RAMNIKLAL TRIBHOWANDAS Vs. AMIN V R ITO FIRST

JUDGEMENT

(1.) THIS is a petition under Art. 226 of the Constitution of India. The petitioner is the assessee. The respondent is the First ITO, C -11 Ward, Bombay. We are here concerned with the asst. year 1952 - 53. By his order dt. 4th April, 1956, the respondent determined the petitioner's total income at Rs. 1,02,318. In determining that figure the respondent had deducted a sum of Rs. 22,185 which was estimated to be the share of the loss of the petitioner in a firm known as "The Bombay Import and Export Agency" in expectation that the firm would in its assessment be treated as a registered firm. By a further order of rectification under S. 35 of the IT Act, the petitioner's total income was determined at Rs. 1,00,830. Thereafter the assessment of the firm - -and Export Agency -was completed. The said firm, however, was not treated as a registered firm and it was assessed to the total loss of Rs. 1,57,802 and the petitioner's share of loss therein was determined at Rs. 13,150. Intimation, accordingly, was communicated by the ITO, A -V Ward, to the respondent regarding the share of the loss of the petitioner from the firm. On receiving the intimation, the respondent again acting under S. 35 of the Act rectified the petitioner's assessment by adding the entire amount of Rs. 22,185 to the total income of the petitioner. The petitioner's total income was thus increased from Rs. 1,00,830 to Rs. 1,23,015. The petitioner was thereafter called upon to pay income -tax and super -tax on the aforesaid total income of Rs. 123,015 and a notice of demand to pay the said taxes was issued on 11th Feb., 1957. Against this order of the respondent the petitioner moved the CIT under S. 33A to get the order of the respondent revised. One of the contentions raised by the petitioner before the respondent and the CIT was that on a correct interpretation of S. 14(2)(a) and s. 16(1)(a) of the IT Act, the petitioner's share of loss from the unregistered firm should be deducted from the total income for determining the rate at which tax was payable by the petitioner. This contention of the petitioner was not accepted by the CIT. Consequently, the revision application preferred by the petitioner was rejected by him on 28th Aug., 1959. The petitioner avers that he received intimation about this order on 4th Sept., 1959. On 21st Oct., 1959, the petitioner has preferred this application raising the same contentions, and according to Mr. Palkhivala, learned counsel for the petitioner, the error committed by the IT authorities in rejecting his contention is an error apparent on the face of the record, and, therefore, this petition be allowed. Before we proceed to deal with the contentions raised it would be necessary to deal with the preliminary objections raised by Mr. Joshi, learned counsel for the respondent. To appreciate the preliminary objections, some more facts may be stated. We have already stated that the petitioner feeling aggrieved by the order of the respondent had preferred a revision to the CIT and that application was rejected by the CIT. The petitioner, however, has not joined the commissioner of Income -tax as a respondent to this petition. Nor has he asked for issue of a writ in the nature of a certiorari or other direction for quashing the aforesaid order of the CIT made in revision. On the other hand, the relief sought is to get quashed the order of the respondent made on 11th Feb., 1957. Mr. Joshi raises three contentions by way of preliminary objections. In the first instance it is his contention that the order of the respondent made on 11th Feb., 1957, has merged in the order made by the CIT in revision on 28th Aug., 1959, and that is the operative order in the case. The petitioner not having chosen to challenge the order of the Commissioner, it is not open to him to say that the order of the respondent dt. 11th Feb., 1957, be quashed. In support of his contention Mr. Joshi has placed reliance on a decision of this Court in Special Civil Application No. 886 of 1959, decided on 1st Dec., 1959. Mr. Palkhivala, on the other hand, contends that the order made by the CIT in revision was not one varying or modifying the order of the ITO, but the order made is one of rejecting the application. The substance of the order of the Commissioner of ITO thus being one refusing to interfere with the order of the ITO that order still remains as an operative order and has not merged in the order of the CIT. This petition is, therefore, maintainable even though the CIT is not joined as a respondent to this petition and the relief asked is not to get his order of 28th Aug., 1959, quashed. Reliance is placed by Mr. Palkhivala on Lata Mangeshkar vs. Union of India (1959) 36 ITR 527.

(2.) IN that case an identical objection was raised and was overruled by a Division Bench of this Court. It was pointed out that there is a clear distinction between an order made in appeal and an order made in revision rejecting the application in revision. At page 532 it is observed :

(3.) THE ratio emerging from this decision is that where an order in appeal or an order in revision merely dismisses the appeal or rejects the revision application, the original order is not affected in any manner but remains effective. It necessarily follows that in such cases the original order does not merge in the appellate order or the order in revision. This decision of the Supreme Court was followed by a Special Bench of the Calcutta High Court in East India Commercial Ltd. vs. Collector of Customs (1960) AIR (Cal) 1. The facts in that case were that the Collector of Customs, whose office was situated within the jurisdiction of the Calcutta High Court, had made an order under the Sea Customs Act against the petitioner levying the duty and penalty. This order was confirmed in appeal by the appellate authority, namely, the Central Board of Revenue, whose office is located outside the jurisdiction of the Calcutta High Court. Thereafter the petitioner moved the Calcutta High Court by way of a writ petition under Art. 226 of the Constitution to get quashed the order of the Collector of Customs and an order preventing the customs authorities from taking any action against the petitioner under law. An objection was raised to the tenability of the petition on the ground that the order of the Collector had merged in the order of the appellant authority; that the order of the appellate authority was the effective order and the appellate authority being located outside the jurisdiction of the Calcutta High Court, that Court could not issue a writ against the appellate authority and, therefore, no relief could be granted to the petitioner. This contention was not accepted by the learned judges deciding that case. After referring to the decision of the Supreme Court and the observations, which we have already reproduced above, they observed that the pronouncement of The Supreme Court furnished a conclusive answer to the question they had to decide. Their answer was that after the appeal is dismissed and the original order is confirmed, the formal existence of the order made by the appellate authority is no reason why the Court should not exercise the jurisdiction under Art. 226 of the Constitution in respect of the original order. Mr. Joshi, however, drew our attention to the following observations of their Lordships of the Supreme Court in CIT vs. Amritlal Bhogilal & Co. (1958) 34 ITR 130 :