S.K.DESAI, J. - (1.) THE question referred to us by the Tribunal, Bombay Bench "A", under S. 256(1) of the IT Act, 1961, reads as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment order of the ITO merged with the AAC's order in its entirety and that the CIT had no jurisdiction to revise the assessment order under S. 263?"
(2.) THE assessee is an individual. The relevant previous year was Samvat year 2025. During the financial year 1969 70, an advance tax demand of Rs. 13,950 was raised on the assessee under S. 210 of the IT Act. In response to the said demand, the assessee paid an amount of Rs. 12,440. The self assessment tax on the basis of the income return furnished by the assessee came to Rs. 10,007. The assessee was, however, assessed on a total income of Rs. 64,107 and Rs. 29,968 was the tax determined on the assessee's income as per the regular assessment order dated May 22, 1971. The tax determined as aforesaid exceeded the advance tax demanded under S. 210 by more than 33 1/3per cent. The assessee should have, therefore, sent to the ITO under S. 212(3A) of the IT Act an estimate of the current income and of the advance tax payable by her (on the current income), as calculated in the manner laid down in S. 209 and she should also have paid by way of advance tax the difference over and above the advance tax demanded under section 210. The assessee had failed to comply with the said requirements of the provisions of S. 212(3A) of the IT Act. Under these circumstances, by virtue of the provisions of S. 217(1A), interest at 9per cent became payable by the assessee on the amount by which the advance tax paid by her fell short of the assessed tax as defined in S. 215(5). In the assessment order dated May 22, 1971, the ITO did not mention anything about the amount of interest payable by the assessee under S. 217(lA) as aforesaid. The Commissioner was of the opinion that this omission on the part of the ITO was prejudicial to the interests of the Revenue and was, to that extent, erroneous. He, therefore, assumed jurisdiction under S. 263 of the IT Act and levied on the assessee under S. 217(lA) interest amounting to Rs. 1,251. He also directed the ITO to issue the consequential demand notice. The assessee, feeling aggrieved from the CIT's order, took the matter in appeal to the Tribunal. The arguments before it were two fold. Firstly, it was contended that since there was no order before the CIT which could have been said to have been made by the ITO under S. 217(lA), the CIT had under S. 263 of the Income tax. Act no jurisdiction to pass the impugned order levying interest under S. 217(1A). Secondly, it was urged that if the assessment order made by the ITO was considered to have, by implication, included an order waiving the levy of interest payable under S. 217(lA), the order of the ITO was no longer revisable by the CIT as in the meantime the ITO's assessment order had been taken by the assessee in appeal to the AAC and as a result of the disposal of the said appeal by the AAC before May 16, 1973 (the date of the impugned order of the CIT), the ITO's order had merged with the AAC's order. The Tribunal upheld the contention of the assessee and held that the ITO's order dated May 22, 1971, stood merged in the Appellate Asstt. CIT's order and that, therefore, it was no longer open to the CIT to revise the original order of the ITO. The answer to be given to the question referred to us is directly covered by the decision of this Court in CIT vs. P. Muncherji and Co. (1987) 63 CTR (Bom) 338 : (1987) 167 ITR 671 (Bom). Indeed, the Tribunal, in its order, had referred to its previous order in P. Muncherji's appeal (before the Tribunal) and had followed its own view. That view was later on confirmed by the Division Bench of the High Court in P. Muncherji's case. The Division Bench of this Court in P. Muncherji's case (supra) has given a very detailed judgment and held on question No. 2, which was an identical question, that the order of the ITO had merged with the order of the AAC on all points in respect of which an appeal could have been filed before him or in respect of which the AAC could have modified the order. Before the Bench, there was an exhaustive discussion of all the Bombay High Court and the Supreme Court authorities on the point. The Bench found the matter directly covered by CIT vs. Tejaji Farasram Kharawala (1953) 23 ITR 412 (Bom), though a decision under the 1922 Act, laid down the principles which were applicable to the 1961 enactment. According to the Bench, in CIT vs. Amritlal Bhogilal and Co. (1958) 34 ITR 130 (SC), the Supreme Court had referred to the Bombay High Court's judgment in Tejaji Farasram Kharawala's case (supra) (at p. 134 of the report) without adversely commenting upon it. Indeed, a passage from the Supreme Court's judgment has been extracted by the Bench which would approve the view taken by the High Court in Tejaji Farasram Kharawala's case (supra), and subsequently confirmed in P. Muncherji's case. This extract occurs at page 677 of the report in P. Muncherji's case (supra). We do not find it necessary to reproduce the extract in this judgment.
(3.) ACCORDINGLY , the Division Bench in CIT vs. P. Muncherji and Co. (1987) 167 ITR 671 (Bom), was of the view that the Bombay High Court's decision in Tejaji Farasram Kharawala's case (supra), had been subsequently approved by the Supreme Court and was required to be followed by the Division Bench. The said Division Bench also considered the scope and the authority of the AAC qua assessment and extracted relevant passages from various decisions of the Bombay High Court explaining the correct position. The Division Bench noticed that there was a conflict of view amongst the High Courts on the issue (see p. 680 of the report) but was of the opinion that since the question before the Bombay High Court was concluded by the earlier decision which was on all fours and not capable of being distinguished the previous decision was required to be followed. Mr. Jetley with his usual industry has referred us, to a Full Bench decision of the Madhya Pradesh High Court in CIT vs. K. L. Rajput (1987) 59 CTR (MP) 65 : (1987) 164 ITR 197 (MP), where the opposite view has found favour. The Full Bench of the Madhya Pradesh High Court has held that the ITO's order merges with the appellate order of the AAC only to the extent it was considered and decided by the , but the matters which are not covered by the appellate order of the AAC are left untouched and to that extent, the ITO's assessment order survives and would permit exercise of revisional jurisdiction by the CIT under S. 263 of the IT Act, 1961.;