GLAXO LABORATORIES (PAKISTAN) LIMITED VS INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX., 1992 PTD-KARACHI-HIGH-COURT-SINDH 82 (1991)

(a) Income Tax Ordinance (XXXI of 1979)

----S.66-A---Doctrine of merger, application of---Order of Income-tax Officer in regard to that aspect of the case which was not appealable could not be said to have merged with the order passed by the Appellate Authority---Before the doctrine of merger could be extended to cases arising out of the decisions given by the Income-tax Authorities, it must first be considered, whether the decision was reached after holding of a proper enquiry and after consideration of all the relevant aspects of the case otherwise any defect found in the decision can be rectified by invoking the relevant provisions of Income Tax Ordinance.

Commissioner of Income Tax, Bombay v. M/s. Amritlal Bhogilal & Co. AIR 1958 SC 868 and State of Madras v. Madurai Mills Co., Ltd. AIR 1967 SC 681 fol.

A. Khan v. The Government of Pakistan PLD 1964 SC 520; Khalid Malik and others v. Federation of Pakistan and others PLD 1991 Kar. 1; The Commissioner of Income Tax, East Zone, Karachi v. Atta Muhammad Faiz 1985 PTD 874; M/s. Gojer Brothers (P) Ltd. v. Shri Ratan Lal Singh AIR 174 SC 1380; Commissioner of Income Tax, Bhopal v. Mandsaur Electric Supply Co. Ltd. (1983) 140 ITR 677; Commissioner of Income Tax, M.P. v. Narpal Singh Malkhan Singh (1981) 128 ITR 77; Commissioner of Income Tax, Karnataka v. Hindustan Aeronautics Ltd. (1986) 157 ITR 315; Additional Commissioner of Income Tax v. Vijayalakshmi Lorry Service (1986) 157 ITR 327; Commissioner of Income Tax v. P. Muncherji and Company (1987) 167 ITR 671; Commissioner of Income Tax v. Smt. A.S. Narendrakumari Basaheba (1989) 176 ITR 515; J.K. Synthetics, v. Additional Commissioner of Income Tax (1976) 105 ITR 344; General Beopar Co. (Pvt.) Ltd. v. Commissioner of Income Tax (1987) 167 ITR 86; Jeewanlal 1929 Ltd. v. Additional Commissioner of Income Tax (1977) 108 TTR 407; Commissioner of Income Tax. Bombay v. M/s. Amritlal Bhogilal & Co. AIR 1958 SC 868; State of Madras v. Madurai Mills Co., Ltd. AIR 1967 SC 681; Commissioner of Income Tax, East Pakistan Dacca v. Wahiduzzaman PLD 1965 SC 171; Hindustan Aluminium Corporation Ltd. v. Commissioner of Income Tax (Central) (1990 PTD 90); V. Jaganmohan Rao v. Commissioner of Income Tax (1970) 75 ITR 373; FA. Khan reported in PLD 1964 SC 520 and Commissioner of Income Tax v. Atta Muhammad Faiz 1985 PTD 874 ref.

(b) Income-tax--

----Appeal---Doctrine of merger---Application---Order of Income-tax Officer in regard to that aspect of the case which was not appealable could not be said to have merged with the order passed by the Appellate Authority---Before the doctrine of merger could be extended to cases arising out of the decisions given by the Income-tax Authorities, it must first be considered, whether the decision was reached after holding of a proper enquiry and after consideration of all the relevant aspects of the case otherwise any defect found in the decision can be rectified by invoking the relevant provision of the Income Tax Ordinance.

Commissioner of Income Tax, Bombay v. M/s. Amritlal Bhogilal & Co. AIR 1958 SC 868 and State of Madras v. Madurai Mills Co., Ltd. AIR 1967 SC 681 fol.

Commissioner of Income Tax, East Pakistan Dacca v. Wahiduzzaman PLD 1965 SC 171 rel.

Fateh Ali W. Vellani for Petitioner.

Shaikh Haider for Respondents.

Date of hearing: 19th September, 1991.

JUDGMENT

MAMOON KAZI, J. --Glaxo Laboratories (Pakistan) Limited, the petitioners in this petition, have called in question the notice, dated 18-3-1991 issued by the Inspecting Assistant Commissioner of Income Tax, Range-01, Companies-II, Karachi, respondent No.l in this case, notifying the intention to cancel the assessment made by the Income-tax Officer, Companies Circle B-I, Karachi pertaining to the year 1987-88. The reasons for the notice are stated in the notice itself which show "that the assessment framed by the I.T.O. is erroneous in law in so far it is prejudicial to the interests of revenue as I.T.O. had failed to tax receipts of Rs.130 million which is the income of the assessee ?company and is chargeable to tax."

