1984 (5) TMI 82

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....ingly, initiated proceedings under section 263 of the Income-tax Act, 1961 ('the Act'). During the course of hearing before the Commissioner, the assessee's learned counsel, Shri A.K. Moitra, admitted that he was not able to reconcile the discrepancy as pointed out in the Commissioner's show-cause notice under section 263. The Commissioner was, accordingly, of the opinion that the ITO's order of assessment in respect of the assessment year 1976-77 was erroneous insofar as it was prejudicial to the interests of the revenue. The Commissioner held in his order under section 263 that 'the assessee has taken credit of Rs. 87,000 on account of opening stock in the subsequent assessment year. The value of the closing stock as shown in the trading ....

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.... setting aside the entire assessment which resulted in great miscarriage of justice, inasmuch as in the reassessment completed on the basis of the Commissioner's direction the ITO made a thumping assessment under section 144 of the Act on a total income of Rs. 3,02,850. The learned counsel, in this connection, filed before us a paper book containing 18 pages. He also submitted that on the question of merger itself, the assessee was entitled to the relief claimed in view of the Full Bench decision of the Madhya Pradesh High Court in the case of CIT v. Mandsaur Electric Supply Co. Ltd. [1983] 140 ITR 677. In regard to the action of the Commissioner in setting aside the whole of the assessment order, the learned counsel relied on a Delhi High ....

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....in CIT v. R.S. Banwarilal [1983] 140 ITR 3 and another Madhya Pradesh High Court decision in Alok Paper Industries v. CIT [1983] 139 ITR 1064. The departmental representative also referred to a Gujarat High Court decision in Karsandas Bhagwandas Patel v. G. V. Shah, ITO [1975] 98 ITR 255 and to a Supreme Court decision in State of Madras v. Madurai Mills Co. Ltd. [1967] 19 STC 144. He particularly drew our attention to their Lordships' observation wherein it has been observed as under: "... But the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior Tribunal and the other by a superior Tribunal, passed in an appeal or revision, there is a fusi....

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.... Madhya Pradesh High Court decision relied on by the departmental representative R.S. Banwarilal's case is a later decision than the one relied on by the assessee's learned counsel Mandsaur Electric Supply Co. Ltd.'s case. The High Court in that case held that 'under section 263 of the Income-tax Act, 1961, the Commissioner has no jurisdiction to set aside an order of assessment passed by the ITO when that order is the subject-matter in an appeal preferred by the assessee before the AAC'. In the latter Full Bench decision, which has been relied on by the departmental representative, their Lordships observed that "where an appeal has been preferred by the assessee to the AAC from an order of assessment made by the ITO in respect of only some....