Commissioner and showed cause on the 17th of January, 1966. In the show cause the assessee raised a number of grounds, one of the grounds being that the Commissioner had no jurisdiction to exercise suo motu power of revision. The learned Commissioner of Commercial Taxes decided that question as the preliminary issue and by his order dated the 26th of July, 1966, he overruled the preliminary objection and decided to proceed with the suo motu revision on merits. Being aggrieved by and dissatisfied with the order of the Commissioner, the assessee filed an application in revision before the, Commercial Taxes Tribunal which was registered as Revision Case No. 217 of 1966. Before the Tribunal the following three points were urged on behalf of the assessee:

(1) That the order of assessment dated the 30th of July, 1962 had become non-existent, having been superseded by the order of the Board of Revenue.

(2) That the order of assessment dated the 30th of July, 1962, had merged in the order of the Board of Revenue, which became the operative order, and as such the Commissioner of Commercial Taxes had no jurisdiction to revise the assessment order dated the 20th of July, 1968; and

(3) That the suo motu revision was barred by the principles of constructive res judicata.

4. It was urged on behalf of the Revenue that the revisional application filed by the assessee before the Tribunal was not maintainable as no final order had been passed by the Commissioner while exercising suo motu power of revision. The Tribunal by its order dated the 19th of November, 1966, held that under Rule 36(5)(a) of the Bihar Sales Tax Rules, 1949, the Tribunal can suo motu revise any order passed by the Commissioner which includes interlocutory orders passed by him. The Tribunal further held that the entire order of assessment dated the 30th of July, 1962, had merged in the order dated the 11th of January, 1964, passed by the Board of Revenue and as such the Commissioner had no jurisdiction to suo motu revise the assessment orders dated the 30th of July, 1962. The Tribunal thought it unnecessary to give any finding on the question whether the revisional application filed by the assessee was barred by the principles of constructive res judicata. The Commissioner of Commercial Taxes thereupon moved the Tribunal for stating a case under Section 25(1) of the Act and referring the aforesaid question and some other questions to this Court. The Tribunal has, therefore, stated a case and made a reference for decision of only one question which has already been stated.

5. It is well settled principle that the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that whenever there are two orders, one by the inferior Tribunal and the other by a superior Tribunal passed in appeal or revision, there is a merger irrespective of the subject-matter of the appellate or revisional order and the scope of the appeal or revision. It is necessary, therefore, to consider the question as to what is the scope of the appellate power which was exercised in the instant case by the Deputy Commissioner of Commercial Taxes and the revisional power which was exercised by the Board of Revenue under the provisions of the Act. In Section 24 provisions for appeal, review and revision have been made. The relevant part of Section 24 is extracted below:

“24(1) Any dealer objecting to an order of assessment, with or without penalty, under Section 13, or to an order passed under Sub-section (3) of Section 12(2) or under Section 24A may, in the prescribed manner, appeal to the prescribed authority against such assessment or penalty or both:

Provided that no appeal shall be entertained by the said authority unless he is satisfied that twenty per centum of the tax assessed or such amount of the tax as the appellant may admit to be due from him, whichever is greater, has been paid.

(3) Subject to such rules of procedure as may be prescribed, the appellate authority, in disposing of any appeal under Sub-section (1), may—

(a) confirm, reduce, enhance or annul the assessment or penalty, if any, or both, or

(b) set aside the assessment or penalty, if any, or both and direct the assessing authority to pass a fresh order after such further inquiry as may be directed.

(4) Subject to such rules as may be prescribed and for reasons to be recorded in writing, the prescribed authority may upon application or of its own motion, revise any order passed under this Act:

Provided that where the prescribed authority revises any order of its own motion, no proceeding for such revision shall be initiated at any time except before the expiry of four years from the date of such order:

Provided further that no order under Section 13 shall be revised, upon application by a dealer, unless an order under Sub-section (3) of this Section has been previously passed in respect of the said order.”

