1984 PLP (Trib (PTD)

The appellant preferred an appeal before the appellate Assistant Commis sioner, on 17-2-I

980. During the pendency of that appeal the Inspecting Assistant Commissioner on 3-2-1977 issued under section 34-A of the Income tax Act. The basis for issuance of notice was that the assessment was erroneous in law being prejudicial to the interest of revenue. The Inspecting Assistant Commissioner held that in the immediately preceding assessment year 1975-76, after discarding the appellant's plea of business to be oft whole sales and retail sales gross profit rate of 15 % was applied to sales estimated at Rs.2,10,

00. The appellant's income therefrom was determined at Rs. 21,

600. In the two years earlier than that the appellant's net yearly income was determined at Rs. 24,

000. In the year under consideration the Inspecting Assistant Commissioner found the appellants assessed income at Rs. 18,604 to be low. The appellant's plea of dealings on wholesale basis was discarded. Gross profit rate of 14 % was applied to sales estimated at Rs. 2,60,000 and after allowing claimed expenses with some add backs in the Profit and Loss Account expenses, the appellant's net income for the year under consideration was determined at Rs. 30,604.

3. The appellant's Authorised Representative bas questioned the legality of the order passed by the Inspecting Assistant Commissioner under section 3-4-A of the Income-tax Act. It was contended that the Inspecting Assistant Commissioner was not justified in assuming jurisdiction under section 3-A when the assessment processed on 20-11-1976 was sub judice in appeal before the appellate Assistant Commissioner. It was further submitted that after tiling of appeal before the appellate Assistant Commissioner on 17-12-1976, the Income-tax Officer order lost its independent entity as the assessment had to merge in the appellate order leaving no scope for assump tion of jurisdiction by the Inspecting Assistant Commissioner. The other contention of the appellant's Authorised Representative was that the assessment processed by the Assessing Officer was neither erroneous nor prejudicial to the interest of revenue as assessment at an income lower than that of the preceding year in itself does not come within the ambit of provisions of section 34-A of the Income-tax Act. The appellant's Authorised Representa tive continued that due to the impugned order passed on 19-12-1977, the appellate Assistant Commissioner .bad to dismiss the assessee's appeal on 6-12-1977 as being infructuous as the assessment order assailed therein stood merged in the Inspecting Assistant Commissioner's order. On this basis the contention of the appellant Authorised Representative was that a good deal of prejudice has been caused in depriving the appellant from his vested right of appeal as provided under section 30 of the repealed Income-tax Act. The Departmental Representative in his turn, submitted that merely filing an appeal, the scope of jurisdiction of Inspecting Assistant Commis sioner as provided under section 34-A of the Income-tar Act could not be curtailed as that jurisdiction was provided by an independent provision of law. The Departmental Representative further continued that mere filing of appeal, before the appellate Assistant Commissioner was no bar for exercise of jurisdiction by the Inspecting Assistant Commissioner under section 34-A of the Act as the assessment held the field till an order eras passed by the Appellate Assistant Commissioner. The last submission of the Departmental Representative was that the assessee's income assessed by the Income-tax Officer being less titian that of the preceding year, the assessment was prejudicial to the interest of revenue and as such the Inspecting Assistant Commissioner rightly invoked the provisions of section 34-A.