2. It may be noted that for the said assessment year the Income-tax Officer, Companies Circle B-I, Karachi assessed the income of the petitioners under section 62 of the Income Tax Ordinance, 1979, by assessment order dated 31-5-1988. The said assessment order was made after a detailed scrutiny under the departmental procedure known as total audit as described in Circular No.9 of 1987 issued by the Central Board of Revenue. From the said assessment order the petitioner filed an appeal to the Commissioner of Income Tax (Appeals), Zone-II, Karachi which was partly allowed by an order, dated 30-7-1988. The Income-tax Officer being dissatisfied with the said order appealed to the Income-tax Appellate Tribunal; however the appeal was subsequently withdrawn and dismissed by the learned Appellate Tribunal. The petitioners have also filed appeal against the said appellate order to the learned Appellate Tribunal which is still pending before the said Tribunal.

3. It is pertinent to note that after the dismissal of the appeal filed by the Income-tax Officer, the case of the petitioners was reopened under section 65 of the Income-tax Ordinance, 1979, as it was found that the Income Tax Officer had completely missed to tax the receipts of Rs.130 million shown as extraordinary receipts in the audit accounts of the petitioners which, according to them, had been received on sale of technical and marketing know how and sale of their rights in trade-mark and related goodwill. This receipt was brought to tax by Panel-04 Companies-II, Karachi as capital gains vide the assessment order, dated 24-6-1989. The petitioners preferred an appeal against the said additional assessment framed by the said Panel but the assessment was confirmed by the learned Commissioner, Income-tax (Appeals). However, on further appeal to the learned Tribunal, the Tribunal held that the said proceedings initiated under section 65 of the Income Tax Ordinance were illegal and without jurisdiction as reopening of the proceedings tantamounted to change of opinion. Consequently, the assessment made by the said Panel was cancelled and the original assessment order passed by the Income-tax Officer was restored.

4. Thereafter by notice, dated 18-3-1961, addressed to the petitioners, the said respondent No.l has notified his intention to cancel the original assessment made by the Income-tax Officer by invoking section 66-A of the Income Tax Ordinance for the said purpose.

5. The main contention of Mr. Fateh Ali Vellani, learned counsel for the petitioners before us has been that after filing of the appeal by the petitioners against the said order of the Income-tax Officer and after passing of the -Appellate order by the learned Assistant Commissioner (Appeals), there was no order of the said Income-tax Officer in the field which could be subjected to revision under section 66-A of the Income Tax Ordinance. The contention of the learned counsel is based on the well-established doctrine of merger noticed by the Supreme Court in the case of FA. Khan v. The Government of Pakistan PLD 1964 SC 520. The learned counsel has also invited us to take into consideration the following observations made in the case by Kaikaus, J. in this regard. It was observed:

"If the propositions stated above are to be accepted there appears to be good ground for holding that the passing of an order subject to appeal will not necessitate the filing of a suit for it is only a step in proceeding and not a final order. In any case once an appeal is filed the matter becomes sub-judice and when the appellate authority passes an order the order of the original authority disappears and merges in the order of the appellate authority so that there remains in existence only the appellate order and this order can be made the basis of a suit."

The question before the Supreme Court was in a case of dismissal of a Government servant, where period of limitation for a declaratory suit contesting order of dismissal is to be reckoned under Article 120 of the Limitation Act, whether such period is to be reckoned from the time when the first order of dismissal was passed or when the appellate order confirming the first order was passed. Support was sought by the Supreme Court from various decisions of the Privy Council before arriving at the said conclusions. The observations made by the Supreme Court in the case of FA. Khan were once again noted by this Court in the case of Khalid Malik and others v. Federation of Pakistan and others PLD 1991 Kar.1 which was decided by a Full Bench of five Judges. The doctrine of merger had also come up for discussion before a Division Bench of this Court in the case of the Commissioner of Income-tax, East Zone, Karachi v. Atta Muhammad Faiz 1985 PTD 874. In this case the respondents who were partners at the relevant time were assessed by an order passed by the Income Tax Officer for the years in question. They filed appeal before the Assistant Appellate Income-tax Commissioner which was allowed by an order, dated 23-9-1969. In pursuance of the said order, the Income-tax Officer revised the' assessment accordingly to give effect to the said order. However, notices were issued to the respondents under section 34-A of the Income Tax Act, 1922 which contained similar provisions as are now contained in section 66-A of the Income Tax Ordinance, 1979 for revision of the original assessment order passed by the Income-tax Officer. The respondent being aggrieved by such notice, filed appeals before the Income-tax Appellate Tribunal which accepted the appeals and set aside the order of the Assistant Commissioner. Reference was, however, made to this Court on the point of law viz., whether the Tribunal was justified in setting aside the order passed by the Assistant Commissioner of Income Tax under section 34-A of the repealed Income Tax Act. The Division Bench which ultimately disposed of the reference in favour of the respondents observed as follows:--

