Susanta Chatterjee, J. - (1.) Both the rules were issued on September 26, 1977. The writ petitioner has challenged the notice dated August 17, 1977, issued by the Commissioner of Income-tax (Central) under Section 16 of the Companies (Profits) Surtax Act, 1964, for the assessment year 1971-72 and all proceedings, notices and orders relating thereto and thereunder on the ground that there was no material or circumstance whatsoever before the Commissioner of Income-tax (Central-I) (respondent No. 1) on the basis whereof he could consider that the said assessment for the assessment year 1971-72 under the said Act was, in any way, erroneous and prejudicial to the interests of the Revenue within the meaning of Section 16 of the said Act. It is urged that, on the basis of the allegations made in the said notice, no person properly instructed in law could reasonably consider the said assessment to be erroneous and prejudicial to the interests of the Revenue. A condition precedent necessary to confer jurisdiction upon respondent No. 1 to act and proceed and pass any order under Section 16 of the said Act did not exist and the basic requirements were not satisfied and/or fulfilled. The petitioner has also challenged alleging, inter alia, that respondent No. 1 had acted mechanically without applying his mind either and was influenced by irrelevant and extraneous considerations. It is stated that inasmuch as out of the aggregate dividend of Rs. 78,84,795, the dividend of Rs. 9,30,000 on preference shares had already been adjusted in the profit and loss account itself, and the said amount of Rs. 9,30,000 was not included in the general reserve, there was and could be no question of reducing the general reserve by the said amount of Rs. 9,30,000, as alleged or at all.
(2.) Dr. Pal, learned counsel appearing for the petitioner, has mainly argued that the power conferred upon the Commissioner of Income-tax under Section 16 of the Surtax Act to revise an order passed by the Income-tax Officer is in identical terms with the power conferred under Section 263 of the Income-tax Act, 1961, to revise any order passed by the Income-tax Officer under the Income-tax Act, 1961. In the present case, the challenge of the petitioner is against the notice on the ground that the Commissioner of Income-tax has no jurisdiction and power to issue the said notice as the order passed by the Income-tax Officer, Central Circle, under Section 6(2) of the Surtax Act had been the subject-matter of appeal before the Appellate Assistant Commissioner and the appellate authority having disposed of the said appeal by his order dated December 4, 1976, the order of the Income-tax Officer has merged with the order of the Appellate Assistant Commissioner and the operative order is the order of the Appellate Assistant Commissioner. Hence, the Commissioner of Income-tax has no power to revise the order of the Income-tax Officer which had already merged with the order of the Appellate Assistant Commissioner before the issuance of the purported notice.
(3.) Dr. Pal has also argued by drawing the attention of the court to a decision of the Division Bench of this court in General Beopar Co. (Pvt.) Ltd. v. CIT [1987] 167 ITR 86. The Bench decision mainly followed the judgment of the Supreme Court in the case of Amritlal Bhogilal and Co. Ltd. [1958] 34 ITR 130. The ratio of the said decision is that when an order of assessment was appealed against, and an order was passed by the appellate authority, there was merger of the assessment order with the appellate order in all respects, including matters which were merely affirmed by the appellate authority. The Supreme Court observed that the law is settled that when an appeal is preferred against an order of assessment, the entire assessment is at large before the Appellate Assistant Commissioner who has jurisdiction and power also to go into the questions which are not the subject-matter of the appeal. The exceptions which have been considered by this court are cases where the questions involved cannot be the subject-matter of appeal before the appellate authority. The attention of the court has also been drawn to the case reported in General Beopar Co. (Pvt.) Ltd. v. CIT [1987] 167 ITR 86 and, in particular, the relevant portion at page 91 and also page 99. It is strongly submitted that if the notice is without jurisdiction, the court will not hesitate to quash the same. There is a reference to the case in Russell Properties Ltd. v. A. Chowdhury.;