1985 PLP 874 (PTD)

AJMAL MIAN, J.‑By this common judgment, we intend to dispose of the above two Income‑tax References under section 66(1) of the Income‑tax Act, 1922 (hereinafter referred to as the Act) pertaining to the assessment year 1968‑69, which raise the following two questions :‑ "(1) Whether on the facts and in circumstances of the case the learned Tribunal was justified in holding that where an order of the A. A. C. modifies any part of the I. T. O's order the whole of the I. T. O.'s order is merged into appellate order and thus ousts the jurisdiction of the I. A. C. under section 34‑A completely ? (2) Whether on the facts and in the circumstances of the case the learned Tribunal was justified, in holding that the I. A. C. cannot modify an independent order of the L. T. O. In respect of an individual where the said order has been modified consequent upon an appellate order of the A. A. C. in respect of the firm in which the said individual is a partner ?

2. The brief facts leading to the filing of the reference are that the respondents who were partners at the relevant time in the firm, known as "Messrs Faiz and Sons", were assessed by an order, dated 30‑4‑1969 by the Income‑tax Officer for the above assessment year. They filed appeal before the Assistant Appellate Income‑tax Commissioner which was allowed by an order, dated 23‑9‑1969. In pursuance of the above appellate order, the Income‑tax Officer revised the assessment by his order, dated 16‑10‑1969 in order to give effect of the above appellate order. However, it seems that the Inspecting Assistant Commissioner, in purported exercise of power under section 34‑A of the Act, issued notices to the respondents/ assessees on 25‑5‑1972 for revising the above original assessment order dated 30‑9‑1969 and factually passed an order, dated 28‑4‑1973. The respondents being aggrieved by the above order, filed appeals namely, I. T. A, No. 2145/KB of 1972‑73 and I. T. A. No. 2146/KB of 1972‑73 which were disposed of by separate orders both, dated 29‑4‑1974 passed by the learned Income‑tax Appellate Tribunal setting aside the above orders of the inspecting Assistant. Commissioner, dated 28‑4‑1973. The applicant/Department, therefore, hagTilea the present two references. 3, In support of the above references Mr. Nasrullah Awan. learned counsel for the applicant has urged that in terms of section 34‑A of the Act, the Inspecting Assistant Commissioner is competent to examine the record of any proceedings under the Act and the order passed thereon. On the other hand Mr. Ali Athar, learned counsel for the respondents; assessees, has contended that an Inspecting Assistant Commissioner can press into service section 34‑A of the Act only for the purpose of examin ing an order passed by an Income‑tax Officer in any proceedings, but has no power to undo an appellate order. In order to appreciate the respective contentions of the learned counsel for the parties, it may be pertinent to reproduce herein-below sec tion 34‑A of the Act, which reads as follows :‑ "34‑A. Power of Inspecting Assistant Commissioner to revise Income‑tax Officer's orders (1) The Inspecting Assistant Commissioner may call for and examine the record of any proceeding under this 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 cancel ling the assessment and directing a fresh assessment to be made. (2) No order shall be made under subsection (1) after the expiry of four years from the date of the order ought to be revised." A plain reading of the above section indicates that an Inspecting Assistant Commissioner has been empowered to examine the record of any proceed ings under the Act and to, revise any order passed therein by the Income- tax Officer, if he considers it erroneous and prejudicial to the interest of the revenue. In our view, the words any proceeding' are to be read with in conjunction with the words 'Income‑tax Officer'. In order to invoke the above section, it is prerequisite that the order, which is to be revised, must be an order of an Income‑tax Officer.

5. In the present case, since the original assessment order was modified by the Assistant Appellate Income‑tax Commissioner by his order, dated 16‑10‑1969, the original order of the Assistant stood merged with the appellate order and hence the appellate order was holding the field and not the original assessment order, dated 30‑4‑1969.

6. Mr. Ali Athar, learned counsel for the respondents/assessees, has referred to the following cases in furtherance of his above submis sion :‑ (i) Commissioner of Income‑tax, Bombay North v. Tejaji Farasram Khara wala (1953) 23 I T R 412, in which a division bench of the Bombay High Court, while construing section 33‑A and section 33‑B held that upon the passing of an order by the appellate Tribunal, the order of the original Courts ceases to exist and merges in the order of the appellate Court. It was held that the Commissioner of Income‑tax was not competent to revise either the order of the appellate Income‑tax Commissioner or the appellate Tribunal. (ii) Commissioner of Income‑tax Bombay v. Amritlal. Bhogilal & Co. (1958) 34 I T R 130, in which the Indian Supreme Court was con sidering the question of the scope of section 33‑B of the Act and held that since an order passed under section 26‑A of the Act for the registration of a firm was not appealable, the Commissioner was competent to invoke the above section 33‑B, even while an appeal is pending from the order of assessment and even after the appeal is disposed of by the appellate Assistant Commissioner.

7. Mr. Ali Athar has also referred to the following cases, in which it has been held that an order of imposing penalty under section 46 (1) of the Act, passed by an Income‑tax Officer, does not hold the ground, if the original assessment order is set aside or modified in appeal :‑ (i) Bombay Violine Textile Mills Ltd., Karachi v. Commissioner of Income‑tax (1967) 15 Taxation 191 ; (ii) Commissioner of Income‑tax, Rawalpindi v. Begum Mumtaz Jamal PLD 1976 Lah. 761 ; (iii) Commissioner of Income‑tax, Karachi v. Messrs Azam Industries Ltd., Karachi 1980 P T D 26, and (iv) The Commissioner of Income‑tax, Karachi v. Sadruddin 1984 P T D

234. We are inclined to hold that the learned Income‑tax Tribunal was justified in holding that the Inspecting Assistant Commissioner was not competent to invoke section 34‑A of ‑the Act in the instant case, Of as the original assessment order, dated 30‑4‑1969 stood merged in the appellate order, dated 23‑9‑1969 and therefore, there was no order of an Income‑tax Officer in any proceeding in terms of the above section. Accordingly our answer to the above questions is in the affirmative. However, there will be no order as to costs. M. B. A. Answer in affirmative.