6. As provided under Sub-section (1), only a dealer objecting to an order of assessment can prefer an appeal before the prescribed authority. It is not open to the Department to challenge the order of assessment before the appellate authority by filing the appeal. Under Sub-section (3), however, the appellate authority has been given very wide power. On a plain reading of that Sub-section it is clear to me that the power of the appellate authority is not restricted to the questions agitated in the appeal by the assessee but ranges over the whole assessment and consequently it is open to it to correct not only matters raised by the assessee in the appeal but also other matters considered and determined in course of the assessment. Thus in appropriate cases the appellate authority may dispose of the appeal to the prejudice of the assesses by enhancing tax and penalty. The scope of the power of the appellate authority being so wide under Sub-section (3) of Section 24, the Deputy Commissioner while dealing with the appeals of the dealer in the instant case was, therefore, competent to disallow the claims of deduction for sale to the three registered dealers during the period 1957-1958 and to one of the registered dealers during the period 1958-1959, which had been allowed by the assessing authority, and to enhance the tax. I am fortified in the view which I have taken by some of the decisions which I am presently going to refer.

7. Under Section 31(3) of the Indian Income Tax Act, 1922, the powers of the Appellate Assistant Commissioner while disposing of an appeal have been prescribed. The relevant provision is quoted below:

“31(3) In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment,—

(a) confirm, reduce, enhance or annul the assessment or

(b) set aside the assessment and direct the Income Tax Officer to make a fresh assessment after making such further inquiry as the Income Tax Officer thinks fit or the Appellate Assistant Commissioner may direct, and the Income Tax Officer shall thereupon proceed to make such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment, or, in the case of an order canceling the registration of a firm under Sub-section (4) of Section 23 or refusing to register a firm under Sub-section (4) of Section 23 or Section 26A or to make a fresh assessment under Section 27”.

8. It will be noticed that the power to enhance the assessment has also been given to the Appellate Assistant Commissioner under Clause (a) of Section 31(3) of the Income Tax Act, 1922, as has been given to the appellate authority under Clause (a) of Section 24(3) of the Act. In the case of (1) Narrondas Manordass, Bombay…Applicant; v. Commissioner Of Income-Tax, Central Bombay,…., Central, Bombay (31 I.T.R 909 = A.I.R 1958 Bombay 35) Chagla, C.J, in dealing with the powers of the Appellate Assistant Commissioner under Section 31(3) of the Income Tax Act, 1922, made the following observation:

“It is clear that the Appellate Assistant Commissioner has been constituted a revising authority against the decisions of the Income Tax Officer; a revising authority not in the narrow sense of revising what is the subject-matter of the appeal, not in the sense of revising those matters about which the assessee makes a grievance, but a revising authority in the sense that once the appeal is before him he can revise not only the ultimate computation arrived at by the Income Tax Officer but he can revise every process which led to the ultimate computation or assessment. In other words, what he can revise is not merely the ultimate amount which is liable to tax, but he is entitled to revise the various decisions given by the Income-Tax Officer in the course of the assessment and also the various incomes or deductions which came in for consideration of the Income Tax Officer.”

9. In the case of (2) Commissioner Of Income Tax v. Mcmillan & Co and Co. (A.I.R 1958 Supreme Court 207 = 33 I.T.R 182) the Supreme Court agreed with the above observation and held that the language of Sub-section (3) of Section 31 is wide enough to enable the Appellate Assistant Commissioner to correct the Income Tax Officer not only with regard to a matter which has been 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. The power of the revisional authority under Sub-section (4) of Section 24 of the Act has not been restricted or circumscribed. The revisional authority is, therefore, quite competent to exercise all such powers which can be exercised by the appellate authority under Section 24(3) of the Act. I may refer in this connection to the case of (3) The State of Orissa v. Debaki Debi (15 S.T.C 153). In that case the Supreme Court while considering the scope of the provisions of Section 23(3) of the Orissa Sales Tax Act, 1947, observed as follows:

“We need hardly add that what applies to an appeal under Section 23(3) applies to a revision under Section 23(3), as the powers of the revising authority and the orders it might pass are not conceived of as differing in any manner from those of the appellate authority.”

