INSPECTING ASSISTANT COMMISSIONER v. M.L. AGGARWAL
[Citation -1987-LL-0511-2]

Citation 1987-LL-0511-2
Appellant Name INSPECTING ASSISTANT COMMISSIONER
Respondent Name M.L. AGGARWAL
Court ITAT
Relevant Act Income-tax
Date of Order 11/05/1987
Assessment Year 1982-83
Judgment View Judgment
Keyword Tags search and seizure operation • opportunity of being heard • unexplained investment • doctrine of merger • married daughter
Bot Summary: One of the points urged on behalf of the assessee was that the order of the ITO had already been the subject-matter of appeal before the AAC and the same had been merged in the said order. In support thereof, reliance was placed on a number of authorities, for example, J.K. Synthetics Ltd., vs. Addl., CIT 105 ITR 344, was cited for the proposition that the entire subject-matter of assessment order was within the jurisdiction of the AAC hearing on appeal and the order had merged in the appellate order irrespective of the points urged by the parties or directed by the appellate authority. The order merges only to the extent to which it was considered and decided by the AAC but on matters which were not covered by the appellate order, the order of the ITO survives and the CIT has the jurisdiction to revise the same. The order of the ITO in question does not say nothing about the seizure of the jewellery as that any part thereof was liable to the considered for the purpose of making an addition on account of unexplained investment by the assessee during the relevant accounting year. If there are certain matters wholly extraneous to the language of the assessment order, the order cannot be deemed to merge in the appellate order, inasmuch as an appellate authority is not expected to make any fresh enquiries other than on the points on which there is a reference in the assessment order itself. An order under s. 132(5) is a summary order passed by way of interim measure and it is liable to be scrutinised afresh at the time of final assessment. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.


H.S. AHLUWALIA, J.M.: assessment was completed under s. 143(3) of it Act, 1961. CIT was, however, of opinion that during course of search and seizure operation carried out at Locker No. 25 in Oriental Bank of Commerce, which was hired by assessee, jewellery weighing 761 grams was seized. In respect of gold ornaments weighing 267 gms., it was contended by assessee that same belonged to his married daughter Veena Gupta. However, it was found that no satisfactory evidence regarding source of acquisition of said jewellery was filed before ITO either by assessee or Veena Gupta. Therefore, according to CIT, value of this jewellery was assessable in hands of assessee under s. 69A. order of ITO in not making addition was, therefore, erroneous insofar as it was prejudicial to interests of Revenue. He, therefore, initiated proceedings under s. 263 and asked assessee to show cause as to why order should not be revised. Ultimately, h e was of opinion that there was no documentary evidence regarding acquisition of jewellery. Further assessee had not filed any evidence regarding source from where jewellery has been purchased and cost thereof was liable to be assessed in his hands during relevant accounting year. assessee has come up in appeal before Tribunal. We have heard representatives of parties at length in this appeal. One of points urged on behalf of assessee was that order of ITO had already been subject-matter of appeal before AAC and same had been merged in said order. Therefore, CIT could not take any action under s. 263. In support thereof, reliance was placed on number of authorities, for example, J.K. Synthetics Ltd., vs. Addl., CIT (1976) 105 ITR 344 (All), was cited for proposition that entire subject-matter of assessment order was within jurisdiction of AAC hearing on appeal and order had merged in appellate order irrespective of points urged by parties or directed by appellate authority. Next, reference was made to cases of Addl., CIT vs. Vijalakshmi Lorry Service (1986) 157 ITR 327 (Kar) and CIT vs. Hindustan Aeronautics Ltd. (1986) 54 CTR (Kar) 247: (1986) 157 ITR 549 (Kar) for proposition that where order had been subjected to appeal, order in its entirety merged with order of appellate authority and revision proceedings could not be taken in respect of another part of same order even where subject-matter of appellate and revisional proceedings are not same but related to distinct matters. As against this, departmental representative relied upon Full Bench decision of Madhya Pradesh High Court in case of CIT vs. R.S. Banwarilal (1982) 28 CTR (MP) 59 (FB): (1983) 140 ITR 3 (MP) (FB). It has been held therein that doctrine of merger applies to income-tax proceedings but extent of its application depends on scope and subject-matter of appeal and decision rendered by appellate authority. order merges only to extent to which it was considered and decided by AAC but on matters which were not covered by appellate order, order of ITO survives and CIT has jurisdiction to revise same. decision of Allahabad High Court in case of J.K. Synthetics Ltd., (supra), which is basic authority on which stress was laid down by representative of assessee, was expressly dissented from in this case R.S. Banwarilal (supra). Apart from that, reliance was placed upon decision of Punjab and Haryana High Court in case of New Diwan Oil Mills vs. CIT (1980) 18 CTR (P&H) 246: (1981) 129 ITR 224 (P & H). After carefully considering all facts and circumstances of case, we are of opinion that there is little force in contention raised on behalf of assessee. reason for that is that question of making addition on