4. After hearing the parties and on going through the provisions of section 34-A of the Income-tax, Act, I am of the considered opinion that one an appeal having teen filed by the assessee before the Appellate Assistant Commissioner, the Inspecting Assistant Commissioner ceases to have jurisdiction to revise the assessment order. My conclusion is based on more than one reason. Section 34-A provides in clear terms that record in any proceedings raider tire Income-tax Act, can be examined by the Inspecting Assistant Commissioner for passing such order as the circumstances of the case justify but subject to the conditions laid down therein. The meaning and scope of the word "any proceedings" is restricted to the level of the orders passed by the Income-tax Officer only. Appeal proceedings pending before the Appellate Assistant Commissioner cannot come within the purview of section 34-A of the Income-tax Act. The reason for this conclusion is very simple as the Inspecting Assistant Commissioner and the Appellate Assistant Commissioner are the officers of the same status having virtually equal powers under two different sections of the Income-tax Act. So far as the case wherein the Appellate Assistant Commissioner has passed an order disposing of an appeal against the Income-tax Officer's assessment order is concerned, the Inspecting Assistant Commissioner does not have any jurisdiction in the matter. There is a long chair of authorize holding that original assessment order merges in the Appellate order even if the appellate order merely confirms the assessment order and dismisses the appeal. Even if subject-matter of .the purported revision by the Inspecting Assistant Commissioner under section 34-A is different than that of the Appellate Assistant Commissioner no jurisdiction accrues to the Inspecting Assistant Commissioner as the original assessment order stands merged in the appellate order by filing an appeal before the Appellate Assistant Commissioner, a vested right accrues to the assessee for getting any relief as prescribed under section 30 of the Income-tax Act. In such circumstances, the assessee is entitled for adjudication of the assessment order by the appellate order and that right cannot be snatched away be another officer of the equal jurisdiction. The assessment order becomes sub judice the moment it is assailed in appeal at the appellate forum. The appeal proceedings commence from the date of institution of appeal and the impugned order remains sub judice till the final determination. In the instant case, the assessee having preferred, appeal against the Income-tax Officer's order before the Appellate Assistant Commissioner, a vested right had accrued to him for adjudication of the, matter on merits by the Appellate Assistant Commissioner. On 3-2-1977 the Inspecting Assistant Commissioner had no jurisdiction to take cognizance of the appeal proceedings pending before an officer of equal jurisdiction. In these circumstances, the only recourse available to the Inspecting Assistant Commissioner was to take up the. case for enhance ment of the assessee's income before the Appellate Assistant Commissioner where the appeal wan pending. The material on which the Inspecting Assistant Commissioner thought that a case for enhancement of the assessee's income could be made out should have been brought to the notice of the Appellate Assistant Commissioner through the concerned Income-tax Officer with prayer for exercise of powers for enhancement of assessment. It is only in cases where no appeal proceedings are pending that the Inspecting Assistant Commissioner can take action under section 34-A of the Income-tax Act. In the instant case by the impugned order of the Inspecting Assistant Commissioner a very anomalous position was created when the Appellate Assistant Commissioner had to dismiss the assessee's appeal on 26-12-1977 as being infructuous, the order impugned therein having already been adjudicated by the Inspecting Assistant Commissioner.

5. The object of section 34-A is not to invest the Inspecting Assistant Commissioner with the powers to reopen the cases under the Income-tax Officer's order have merged with the appellate order or are sub judice before the appellate authorities. The legislature enacted the provision of section 34-A only for the cases where no appeal was preferred against the order of the Income-tax Officer because of lacuna in the Income-tax Act regarding availabi lity of no right of appeal to the Department against the income-tax Officer's assessment. The provision of section 34-A was enacted to such the Inspecting Assistant Commissioner with the powers of revising any order which is erroneous and is prejudicial to the interest of revenue. The Legislature by incorporation of section 34-A never intended to give a supervisory powers to the Inspecting Assistant Commissioner. The intention of the Legislature is to be gathered from the express words used in the Act and it is only in a case where more than one interpretation is possible that a Court may prefers one over the other. In the instant case, no other interpretation is possible for the word "any proceeding" except that proceedings till the level of the Assessing Officer.

6. The prerequisites of section 34-A are that the orders of the Assessing Officer should be both erroneous and prejudicial to the interest of revenue. These two conditions are independent. These are got to be fulfilled before initiating any action under section 34-A of the Act. The Inspecting Assistant Commissioner is required to hold that the order which be proposes to cancel is not only arroneous in law but is also prejudicial to the interest of revenue. Any order which fails to establish these two factors is, un sustainable in law. The word "erroneous" connotes the orders not in accordance with law. However, any order not being opposed to any provision of law cannot be regarded as erroneous. In the instant case the Inspect ing Assistant Commissioner did not hold how the order of the Income-tax Officer was erroneous. The only basis compelling the Inspecting Assistant Commissioner to assume jurisdiction was that the Income-tax Officer's order was prejudicial to the interest of revenue. Assessment of an assessee at an' income lower than that of the preceding year cannot be straightaway held toll be prejudicial to the interest of revenue as the assessee's income varies from year to year in accordance with the terms and conditions of the business. It is not necessary that an assessee who earns more profits in one year will continue earning the some profits in the succeeding year. It can thus safely' be held that the basis adopted by the Inspecting Assistant Commissioner for assuming jurisdiction was not available. Another aspect of the matter is that if assuming for the arguments sake (though not conceded) by adopting a different mode of assessment the Income-tax Officer had worked-out the assessee's income at a figure less than that of the preceding year and the assessee's income assessed for the year under review was prejudicial to the interest of revenue, even then it cannot be said that every order which is, prejudicial to the interest of revenue is per se erroneous as well, before the Inspecting Assistant Commissioner can assume jurisdiction for ' initiating action under section 34-A he is to see that not only the order is prejudicial to the interest of revenue but is also erroneous. If both these conditions are satisfied only then action can be initiated under section 34-A.of the Income-tax Act.