"In the present case since the original assessment order was modified by 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. Although Mr. Vellani has mainly relied upon the decision in the case of the Commissioner of Income-tax v. Atta Muhammad Faiz but the learned counsel nonetheless being conscious of the fact that the facts of the instant case are distinguishable has further invited our attention to the various judgments given on the point by the Indian Courts. In the present case, it is once again pertinent to note that although the receipt of Rs.130 million was disclosed to the I.T.O. in the tax returns filed by the petitioners but he failed to subject the same to income tax. The petitioners then filed appeal against the order of assessment passed by the I.T.O. but although the Commissioner of Income-tax (Appeals) disposed of the appeal but no reference was made by him to the receipt of the amount of Rs.130 million by the petitioners. It is, therefore, clear that notwithstanding the fact that the said amount of Rs.130 million had been shown in the returns filed by the petitioners before the Income-tax Officer, the question of its being subjected to tax was neither raised nor considered by the learned Commissioner of Income Tax in his appellate order. The question, therefore, arises, whether the said doctrine of merger can be extended to the instant case because issues which were raised and decided in the appellate order do not form the subject-matter of proceedings proposed to be initiated in pursuance of the said notice under section 66-A of the Income-tax Ordinance. Our attention was invited by Mr. Vellani to the case of M/s. Gojer Brothers (P) Ltd. v. Shri Ratan Lal Singh (AIR 1974 SC 1380) which according to him, fully supported his contention. In this case the question before the Supreme Court was as to the benefit which was available to a tenant under section 17-D of West Bengal Premises Tenancy Act. It may be pointed out that the benefit under the said section became available to a tenant if a decree for possession had been passed against him before the commencement of the West Bengal Premises Tenancy (Amendment) Act, 1968 which came into force with retrospective effect from 26-8-1967. The said section also conferred power on the Court to set aside decrees which were operative, i.e., capable of execution. The said doctrine of merger came for discussion and it was observed at paragraph No.10 of the judgment as follows:--

"10. The juristic justification of the doctrine of merger may be sought in the principle that there cannot be, at one and the same time, more than one operative order governing the same subject-matter. Therefore the judgment of an inferior Court, if subjected to an examination by the superior Court, ceases to have existence in the eye of law and is???? treated as being superseded by the judgment of the superior Court. In other words, the judgment of the inferior Court loses its identity by its merger with the judgment of the superior Court:'

Besides seeking support from the case of Gojer Brothers, Mr. Vellani has also referred to various other cases from the Indian jurisdiction where, no doubt, the doctrine of merger was applied and reference in this regard may be made to Commissioner of Income-tax, Bhopal v. Mandsaur Electric Supply Co. Ltd. (1983) 140 ITR 677, Commissioner of Income-tax, M.P. v. Narpal Singh Malkhan Singh (1981) 128 ITR 77; Commissioner of Income-tax, Karnataka v. Hindustan Aeronautics Ltd. (1986) 157 ITR 315; Additional Commsisioner of Income Tax v. Vijayalakshmi Lo Service (1986) 157 ITR 327; Commissioner of Income Tax v. P. Muncherji and Company (1987) 167 ITR 671; Commissioner of Income Tax v. Sint. A.S. Narendrakumari Basaheba (1989) 176 ITR 515; J.K. Synthetics v. Additional Commissioner of Income-tax (1976) 105 ITR 344; General Beopar Co. (Pvt.) Ltd. v. Commissioner of Income-tax (1987) 167 ITR 86 and JeewanIal 1929 Ltd. v. Additional Commissioner of Income-tax (1977) 108 ITR 407. Two more cases, both having been decided by the Supreme Court of India, have been cited by Mr. Vellani before us to which, according to him, the doctrine of merger was not extended but the facts of the said cases, according to him, are distinguishable. In the first case, which is reported as Commissioner of Income Tax, Bombay v. M/s. Amritlal Bhogilal & Co. (AIR 1958 SC 868) the Income Tax Officer had passed a composite order of assessment, one part of which related to registration of the firm which was the assessee in the case and the other part related to computation of the income of the firm. No appeal had been provided for in respect of the order passed in connection with the registration of the firm. However, an appeal was filed to the Appellate Assistant Commissioner in respect of the other aspect of the order. When the matter went before the Supreme Court it held that in such a case, it could not be said that the entire order of the Income-tax Officer had merged in the order of the Appellate Assistant Commissioner. The Supreme Court further observed that the Courts are not justified in imposition of an additional limitation on the exercise of the revisional powers by the Commissioner on hypothetical consideration of policy or the extraordinary nature of the power. It further observed at paragraph No.10 of the judgment:

"(10) There can be no doubt that, if an appeal is provided against an order passed by a tribunal, the decision of the appellate authority is the operative decision in law. If the appellate authority modifies or reverses the decision of the tribunal, it is obvious that it is the appellate decision that is effective and can be enforced. In law the position would be just the same even if the appellate decision merely confirms the decision of the tribunal. As a result of the confirmation or affirmance of the decision of the tribunal by the appellate authority the original decision merges in the appellate decision and it is the appellate decision alone which subsists and is operative and capable of enforcement, but the question is whether this principle can apply to the Income-tax Officer's order granting registration to the respondent:'

It thereafter observed:

"(12) It is therefore necessary to inquire whether the order of registration passed by the Income-tax Officer can be challenged by the department before the Appellate Assistant Commissioner where the assessee-firm has preferred an appeal against the order of assessment. The decision of this question would obviously depend upon the relevant provisions of the Act in respect of appeals to the Appellate Assistant Commissioner and the powers of the Appellate Assistant Commissioner. Section 30(I) gives the assessee the right to prefer appeals against the order specified in the said section. The assessee? firm can, for instance, object to the amount of income assessed under section 23 or section 27. The assessee firm can also object to the order passed by the Income-tax Officer refusing to register it under section 23(4) or section 26-A. It can likewise object to the cancellation by the Income-tax Officer of its registration under section 23(4). It is significant that, whereas an appeal is provided against orders passed by the Income-tax Officer under section 23(4) or section 26-A either refusing to register the firm or cancelling registration of the firm, no appeal can be filed by the department against the order granting registration. Indeed it is patent that the scheme of the Act in respect of appeals to the Appellate Assistant Commissioner is that it is only the assessee who is given a right to make an appeal and not the department. Thus there can be no doubt that the Income-Tax Officer's order granting registration to a firm cannot become the subject-matter of an appeal before the Appellate Assistant Commissioner."

In the next case reported as State of Madras v. Madurai Mills Co., Ltd. (AIR 1967 SC 681), the said company was assessed for the year 1950-51 when the Deputy Commercial Tax Officer determined net turnover of the dealer at Rs.15,44,09,109-3-11. In the appeal filed before the appellate authority it was contended on behalf of the assessee that a sum of Rs.1,44,294-14-4 was wrongly included by the assessing authority in the purchase value of cotton as that amount only represented the commission paid by it to another company. It was further contended on behalf of the assessee that a sum of Rs.81,546-0-1 which reprsented sale proceeds realized by sale of empty drums was not a realization in the course of the assessee's business. The appellate authority upheld the first contention in regard to the payment of commission but rejected the second contention with regard to the sale of empty drums. A revision was thereafter filed before the Deputy Commissioner of Commercial Taxes by the assessee and the only contention raised by the assessee was that the Tax Officer should not have assessed to tax the amounts collected by way of tax, amounting to Rs.6,57,971-4-9. However, by his order, dated the 21st August, 1954, the Deputy Commissioner of Commercial Taxes dismissed the revision holding that such contention could not be raised for the first time before him. It was further held that even otherwise the relevant law permitted the inclusion of tax in the taxable turnover of the assessee. Thereafter, the Board of Revenue issued a notice, dated the 4th August, 1958 to the assessee proposing to revise the assessment made by the Deputy Commercial Tax Officer. It was proposed to include in the net turnover a sum of Rs.7,74,62,706-1-6 as the amount had been wrongly excluded by the assessing authority. The assessee objected to the proposed revision on the ground that the proceeding was barred by limitation. It was further contended on its behalf that there was no wrong exclusion by the Deputy Commercial Tax Officer as alleged in the notice. The Board of Revenue, however, overruled both the objections and revised the taxable turnover by including the said amount of Rs.7,74,62,706-1-6 in the assessment. When the matter ultimately reached the Supreme Court the question to be determined by it was, whether the order of the Board of Revenue dated the 25th August, 1958, was illegal because there was a contravention of the rule of Limitation Act under section 12(3)(i) of the Madras General Sales Tax Act inasmuch as the order of the Board of Revenue was made after a period of four years from the date on which the order of the Deputy Commercial Tax Officer was communicated to the assessee. The contention made on behalf of the State of Madras was that the order passed by the Deputy Commercial Tax? Officer had merged in the appellate order passed by the Deputy Commissioner of Commercial Taxes and consequently the latter was the only operative order. This contention was, however, repelled by the Supreme Court in the following terms:

"(6) 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 fusion or merger of two orders irrespective of the subject-matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the appellate or revisional jurisdiction. For example in Amritlal Bhogilal and Co's case, 1958-34 ITR 130: (AIR 1958 SC 868) (supra) it was observed by this Court that the order of registration made by the Income-tax Officer did not merge in the appellate order of the Appellate Commissioner, because the order of registration was not the subject-matter of appeal before the appellate authority. It should be noticed that the order of assessment made by the income-tax Officer in that case was a Composite order viz., an order granting registration of the firm and making an assessment on the basis of the registration. The appeal was taken by the assessee to the Appellate Commissioner against the composite order of the Income-tax Officer. It was held by the High Court that the order of the Income-tax Officer granting registration to the respondent must be deemed to be merged in the appellate order and that the revisional power of the Commissioner of Income-tax cannot, therefore, be exercised in respect of it. The view taken by the High Court was overruled by this Court for the reason that the order of the Income-tax Officer granting registration cannot be deemed to have merged in the order of the Appellate Commissioner in an appeal taken against the composite order of assessment. Similarly, in State of Uttar Pradesh v. Muhammad Nooh, 1958 SCR 595: (AIR 1958 SC 86) it was held by this Court that the principle of merger cannot apply in the case of an order of dismissal of a public servant which was made by the departmental Tribunal on the 20th April, 1948 and against which the appeal was dismissed by the Appellate Authority on the 7th May, 1949, and the revisional application was rejected on the 22nd April, 1950. In the circumstances of the present case it cannot be said that there was a merger of the order of assessment made by the Deputy Commercial Tax Officer dated the 28th November, 1952 with the order of the Deputy Commissioner of Commercial Taxes dated the 26th August, 1954 because the question of exemption on the value of yarn purchased from outside the State of Madras was not the subject-matter of revision before the Deputy Commissioner of Commercial Taxes. The only point that was urged before the Deputy Commissioner was that the sum of Rs.6,57,971-4-9 collected by the respondent by way of tax should not be included in the taxable turnover. This was the only point raised before the Deputy Commissioner and was rejected by him in the revision proceedings. On the contrary, the question before the Board of Revenue was whether the Deputy Commercial Tax Officer, Madurai was right in excluding from the net taxable turnover of the respondent the sum of Rs.7,74,62,706-1-6 which was the value of cotton purchased by the respondent from outside the State of Madras. We are, therefore, of the opinion that the doctrine of merger cannot be invoked in the circumstances of the present case."

7. Mr. Shaikh Haider, learned counsel for the respondents has argued that, as was held in Madurai Mills' case by the Supreme Court of India, the doctrine of merger is not a doctrine which can be applied universally in all such cases where orders of the subordinate authority were subjected to an appeal or a revisional jurisdiction of a higher authority or a Tribunal. The learned counsel further pointed out that under the Income-tax ordinance, it is only the assessee who can prefer an appeal against an order passed by the Income-tax Officer. Such order cannot be subjected to appeal by the department. Consequently, if an error has been committed by the income-tax Officer the same can only be rectified by the Commissioner by invoking the provisions of section 66-A of the Ordinance. Reliance in this regard was placed by the learned counsel upon the case of Commissioner of Income-tax, East Pakistan Dacca v. Wahiduzzaman (PLD 1965 SC 171). In this case, the question which arose before our own Supreme Court was whether the provisions of res judicata could be applied in relation to decisions of income tax authorised.? It was observed by the Supreme Court as follows:-