ground of unexplained investment in jewellery could not have possibly been considered by AAC on appeal by assessee inasmuch as particulars relating to search and seizure of jewellery were not at all before him. order of ITO in question does not say nothing about seizure of jewellery as that any part thereof was liable to considered for purpose of making addition on account of unexplained investment by assessee during relevant accounting year. After all, theory of merger has to be taken to some logical extent. If there are certain matters wholly extraneous to language of assessment order, order cannot be deemed to merge in appellate order, inasmuch as appellate authority is not expected to make any fresh enquiries other than on points on which there is reference in assessment order itself. This is apart from fact that decision relied upon by departmental representative is Full Bench decision of Madhya Pradesh High Court, wherein nearly all relevant authorities on subject have been considered. In absence of any larger Bench decision to contrary and any decision of Punjab and Haryana High Court, Full Bench decision ought to be given preference over Division Bench decisions. only authority Of Punjab and Haryana High Court cited at Bar was New Diwan Oil Mill's case (supra); though it does not directly deal with issue, whatever can be gathered from it, it goes to support case of Revenue. other point argued was that enquiry in question had already been conducted by ITO in proceedings under s. 132(5). copy of order of ITO under s. 132(5) was produced before us in which it has been mentioned that one set of gold ornaments weighing about 267 gms., was stated to have belonged to assessee's married daughter Veena Gupta. In her statement, Veena Gupta deposed that no jewellery was purchased or acquired by her, because her husband was opposed to it as he had taken oath not to accept any jewellery in dowry. ITO in that case had rejected contention of assessee and had held that assessee had given said jewellery at time of marriage of Veena Gupta but same had been acquired by assessee out of his income from undisclosed sources. He had accordingly directed that value thereof amounting to Rs. 4,600 be assessed in hands of assessee during asst. yr. 1972-73. In this behalf, our attention was also drawn to affidavit filed by Sh. C.S. Gupta, husband of Veena Gupta, in which it has been deposed that at time of his marriage, his parents had given gold jewellery weighing about 22 tolas to bride and said jewellery was purchased from out of ancestral funds and same was kept in locker hired by assessee in Oriental Bank of Commerce. It was contended that all these facts had been considered by ITO while making earlier assessment. After carefully considering all facts and circumstances of case, we are afraid, we are not inclined to agree with assessee's contention raised in this behalf. order under s. 132(5) is summary order passed by way of interim measure and it is liable to be scrutinised afresh at time of final assessment. All that had been directly decided in order was that jewellery assessment. All that had been directly decided in order was that jewellery did not belong to Veena Gupta and she had not acquired it from her in-laws. According to that order, jewellery belonged to assessee. In what year it was liable to be assessed was probably not considered in that order, because that question would arise only when price of jewellery was sought to be added in hands of assessee. So far as assessment of Veena Gupta is concerned, any observations in that case would not be binding on assessee. At present, CIT has only observed that ITO should have considered assessability of jewellery under s. 69 which he had failed to do. He has, therefore, only set aside order of ITO and directed him to afford opportunity of being heard to assessee and to pass fresh order according to law after obtaining necessary evidence. This order is erroneous inasmuch as entire matter has been left open to ITO and, we are confident, that all points sought to be put forward on behalf of assessee will be considered afresh by him. It has been held in case of Gee Vee Enterprises vs. Addl., CIT 1975 CTR (Del) 61: (1975) 99 ITR (Del) that: "It is not necessary for Commissioner to make further enquiries before cancelling assessment order of ITO. Commissioner can regard order as erroneous on ground that in circumstances of case ITO should have made further inquiries before accepting statements made by assessee in his return. reason is obvious. position and function of ITO is very different from that of civil Court. statements made in pleading proved by minimum amount of evidence may be adopted by civil Court in absence of any rebuttal. civil Court is neutral. It simply gives decision on basis of pleading and evidence which comes before it. ITO is not only adjudicator but also investigator. He cannot remain passive in face of return which is apparently in order but calls for further inquiry. It is his duty to ascertain truth of facts stated in return when circumstances of case are such as to provoke inquiry. It is because it is incumbent on ITO to further investigate facts stated in return when circumstances would make such inquiry prudent that word 'erroneous' in s. 263 includes failure to make such inquiry. order becomes erroneous because such inquiry has not been made and not because there is anything wrong with order if all facts stated therein are assumed to be correct". Consequently, we are of opinion that at this stage there is no reason for us to interfere, in this appeal, which is hereby dismissed. *** INSPECTING ASSISTANT COMMISSIONER v. M.L. AGGARWAL
Report Error