10. The Board of Revenue, therefore, while dealing with the revisional applications filed by the assessee was also competent to disallow the claim of deductions of the dealer, which had been allowed by the assessing authority, and to enhance the tax. I would refer in this connection to a Bench decision of the Madras High Court in the case of (4) the State of Madras v. The India Coffee: Board, Batlagundu (11 S.T.C 1). The learned Judges of the Madras High Court while considering the provisions of the Madras General Sales Tax Act, 1939, observed as follows:

“These provisions make it clear that an order of assessment is treated as a single one subject to an appeal by a taxpayer, the State being left with the limited right to get the orders revised by the competent authority to correct errors in assessment. The powers of revision conferred on the respective authorities may be exercised both for the benefit of the State and the taxpayer. There is nothing in Section 12 to warrant an assumption, that such powers are given only to protect the interests of revenue and not to protect the interests of the taxpayer as well. Though the statute envisages two sets of remedies, appeals and revision, the former being available only to the taxpayer and the latter both to the taxpayer and the State, the order of assessment itself is not treated as a severable one with respect to each item of the total turnover. We are unable to see any basis in principle or authority for a view, that the Act provided two independent hierarchies of tribunals, one to exercise appellate jurisdiction and the other to exercise revisional jurisdiction in the interests of the State, each functioning independent of the other in their respective fields with reference to the same order of assessment.”

11. Having arrived at the above conclusion, I have now no difficulty in answering the question. In the case of (5) Commissioner Of Income Tax, Bombay v. Amritlal Bhogilal & Co. and Co. (A.I.R 1958 Supreme Court 868) the Supreme Court has made the following observation:

“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; but the question is whether this principle can apply to the Income Tax Officer's order granting registration to the respondent’”

12. In that case the order of assessment made by the Income Tax Officer was a composite order, namely, an order granting registration of the firm and making an assessment on the basis of the registration. An appeal was taken by the assessee to the Appellate Assistant Commissioner against the composite order of the Income Tax Officer. It was held by the High Court that the order of the Income Tax Officer granting registration to the respondent must be deemed to be merged in the appellate order and the revisional power of the Commissioner could not, therefore, be exercised in respect of it. The view taken by the High Court was overruled by the Supreme Court for the reason that the order of the Income Tax Officer granting registration could not be deemed to have been merged in the order of the Appellate Assistant Commissioner in an appeal taken against the order of assessment. Although on the facts of that case it was held by the Supreme Court that there was no merger, but keeping in view the principles which have been enunciated by the Supreme Court in paragraph 10 of the judgment, which I have quoted above, it is clear that when an order of assessment is confirmed by the appellate authority or the revisional authority, the original decision merges in the appellate decision or the revisional decision, as the case may be, and it is the appellate decision or the revisional decision alone which subsists.

13. Mr. Shreenath Singh, learned Standing Counsel No. 1 appearing for the Revenue, placed reliance on a subsequent decision of the Supreme Court in the case of (6) The State Of Madras v. Madurai Mills Co., Ltd. (19 S.T.C 144). In that case the Supreme Court after considering the scope of the power of revision under Section 12 of the Madras General Sales Tax Act, 1939, accepted the view of the High Court that the whole assessment proceeding was not the subject-matter of revision and as such the dismissal of the revisional petition did not tantamount to confirmation by the revising authority of the other portion of assessment which was not before that authority. In that view of the matter, it was held that there was no question of merger. In my opinion, that case is distinguishable from the instant case inasmuch as, I have already observed, the revisional authority has unfettered powers under Sub-section (4) of section 24 of the Act and as such the Board of Revenue while exercising the revisional powers was quite competent to enhance the tax of the assessee by disallowing the claim of deductions for sale to the three registered dealers during the year 1957-1958 and for sale to one of the registered dealers, namely, Kailash Stores, during the year 1958-1959. That being the position, the entire order of assessment dated the 30th of July, 1962, passed by the assessing authority merged in the revisional order passed by the Board of Revenue on the 11th of January, 1964.

14. For the aforesaid reasons, I answer the question framed in the affirmative. The reference is accordingly answered in favour of the assessee and against the Revenue. In the circumstances, the parties are directed to bear their own costs of this reference.

15. S.K Jha, J. I agree.

Application dismissed.