"The principle of res judicata can be applied with strictness to cases before Courts or before Judicial Tribunals where there are before the Court or Tribunal two contesting parties each trying to substantiate its own case. It cannot however be applied with the same strictness to decisions of Income-tax authorities. The Income-tax Officer is not a Tribunal that decides a question between the Income-tax Commissioner and the assessee. The Income-tax Commissioner does not lead evidence before the Income-tax Officer and no appeal lies from the order of the Income-tax Officer at the instance of the Income-tax Commissioner, the right of appeal being vested in tile assessee only. The position of the; Income-tax Officer is that of an agent of the Income-tax Commissioner or an officer authorised by the Income-tax Commsisioner to determine the amount of tax payable. The assessee files a return as to his liability to pay tax and the Income ?tax Officer on behalf of the Income-tax Commissioner either accepts the return or rejects it wholly or partly. The acceptance of an explanation or plea or statement of accounts by the Income-tax Officer though in one sense a decision, is more like an acceptance by the Income-tax Officer of the plea taken up by the assessee, or an admission that the plea is correct. It is true that so far as the order of the Appellate Assistant Commissioner is concerned there is a right of appeal in the Income-tax Commissioner, but the foundation of the proceedings is the order of the Income-tax Officer. The provision in section 34 which permits the Income-tax Officer himself to re-open an assessment when some income has escaped assessment, etc. also supports the conclusion that the position of the Income-tax Officer is not that of Judicial Tribunal deciding a matter between two contending parties, but rather that of a person acing on behalf of the department who is charged with the duty of seeing that persons pay the amount of income-tax to which they are in fact liable. Under the circumstances the ends of justice will be served by confining the bar of res judicata in relation to decisions of Income-tax authorities to cases where the decision is not clearly open to some objection. It should be a decision which is reached after proper enquiry, which is such as could reasonably have been reached on the material before the authority, and which does not suffer from such a defect as would render it liable to be set aside under section 100, C.P.C. in second appeal if it was a decision of a Civil Court. Also a matter can always be re-opened on the ground that fresh evidence having a material bearing on the point decided is available."

Reliance has also been placed by Mr. Shaik Haider upon a judgment of the Calcutta High Court in the case of Hindustan Aluminium Corporation Ltd. v. Commissioner of Income Tax (Central) (1990 PTD 90). In this case under identical circumstances the doctrine of merger was invoked but the Calcutta High Court declined to apply this doctrine while relying upon the dictum laid down by the Supreme Court in Amritlal Bhogilal's case and Madurai Mfls's case. Reference in this case was made to a number of decisions earlier given by the superior Courts in India. In the said case the Income Tax Officer had allowed the claim of the petitioner, on account of revenue loss resulting from exchange rate difference of Rs.19,27,347 in the assessment year 1973-74. The Commissioner of Income Tax initiated proceedings under section 263 of the Indian Income Tax Act as he was of the opinion that the order passed by the Income Tax Officer allowing the claim of the assessee in respect of revenue loss on account of exchange fluctuation was erroneous and prejudicial to the interests of the revenue. On behalf of the petitioner it was urged that the entire proceedings were void inasmuch as the order of the Income-tax Officer had merged in the appellate orders passed in the case. There was an appeal to the Appellate Assistant Commissioner from the order of the Income-tax Officer which had been disposed of by him by an order dated May 17, 1976. There was a further appeal to the Tribunal which was decided on merits by an order dated April, 30, 1977. The contention raised on behalf of the petitioner, therefore, was that the power of the Commissioner to exercise jurisdiction under section 263 had ceased because the Commissioner could only revise an order passed by the Income-tax Officer and in a case where the Income-tax Officer's order had merged in an appellate order, the Commissioner of Income-tax would cease to have jurisdiction to pass any order of revision. The question of admissibility or otherwise of any loss relating to any exchange fluctuation was neither raised before nor considered by the Appellate Assistant Commissioner or the Tribunal. The contention raised on behalf of the petitioner was consequently repelled as the learend Judge of the Calcutta High Court who decided the case came to a conclusion that the doctrine of merger could not be attracted under the circusmtances of the case. It was further held by him that if the doctirne was rigorously applied then the Income Tax Officer would not be able to reopen a case under section 147 (of the Indian Income-tax Act) after the assessment order was affirmed or modified by the appellate authority. Consequently, if the assessment order is treated as having lost its identity in its entirety and completely merged in the order of the appellate authority, then the power of reopening of an assessment under section 147 would be confined only to such orders against which no appeals had been preferred. Referring to the following quotation from the case of V. Jaganmohan Rao v. Commissioner of Income Tax (1970) 75 ITR 373 he held that the scheme of the income-tax law cannot justify the conclusion that the 'entire order of the Income-tax Officer could merge in the order of the appellate or regional authority. In the said case the Supreme Court had observed that:

"Once valid proceedings are parted under section 34(1)(b), the Income-tax Officer had not only the jurisdiction but it was his duty to levy tax on the entire income tlik had escaped assessment during that year."

8. After considering the cases cited before us, we are of the view that the principle enunciated by the Supreme Court of India first in the case of Amritlal Bhogilal and again in State of MadrAs v. Madurai Mills Co. Ltd. is fully attracted to the facts of the present case. Mr. Fateh Ali Vellani, learned counsel for the petitioners has although very strongly urged before us that the entire order passed by the Income-tax Officer in the present case was appealable before the Assistant Commissioner of Income-tax who was empowered to consider all the issues arising from the Circumstances of the case including issues not touched upon by the Income-tax Officer in his order and consequently notwithstanding the fact that the Income-tax Officer or the learned Assistant Commissioner referred only to some of the aspects of the case leaving the matter in controversy in the present case completely untouched, the order of the Income-tax Officer would still be deemed to have merged into the appellate order passed by the learned Assistant Commissioner. The facts of the case of Amritlal Bhlogilal, according to the learned counsel, were clearly distinguishable as in that case a composite order had been passed by the Income-tax Officer in relation to two different aspects of the case and only one of them was appealable but no appeal lay in respect of the other. It was on such ground that the Supreme Court of India held that the order of the Income-tax Officer in relation to the aspect of the case which was not appealable could not be said to have; Merged with the order passed by the appellate authority. The facts of Madurai?s case are distinguishable because in the present case the question of the said amount of FcZs.130 million not being subjected to tax by the Income-tax Officer was easily noticeable by the Assistant Commissioner who decided the appeal filed by the petitioners against the order of the Income-tax Officer, because as is evidence from the order of the learned Income-tax Tribunal dated 18-8-iaW, the receipt of the said amount by the petitioners was disclosed to the I.T.O. in a very clear manner and at more than one places and the same was not concealed by, the petitioners in any manner. Consequently, according to the learned counsel for the petitioners, the facts of the present case are distinguishable. We would, however, like to emphasize once again that the broad Principle enunciated by the Supreme Court of India in the two cases is fully attracted to the f facts of the instant case. It may once again be noted that, as in tile instant case, the common ground urged in both the cases was that one of the aspects of the case which subsequently became the subject-matter if the proposed proceedings before the revisional authority was not considered at all by the - appellate authority and therefore the doctrine of merger could not be invoked in the said cases. The mere fact that in the instant case the said amount of Rs.130 million was disclosed clearly by the petitioners in their tax returns filed by them before the Income-tax Officer can hardly alter the position, because the basic question still would be, was the question which has now been raised in the impugned notice, raised before or considered by the appellate authority? Since there is no controversy on the fact that the said question was neither raised before nor considered by the appellate authority, we find that the argument raised by the counsel has no force. We would further like to point out that even in the case of Gojer Brothers (P) Ltd. v. Shri Ratan Lal Singh (AIR 1974 S C 13801) decided by the Supreme Court of India, upon which Mr. Vellani has very heavily relied, the view taken by it was not different from what was held by the Supreme Court of India in Amritlal Bhogilal's case or Madurai's case, as would be clear?from the following observations which appear at pages 1388 and 1389 of the report. The observations are as follows---

"These observations cannot justify the view that in the instant case there can be no merger of the decree passed by the trial Court in the decree of the High Court. The Court, in fact, relied on Amritlal Bhogilal's case (1959) SCR 713 = (A I R 1958 S C 868) while pointing out that if the subject-matter of the two proceedings is not identical, there can be no merger. Just as in Amritlal Bhogilal's case the question of registration of the assessee-firm was not before the appellate authority and, therefore, there could be no merger of the order of the Income-tax Officer in the appellate order, so in the case of Madurai Mills (1967) 1 SCR 732 = (A I R 1967 S C 681) there could be no merger of the assessment order in the revisional order as` the question regarding exclusion of the value of yarn purchased frond` outside the State was not the subject-matter of revision before the Deputy Commissioner of Commercial Taxes.