7. As a result of the above discussion I hold that during the pendency or after the disposal of the appeal by the Appellate Assistant Commissioner, the Inspecting Assistant Commissioner does not have powers to invoke provision of section 34-A of the income-tax Act. The impugned order passed by the Inspecting Assistant Commissioner being without jurisdiction is hereby Cancelled. Order accordingly. M. KARIM (ACCOUNTANT MEMBER).-I have gone through the order pro posed by my learned brother but with respect I could not bring myself to accept the proposition of law enunciated by my learned brother and the conclu sion drawn by him. My learned brother bad concluded thus :- "As a result of the above discussion, we bold that during the pendency or after the disposal of the appeal before the Appellate Assistant Commissioner, the I. A. C. does not power to invoke provisions of section 34-A.oi the Income-tax Act. The impugned order passed by I. A. C, being without jurisdiction is hereby cancelled. Order accordingly-."

2. The scope for differing with my learned brother's view is thus narrowed by his conclusion and I would confine to the proposition of law enunciated by, my learned brother. Subsection (1) of section 3H-A of the Income-tax Act runs as follows: "The Inspecting Assistant Commissioner may call for and examine the record of any proceeding under the Act and if he considers that any order passed therein by the income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made, such inquiry as he deems necessary pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment to be made." At the very outset I must say that I agree that the Income-tax Officer's order merges in the Appellate Assistant Commissioner's order but only on points raised in appeal and decided by the Appellate Assistant Commissioner. I am however, unable to agree with the view that the moment an appeal is filed against an assessment order the Inspecting Assistant Commissioner is prevented from looking into the assessment. My learned brother has said and quite rightly that the meaning and scope of the words any proceeding is restricted to the level of the orders passed by the Income-tax Officer only. He is restricted to the order passed by the Income-tax Officer only. He, however, fell into error when be laid down that appeal precedings pending before the Appellate Assistant Commissioner cannot come within the purview of the section 34-A of the Income-tax Act because the Inspecting Assistant Commissioner did not tamper with the proceedings before the Appellate Assistant Commissioner. As to the Appellate Assistant Commissioner had not passed any order at the particular point of time when the Inspecting Assistant Commissioner initiated the proceedings under section 34-A, there was no ques tion of merger of Income-tax Officer's order in the Appellate Commissioner' order. To say that once an assessee files an appeal before the Appellate Assistant Commissioner against an assessment order, the inspecting Assis tant Commissioner, ceases to have jurisdiction under section 34-A would wholly contrary to the law and the cannons of interpretation. The inter pretation given by my learned brother is fraught with dubious potentialities in the context of social conditions of our country. The Ins pecting Assistant Commissioner was invested with powers of reopening a assessment only because of the peculiar conditions prevailing in the country. I would like to think that the conditions of political peculium and bureau cratic abetment must have prompted the legislators to insert section 34 in the Act. Fiscal philosophy and interpretative technology 'lust be on the same wave-length if legislative policy is to find fulfilment in the enacted text. That is the challenge the appeal usually offer to judicial resourcefulness demand ing hormonious construction of the section, so that balance may be struck between purpose and result without doing violence to statutory language and social values. The section demanding our attention is not new and the issue is also not virgin.

