Chiranjilal Daga vs Commissioner of Income Tax and Another

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 u/s 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 u/s 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.

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. 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 u/s 264 as he had

already filed appeals before the appellate authorities could be sustained.

Section 264 of the Income Tax Act, 1961, reads as follows :

(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-fa) 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.

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.

In one of the earliest decisions in A. Vs. SREENIVASALU NAIDU v. COMMISSIONER OF Income Tax MADRAS., , in construing

Section 33A of the Indian Income Tax Act, 1922, which corresponds to Section 264 of the Income Tax Act, 196], 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 u/s 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 Vs. The State of Madras, , while construing an analogous provision in the Madras General Sales Tax Act, wherein ft has been held that the

Board of Revenue was not prevented from exercising its power of revision u/s 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 in 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. Vs. Commissioner of Income Tax, Mysore, ,

the Mysore High Court has taken the same view. In that case, the decision in A. Vs. SREENIVASALU NAIDU v. COMMISSIONER OF

Income Tax MADRAS., was quoted with approval, as laying down the correct view and as having stood the test of time. In Swadeshi Cotton

Mills Co. Ltd. Vs. Commissioner of Income Tax, 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 assessce files an appeal before the said authorities

which is dismissed as not maintainable, he can approach the Commissioner in revision u/s 33A and the Commissioner is not barred from exercising

his powers of revision even though an incompetent appeal might have been preferred by the asscssee. 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 asscssee

of the right of revision u/s 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.

However, learned counsel for the revenue relied on the observations in MERCANTILE TOBACCO CORPORATION Vs.

COMMISSIONER OF Income Tax, ANDHRA PRADESH., 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 Vs. COMMISSIONER OF Income Tax, ANDHRA

PRADESH., it was held by the Andhra Pradesh High Court that if an assessed 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 u/s 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 [1961] 41 ITR 375 . In that case, Rajagopalan and Srinivasan JJ. held that an order of assessment cannot be

revised by the Commissioner on an application u/s 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 u/s

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.

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.