"32. In the instant case the subject-matter of the suit and the subject-matter of the appeal were identical. The entire decree of the trial Court was taken in appeal to the first appellate Court and then to the High Court.

33. We are accordingly of the opinion that the decree of the trial Court dated November 24, 1958 merged in the decree of the High Court dated January 8, 1969."

The above observations clearly indicate that even in this case, although the decision was given by the Supreme Court of India long after its two decisions in Amritlal Bhogilal & Co.'s case and Madurai Mills' case, but it made no departure from the view earlier held by it in the said cases. However, as is evident from the observations, the facts of Gojer Brothers' case were found by the Supreme Court to be distinguishable, therefore, the case was decided in favour of the appellant.

9. As pointed out earlier, besides the case of Gojer Brothers (P) Ltd., Mr. Vellani has also relied upon the case of FA. Khan reported in P L D 1964 S C 520 and Commissioner of Income-tax v. Atta Muhammad Faiz reported in 1985 P T D 874: However, in our view, the said cases cannot be called in aid to resolve the present controversy, since the doctrine of merger itself is not in question in the present case. The case reported in 1985 PTD 874, no doubt, arose out of the decisions given by the Income-tax Authorities and in this case also the proceedings proposed to be initiated in pursuance of a notice under section 34-A of the repealed Income-tax Act (which now corresponds with the provisions of section 66-A of the Income-tax Ordinance) had been called in question. However, in this case there was no controversy in regard to the subject-matter of the proceedings before the appellate authority and the revisional authority, as in the present case. The case is, therefore, clearly distinguishable. We are, therefore, of the view that Amritlal Bhogilal & Co.'s case and Madurai Mills' case provide a complete answer to the question to be determined in this case. Reference in this regard may also be made to the judgment of the Calcutta High Court, just referred to by us. We would further like to add that before the said doctrine of merger can be extended to cases arising out of the decisions given by the Income-tax authorities, it must first be considered, whether the decision was reached after holding of a proper enquiry and after consideration of all the relevant aspects of the case. Otherwise any defect found in the decision can be rectified by invoking the relevant provisions of the Income-tax Ordinance. We are fortified in this view by the observations made by our Supreme Court in the case of Commissioner of Income-tax v. Wahiduzzamah, referred to earlier in this judgment. No doubt, in this case the question was as to the application of the principle of res judicata, but the proceedings in the instant case being of the same nature, the legal principle enunciated by the Supreme Court would be equally applicable. We are, accordingly, unable to agree with Mr. Vellani's contention that the doctrine of merger applies to the present case.

10. Mr. Vellani lastly contended before us that by virtue of an amendment introduced by the Finance Act, 1991 a new subsection (1-A) has been inserted in section 66-A which empowers the Inspecting Assistant Commissioner to revise even such orders passed by the Income-tax Officer--

"(a)Where an appeal has been filed under sections 129, 134 and 137, or a reference has been made under section 136, against an order passed by the Income-tax Officer; and

(b)Where an appeal or reference referred to in clause (a) has been decided, in respect of any point or issue which was not the subject? matter of such appeal or reference."

According to Mr. Vellani, the introduction of this amendment lends support to his contention that exercise of power under section 66-A was otherwise open to exception before the said amendment. This argument, in our opinion is too far- According to Mr. Vellani, the introduction of this amendment lends support to his contention that exercise of power under section 66-A was otherwise open to exception before the said amendment. This argument, in our opinion is too far?fetched and it hardly advances the petitioner's case. No doubt, introduction of amendment in the law may lead to an inference that there was a lacuna which the legislature intended to remove but such inference cannot necessarily be drawn from the aforesaid amendment. A possibility cannot be ruled out that the legislature intended to be more explicit in this regard by introduction of the amendment. The last argument of Mr. Vellani, therefore, also fails to convince us.

11. In the result, we find no force in this petition and the same is dismissed. The parties are, however, left to bear their own costs in view of the questions raised in this petition.

M.BA./G-273/K?????????????????????????????????????????????????????????? Petition dismissed.