3. If the interpretation given by my learned brother be accepted, sec tion 34-A would become a dead letter and would be nullified by every tax-payer by filing an appeal against an order passed by the Income-tax Officer. The la gives the Inspecting Assistant Commissioner the power to pass .an order within four years of the passing of the order. The makers of the law could have easily laid down that the power shall not be exercised in cases where appeals have been filed. The Inspecting Assistant Commissioner did not take cog nizance of the appeal proceeding; "pending before an officer of equal jurisdiction" as has been lamented by m) learned brother. It was an order in a proceeding before the income-tax Officer that was taken cognizance of by the Inspecting Assistant Commissioner. As my Earned brother has no based his conclusion on the merits of the Inspecting Assistant Commissioner's order and his cancelled the order only on the ground that the "Ins pecting Assistant Commissioner does not have powers to invoke provision of section 34-A of the Income-tax Act". During the pendency and after the disposal of the appeal by the Appellate Assistant Commissioner I have con fined my arguments to the legal proposition raised by my learned brother.

4. A holistic perspective in the correct statutory setting makes con clusion irresistible that the appeal must be dismissed. "M. KARIM (ACCOUNTANT MEMBER).-Whether in facts and circumstances of case the I. A. C. could start the proceedings under section 34-A after the assessee had filed appeal before the Appellate Assistant Commis sioner. ABRAR HUSSAIN NAQVI (JUDICIAL MEMBER).-This appeal was heard by a Division Bench of the Tribunal who differed in their views and the following question has been referred to me for my opinion. Whether the facts and circumstances of the case the I. A. C. could start the precedings under section 34-A after the assesses had filed an appeal before the Appellate Assistant Commissioner. Since It was an important question of law on which the two learned Members had differed and also perhaps because a similar question and earlier been decided by a Full Bench of the Tribunal consisting of five Members which is reported as (1971) 23 Taxation 27, the President constituted a larger Bench consisting of three Members to decide the above question.

