Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1978-79, the following questions of law have been referred at the instance of the Revenue : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order of assessment passed under Section 143(3) read with Section 144B is an order of the Inspecting Assistant Commissioner of Income-tax and in that view was correct in cancelling the order of the Commissioner of Income-tax made under Section 263 as lacking jurisdiction to direct the inclusion of Rs. 6,60,000 as income from dividend for the assessment year 1978-79 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that an order of assessment merged with the appellate order in all respects irrespective of the subject-matter of appeal, and, in that view, was correct in holding that the Commissioner of Income-tax lacked jurisdiction under Section 263 for the assessment year 1978-79 directing the inclusion of Rs. 6,60,000 as income from dividend ?"
(2.) At the instance of the assessee, the following questions have also been referred : "1. Whether, on the facts and in the circumstances of the case, and in view of the finding of the Tribunal that the Commissioner of Income-tax, West Bengal-V, had no jurisdiction to pass an order under Section 263 of the Income-tax Act, 1961, the Tribunal was legally justified in giving its decision on merits as to whether the sum of Rs. 6,60,000 is liable to be included in the assessment of the assessee-company for the assessment year 1978-79 and also in upholding the order of the Commissioner on merits ? 2. Whether, on the facts and in the circumstances of the case and on a true and proper construction of the order of the Calcutta High Court dated May 12, 1977, passed in Company Petition No. 16 of 1977 connected with Company Application No. 304 of 1976, the Tribunal was justified in law in holding that the order of the Calcutta High Court amounted to a declaration of dividend within the meaning of Section 8 of the Income-tax Act, 1961, and further holding that the dividend must be held to have been paid to the assessee-company on August 24, 1977, when the accounts were finalised within the meaning of Section 8 and as such the said amount was liable to be included in the assessment of the assessee-company for the assessment year 1978-79 ?"
(3.) The facts leading to this reference are that, under a scheme of amalgamation, Messrs. Associated Power Co. Ltd., a wholly owned subsidiary of the assessee-company was amalgamated with the assessee-company with effect from March 31, 1977, i.e., the last day of the accounting period relevant to the assessment year 1977-78. In the accounting year ending on March 31, 1977, a sum of Rs. 6,60,000 was proposed as gross dividends by Messrs. Associated Power Co. Ltd. During the assessment proceedings for the assessment year 1978-79 for which the relevant accounting year ended on March 31, 1978, it was contended on behalf of the assessee that, in that year, no dividend income accrued to or was received by the company during the relevant previous year and as such no dividend income was shown in that year. It was also pointed out that since Messrs. Associated Power Co. Ltd. was amalgamated with the assessee-company with effect from the close of the business on March 31, 1977, the company was not in a position to hold the annual general meeting where the dividend for the accounting year ending on March 31, 1977, could be declared. It was thus contended that, according to the provisions of Section 8 of the Income-tax Act, 1961, no dividend income accrued to the company. It was also submitted that since no dividend income was declared by Messrs. Associated Power Co. Ltd., during the accounting year ending on March 31, 1978, the question of payment of any dividend to the assessee-company also did not arise. Thus, no dividend arose in the hands of the assessee on receipt basis also. The sum of Rs. 6,60,000 was not included by the Income-tax Officer in the assessment for the assessment year 1978-79. The assessment was framed by the Income-tax Officer under Section 143(3) read with Section 144B.;