2. The learned Judicial Member has expressed the view that the moment an appeal is filed before the Appellate Assistant Commissioner the matter becomes sub judice before the appellate authority and the Ins pecting Assistant Commissioner cannot exercise the powers under section 34-A on the ground that Income-tax Officer's order ceases to exist. The learned Accountant Member on the other hand has held that the Inspecting Assistant Commissioner was competent to pass orders under section 34-A in the circumstances of this cast, the sake of convenience section 34-A may be reproduced below: 34-A (I).-The Inspecting Assistant Commissioner may call for and examine the record of any proceeding under the Act and if he con siders that any order passed therein by the Income tax Officer is errone ous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to make, such inquiry as he deems necessary pass such order there as the circumstances of the case justify, including on order enhancing or modifying the assessment, or cancelling the assessment arid directing a fresh assessment to be made. From a bar reading of this section it is obvious that the Inspecting As sistant Commissioner bas been empowered by law in the given circumstance to revise the order of the Income-tax Officer or even to cancel it. The only limitation is that the power should be exercised within four years from the date of the order of the Income-tax Officer. The object of this section is clearly to supervise the functions of the Income-tax Officer. The Inspect'' Assistant Commissioner being the executive incharge of the Income-tax Officer, has been empowered to ensure that the Income-tax Officer under him should pass correct orders in accordance with law. The order passed by an original authority when subjected to appeal, the original order merges in the appellate order. However the question is as to what extent the order of the original authority merges in the appellate order and whether the original order cases to exist merely because an appeal has been filed. The order of the original authority merges in the appellate order only to the exist to which it has been made subject-matter of the appeal. Secondly if the order is silent on a particular point naturally that cannot be a subject-matter of appeal and, therefore, the question of merging does not arise. Here I may quote an instance supposing income of an assessee is assessed from his business but his property income has not been assessed or escapes assessment, the assessee files an appeal before the Appellate Assis tant Commissioner contesting the estimated -income from business. Subse quently if it comes to the notice of the Income-tax Officer or the Inspecting Assistant Commissioner can it be said that since the original order of the Income-tax Officer had merged in the appellate order the Income-tax Officer under section 34 or the Inspecting Assistant Commissioner under section 34-A were debarred from reopening the case merely on that ac count. Such an interpretation of section 34 or 34-A would be putting limita tion the powers which art not there. It. is also a misconception of law and misconception of the theory of merger that when an appellate order is passed the original order ceases to exist. The entire original order does not cease to exist, but only that part of it which has been modified by the appellate order. However where the original order is declared as void or annulled only then the order the original authority ceases to exist. For 'instance if in one case the order of the Income-tax Officer is declared at void in another case the order of the Income-tax Officer is confirmed and in the third case the order is only modified by the appellate authority, it cannot be said that Income-tax Officer's order in all 'the three situations ceases to exist. While in the first case the Income-tax Officer's order ceases to exit because it has been declared void by the appellate authority, in the second case it will remain in tact because no interference was made in his order by the appellate authority. In tire third case the order of the Income-tax Officer still stands but in the modified form to the extent to which interference has been made by the appellate authority. With utmost respect in the earlier Full Bench case of the Tribunal reported as (1971) 13 Taxation 27, the Tribunal has not considered this aspect of the case. In that case perhaps the Tribunal assumed that whenever appellate order is passed the original order ceases to exist, while the various authorities on which judgment has been based only say that after the appellate order, it is that order which is enforceable. This only means that if the original order has been modified natural, the appellate order has to be enforced. If, however, the appellate authority merely confirms the original order that would mean that original order still remains enforceable and there is no question of merger. Another aspect of the case is that section, 34 empowers the Income-tax Officer and section 34-A empowers the Inspecting Assistant Commissioner to reopen the mercy of an assessee. If the view taken by the learned Judicial Member is to be purchased by an assessee with a petty amount of Rs. 25 which is the appeal fee. Both these provisions can be defeated by an uncrupulous assessee who had manoeuvred to get favourable assessment which certainly cannot be the intention or object of law. The Privy Council in the case of Attorney-General of Canada v. Hallet & Carrey Ltd. observed as follows: "In their Lordships view there is no better way of approaching inter pretation of this Act than, to endeavour to appreciate the general object that it serves and to give. its words their natural meaning in the light of that object." There are various rules of construction that Courts of law have resorted to for interpretation of statutes but the paramount rule remains that every statute is to be interpreted according to its manifest or express intention. This brings into focus again the point as to what is the object of section 34 or 34-A. As stated above the object is obvious. The Inspecting Assistant Commissioner has to supervise the work of the Income-tax Officer and he has bean given powers to call for the record of any proceedings under the Act and thus can pass necessary orders specified in that section. By no rule of interpretation the limitation as has been expressed by learned Judicial Member and the Full Bench of the Tribunal referred the above can be read into section 34-A. Reading this defect the provision made by the Legislature with a particular object. The powers of the Commissioner of Income-tax under section 33-A are similar to those of the Inspecting Assistant Commissioner under section 34-A. By comparing the two sections it would be evident that n limitation has been imposed on the powers of the Inspecting Assistant Commissioner except that he cannot revise the orders after expiry of four years. On the other hand a number of limitations have been imposed on the powers of Commissioner of Income-tax. by Finance Act, 1974 certain more limitations were imposed on the powers of the Commissioner of Income-to including the one that where an appeal has been made to the Appellate Assistant Commissioner and the appeal is pending before him the Commissioner of Income-tax is debarred from exercising the power of revision under section 33-A. However, no corresponding limitation has been imposed on the powers of Inspecting Assistant Commissioner under section 34-A. It obviously means that Legislature consciously omitted to impose such a bar on the exercise of power by the inspecting Assistant Commissioner under section 34-A. This is settled rule of interpretation that where the legislature makes specific provision at one place and omits it at other place it would be assumed the legislature consciously and deliberately bad omitted to make that provision. If the legislature had intended to impose limitation as has been held by the learned Judicial Member, it would have certainly did as has been alone in section 33-A.

3. Looking at the case from another angle we notice that in the scheme of the Act it is only the assessee who is given the right to file appeal before the Appellate Assistant Commissioner and the department is not given such a right Therefore, in any case if appeal is filed before the Appellate Assistant Commissioner any grievance of the department against the order of the Income tax Officer can never become subject-matter of appeal before the Appellate Assistant Commissioner and hence that Commissioner on omission of the Income-tax Officer on which the department feels aggrieved cannot be merged in the order of the Appellate Assistant Commissioner being not a subject matter of appeal. The only remedy with the department is to exercise the powers under sections 34, 35 and 34-A as the circumstances may require, To say that filing of appeal by the assessee before the Appellate Assistant Commissioner closes all the doors for the department, negative the specific provisions provided by law and obviously cannot be sustained: In the case of Commissioner of income-tax v. Amrat Lal (1) the Supreme Court of India took a similar view. In that case registration was granted by the Income-tax Officer. The assessee appealed against the regular as and during the pendency of that appeal the Commissioner of Income-tax exercising the powers under section 33-A directed to cancel the registration. The High Court held that Commissioner of Income-tax was not competent to pass such order but the Supreme Court reversed the order of the High Court and held as under :- "Even if appeal is decided and inconsequence the appellate order is the only order which is valid and enforceable under law. What metes in the appellate order is the Income-tax Officer's order under appeal and not his order of registration which was not and can never become subject-matter of appeal before appellate authority. The theory that the order of appellate authority apply to the order of registration passed by the Income-tax Officer in the present case." Coming to the present case the assessee had filed an appeal which was yet to be decided by the Appellate Assistant Commissioner. I could no come across any case-law where pendency of appeal would amount to merging of the order of the subordinate authority. Therefore, even otherwise the theory of merger is in applicable in the facts and circumstances of this case. It is pertinent to note that the Full Bench case of the Tribunal mentioned above also dealt with the case where the order had already been passed by the appellate authority that was not a case of mere pendency of appeal. In the case Wahid Waheeduadin v. Income-tax Officer (1967) 15 Taxation 252 a similar question arose before the Dacca High Court. In that case the assessee's regular assessment for the year 1954-55 was made by the Income-tax Officer against which appeal was filed before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner modified the order of the Income-tax Officer and granted some relief to the assessee. Both the assessee as well as the depart ment went in appeal to the Tribunal which were dismissed. After that notice under section 34 were issued by the Income-tax Officer. These notices were challenged before the High Court on the ground, that the assessment in respect of the assessment year 1954-55 having been subject of appeal, section 34 of the Income-tax Act had no application and that the Income-tax authorities were not legally entitled to reassess the petitioner for the year 1954-55. The High Court repelling this argument observed as follows :- "In the present case the impugned notices show that the petitioner assessee had ascaped assessment/under assessed/assessed at too low rate/ had been subject to excessive relief whereupon notices were issued under section 34 of the Act. There is noting under the Income-tax Act, to show that Income-tax Officer was debarred from acting under section 34 of the Act if an assessment of a particular year has been subject-matter of appeal." (Underlining' is mine).

4. Before closing I would like to discuss the arguments which have been adopted by the learned Judicial Member as well as in the Full Bench case of the Tribunal with approval that if the department feels that the income should be enhanced, the Income-tax Officer or the Inspecting Assistant Commissioner, should move the appellate authority for the enhancement of the income. There are two aspect of the case which have escaped considera tion of both the learned Judicial Member as well as the Full Bench of the Tribunal. Firstly the law has empowered the income-tax authorities to maker-assessment themselves. They cannot be forced to move the appellate authorities for the re-assessment instead of exercising their own powers. Secondly, this argument is available only then the appeals are still pending decision. The re-assessment can be made by the Inspecting Assistant Com missioner within four years. How, this argument will be available if the appellate authority has already passed orders before the illegality or improviety of the kind mentioned in section 3.t-A is detested. Obviously the appeals bad already been decided and there is no occasion for the income-tax authorities to move the appellate authorities for the enhancement of income. Therefore, in such a case the Income-tax authorities will be left-with no remedy in spite of the powers given by the law. Therefore this interpretation would lead to absurdity. The principle of interpretation is that when two seemingly inconsistent provisions are to be interpreted the effort of the Court should be that they should be so interpreted which can give effect to both the provision P L D 1969 Pesh. 47 (F B) may be referred. In another case P L D 19651 Lah. 503 it was held that various provisions on the same subject should be so read to avoid conflict and contradiction. If the interpretation, as has been adopted by the learned Judicial Member is to be accepted, that would nullify the provisions of sections 34, 34-A and

35. The theory of merger, therefore, cannot be stretched to the extent which would nullify some of the provisions of law specifically provided by the legislature. In the case Central Indian Insurance Co. v. I. T. O. (1963) 47 I T R 895 it was held that the point which was not considered or decided by the Tribunal nor was the subject-matter of appeal, the principle of merger does not apply and the Appellate Assistant Commissioner was competent to rectify his order to that extent.

5. In the light of the above discussion I agree with the view expressed by the learned Accountant Member and the appeal is dismissed. A. A. ZUBERI (ACCOUNTANT MEMBER).-I agree with the conclusion to dismiss the appeal. MUHAMMAD MAZHAR ALI (CHAIRMAN). -I concur in the order passed by the learned Accountant Member, Lahore and the learned Judicial Member II, Lahore that the appeal should be dismissed. I would; however, briefly like to add a few words of my own. In the legal terminology the wordy "proceeding" means the instituting or carrying on of an action of law. The word "proceeding" used in section 34-A is confined only to proceeding before the Income-tax Officer and cannot be extended so as to embrace within its fold the proceeding before any other tax authority or Tribunal under the Act. The language of section 34-A in this behalf seems to be perfectly plane. There could be different types of proceedings under the Income-tax Act, 1922, before the Income-tax Officer such as, the assessment proceedings, the proceedings for registration of firm, penalty with which we are concerned in this appeal is "assessment proceedings" which culminated or stood terminated in the passing of order of the assessment by the Income-tax Officer. The order of assessment remains an order passed by the Income-tax Officer in the proceedings under the Act until it is reduced, enhanced, annulled or set aside, as the case may, by the Appellate Assistant Commissioner under section 31 or revisional authority under section 33 of the Act. When an order is passed by any of the said authorities the order of assessment stands merged in the appellate order or revisional order, as the case may be with a view to male the pint further clear, I would not mind, to add, even at the cost of repeti tion, that it is upon the passing of an order by the appellate or revisional authority that the original order of assessment looses it identity and stands merged in the appellate order or revisional order. I would pause here for a moment to mention that I would not like to go into the question of extent of merger of the original order into the appellate order it is not pertinent or relevant for the decision on the .point involved in this appeal The Act envisages that every proceedings initiated by the Income-tax Officer would stand terminated with the passing of an order by him. It may be an order of assessment, an order of levy of penalty, an order of allowing or refusing of registration to the firm etc. The order passed by the Income-tax Officer may, in certain cases, be erroneous and prejudicial to the interest of assessee but beneficial to the interest of revenue. Whereas, there may be some cases where the orders of the Income-tax Officer may be erroneous and prejudicial to the interest of revenue; while in some other cases it may be erroneous but partially prejudicial to the interest of revenue and partly to that of the assessee. Where the order of the Income-tax Officer is erroneous and prejudicial to the interest of assessee, the law gives him, initially, a right to assail such order by filing an appeal before the Appellate Assistant Commissioner under section 30 of the Act, within the statutory period and seeks relief from him. There is also an alternate remedy available to him for seeking redress against such order by filing an application for revision before the Commissioner of Income-tax within 90 days of the date on which such order is communicated to him, or within the such further period as the Commissioner may consider fit to allow to seek redress. The first proviso to section 33-A it is pertinent to note as has also been pointed out by the learned Judicial Member in his order lays down that the Commissioner shall not revise any order under this subsection if (b) where an appeal against the order has been made to the Appellate Assistant Commissioner, the appeal is pending before the Appellate Assistant Commissioner. In the second above-noted instance, i.e. where the order of the Income-tax Officer is erroneous and prejudicial to the interest of revenue, the assessee would be obviously least bothered to file an ap1peal or revision against the order in so far as it is prejudicial to the interest of revenue inasmuch as the would have no cause to object to the amount of income so assessed under section 23 or the amount of loss computed under section 24 or the amount of tax determined under section 23 etc. Likewise in the third above-noted instance he would have no cause or justification for filing an appeal or revision before the respective: appellate or ' revisional authority inasmuch as he is not to be affected by such an order. The legis lature, therefore, with a view to protect the interest of revenue enacted section 34-A empowering the Inspecting Assistant Commissioner to call for and examine the record of any proceedings under Act and if he consider that any order passed therein by the Income-tax Officer is erroneous in so far it is prejudicial to the interest of revenue, he may pass such order therein as the circumstances of the case justify, including the order enhancing or modifying the assessment or cancelling the assessment and direct in a fresh assessment to be made. By virtue of subsection (2) of section 34-A it is provided that no order shall be trade under sub section (1) after the expert of four years from the date of the order sought to be revised. Therefore, unless an order passed by the Income-tax Office in any proceeding is both erroneous and prejudicial to the interest of revenue the Inspecting Assistant Commissioner would not acquire jurisdiction to interfere with his order irrespective of the fact whether the appeal is or is no filed by the assessee. But this right as already pointed out, would be available to him (Inspecting Assistant Commissioner) only for a period of four year from the date of the order sought to be revised. In order to, further elaborate the point; it may be added that as the mere filing of an appeal against the assessment order does not operate as an stay of the recovery of tax demand raised on the basis of assessment, so also, it does not come to the way of the Inspecting Assistant Commissioner, in the exercise of the revisional jurisdiction vested in him under section 34-A of the Act to pass any order as the may deem necessary, including the order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment to be made. But I would refrain from expressing an opinion as to what would involve decision on the question of merger which, as already stated, is not in the instant case, required to be expressed for decision on the point in question I am, however, of the considered view that mere pendency of an appeal before appellate Assistant Commissioner does not deprive the Inspecting Assistant Commissioner of the jurisdiction or right available to him under section 34-A of the Act. I would, therefore, with utmost respect to by learned brother Mian Abdul Khaliq, Judicial Member, disagree with the view express ed by him that on an appeal having been filed by the assessee before the Appellate Assistant Commissioner, the Inspecting Assistant Commissioner, ceased to have jurisdiction to revise the assessment order.

2. No doubt, the right of appeal against certain orders passed by the Income-tax Officer, including the order of assessment, is a statutory right of an assessee and it is in the normal course expected that the appellate authority would, unless debarred by some subsequent law or events, decide the appeal on merits. But it would be stretching the matter too far to think that the appeal would in all cases be decides on merits by the appellate authority without taking into consideration: the subsequent happenings since the passing of the impugned order before hire or to take cognizance of the legislative changes, if any, brought about after the passing of the impugned order and during the pendency of appeal. It is too well-established a proposition of law by authorities to be stated that the appellate Court or authority is not only expected but bound to give due consideration to all the relevant sub sequent happenings-and the changes in law while deciding the appeal. If any authority is required to be quoted, then a reference may be made to P L D 1975 Lah.

445. It seems appropriate to reproduce hereunder the relevant extracts from the above authority. At page 449, it reads as under :- "The proposition is wel6settled. It was hold by the Federal Court of India in A I R 1941 F C 5 that the hearing of appeal under the procedural Law of India is in the nature of re-hearing and, therefore, in moulding the relief to be granted in a case on appeal, the appellate Court is entitled to take into account even facts and events which have come into existence after the decree appealed against. Consequently the appellate Court is competent to take into account legislative changes since the decision in appeal was given and its powers are not confined only to see whether the lower Court's decision was correct according to the Law as it stood at the time when its decision was given. Reliance eras placed in this-case irate: aria on .M. v. R. R. (1I). In that case, the appeal against the judgment and decree of the Nigh Court was dismissed, on the strength of a provision contained to an enactment which was passed during the pendency of the appeal before ibis Majesty-in-Council. In P L D 1965 S C 1, it was held that on the filing of the appeal, the matter becomes re-opened and sub judice and has to be decided to accordance with law prevailing. This was a case where certain amendments have been made in the lax during the pendency of the second appeal. Again in P L D 1974 S C 184, it was held that pendency of the appeal destroys the finality of the judgment of the High Court if a curative statute has been passed during pendency of the appeal and that statute bas to be taken into consideration by the Supreme Court."

3. Therefore, in the context of the facts of this case whets the appeal filed by the assessee came up for hearing before the Appellate Assistant Commissioner, he took notice of the fact that the impugned assessment bad been cancelled by the Inspecting Assistant Commissioner and consequently he dismissed the appeal as having become infructuous or redundant. Tae right of the assessee to get an order on his appeal was thus in no way interfered with, but the decision on the appeal was given upon consideration of the events which happened subsequent to the passing of the impugned order. I, therefore, find it difficult also to agree with the view that the legislature enacted the provisions of section 34-A for the case where no appeal was referred against the order of the Income-tax Officer. The other legal aspects of the case have been elaborately and ably dealt with by my learned brother, Mr. Abrar Hussain Naqvi Judicial Member and I respectfully agree with him. He has aptly observed :- "To say that mere filing of appeal by the assessee before the Appellate Assistant Commissioner closes all the doors for the department, negatives the specific provision provided by Law and obviously cannot be sustained." In the result, the appeal stands dismissed. M. Z. M. Appeal dismissed.