1992 P T D 932

[Supreme Court of Pakistan]

Present: Ajmal Mian, Sajjad Ali Shah and Saleem Akhtar, JJ

GLAXO LABORATORIES LIMITED

versus

INSPECTING ASSISTANT COMMISSIONER OF INCOME-TAX and others

Civil Appeal No.236-K of 1991, decided on 26/04/1992.

(On appeal from the judgment and order of the High Court of Sindh dated 24-10-1991 passed in C.P. No.D-384 of 1991).

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A---Constitution of Pakistan (1973), Art.185(3)---Leave to appeal was granted to consider the questions as to whether upon the appellate order being made on the appeal from the original assessment order the IA.C. had jurisdiction under S.66-A to revise the original assessment order and whether upon the appellate order being made the original assessment order merged with the appellate order according to the doctrine of merger with the consequence that there was then no -longer available an order of the Income -tax Officer capable of revision under S.66-A'of the Ordinance.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A(1) & (1-A)---Inspecting Assistant Commissioner is authorised under S.66-A(1.) to issue a notice for reopening the case if he considers that any order passed by the Income-tax Officer is erroneous causing prejudice to the interest of Revenue---Mere --erroneous order of the Income-tax Officer without causing prejudice to the interest of the Revenue will not authorised Inspecting Assistant Commissioner to exercise power under S.66-A and these ingredients must be satisfied before invoking S.66-A.

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A (before Amendment of 1991)---Inspecting Assistant Commissioner was authorised under S.66-A to examine and initiate action if the order passed by the I.T.O. was erroneous in so far as it was prejudicial to the Revenue-- Inspecting Assistant Commissioner would not have the jurisdiction or power to initiate same action in respect of the orders passed by the Appellate Authority or the Tribunal.

(d) Income-tax

----Appeal---Original order merges in the appellate order.

Corpus Juris Secundum, Vol. 57 at p.1067 and Commissioner of Income Tax v. Farrokh Chemical Industries 1992 S C M R 523 ref.

(e) Words and phrases---

----"Merge" and "merger"---Meaning.

Corpus Juris Secundum, Volume 57, at page 1067 ref.

(f) Income-tax---

----Firm, registration of---While making assessment in cases of registration of partnership the Income-tax Officer passes two separate orders---First order is the assessment order and the second order which is completely separate is for registration of the firm, therefore, there exist two separate orders in the same proceedings and if the assessee files an appeal against the assessment order the second order remains unchallenged and does not become subject-matter of the appellate order and in such a case question of merger does not arise.

(g) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A---Order of assessment was one which was challenged in appeal by the assessee which was partly allowed against which the department and the assessee both had filed appeal---Department withdrew its appeal which was dismissed and then came the proceedings under S.65 in which same question was considered---Order of Income-tax Officer thus merged in the order of Tribunal.

Amritlal & Bhogilal & Company AIR 1958 SC 868 distinguished.

(h) Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 65 (before amendment of 1991)---Fact that no appeal had been provided to the department against the assessment order would not mean that power under S.66-A (as it stood before amendment in 1991) could be exercised even in respect of- orders passed by the appellate authority---In the absence of right of appeal, S.66-A provided an opportunity to the Inspecting Assistant Commissioner to reopen the case if the ITO had committed error prejudicial to the revenue provided his order had not merged in the appellate/revisional order.

(i) Income Tax Ordinance (XXXI of 1979)---

----S. 129---Appeal---Appeal provided under S.129 is not of a limited nature-- Nature and scope of the provision of law as provided for challenging an order in appeal or revision determines the effect and scope of such order---Where such an order has been passed in exercise of such jurisdiction it becomes final and operative in respect of the order against which appeal or revision has been filed---If two separate orders in respect of two separate subjects/proceedings have been passed in a consolidated order which are severable and one of them is appealable while the other is not, then the appeal filed in such a case will only affect that part of the order which is appealable.

Amritlal & Bhogilal & Company AIR 1958 SC 868 distinguished.

(j) Income Tax Ordinance (XXXI of 1979)---

----S. 129---Appeal---Merger---Where there is only one order against which appeal has been provided, filed and decided then there is no scope for argument that as some objections or pleas which did exist but have not been taken, pressed or considered, that part of the order which is covered by such pleas does not merge in the appellate order.

(k) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A (before amendment of 1991)---Order of the Income Tax Officer had merged into the order of the Tribunal---Inspecting Assistant Commissioner of Income Tax. had no jurisdiction to initiate action under S.66-A for reopening the matter.

Fateh Vellani, Advocate Supreme Court and Mrs. Majida Rizvi, Advocate-on-Record for Appellant.

Shaikh Haider, Advocate Supreme Court and S.M. Abbas, Advocate on-Record for Respondents.

Date of hearing: 31st March, 1992.

JUDGMENT

SALEEM AKHTAR, J.---The appellant with the leave of this Court has impugned the judgment of the Division Bench of the High Court of Sindh dismissing the Constitution petition filed by the appellant challenging the validity of notice under section 66-A of the Income Tax Ordinance (hereinafter referred to as `the Ordinance') dated 18-3-1991 issued by the Inspecting Assistant Commissioner of Income Tax, Range-I, of Company Circle-5, Karachi.

2. The: assessment of the appellant for the assessment year 1987-88 was completed on 31st May, 1988, under section 62 of the Ordinance. The appellant filed an appeal before the Commissioner of Income Tax (Appeals) who by order, dated 30th July, 1988, partly allowed it. The appellant. and the department both filed separate appeals against the order of the Commissioner before the Income Tax Appellate Tribunal. The department withdrew its appeal which was consequently dismissed but the appeal filed by the appellant is still pending. After the dismissal of the appeal filed by the, department Respondent No.1 served a notice under section 65 which reads as follows:--

"To

The Principal Officer,

M/s. Glaxo Laboratories Ltd.,

Karachi

Sub: Show cause notice to reopen the case under section 65 of the Income Tax Ordinance. 1979. for assessment year 1987-88.

Please refer to the above. I am in possession of definite information that during the assessment year 1987-88 you received an amount of Rs. 130 million in consideration for having agreed to cease manufacturing infant milk food, weaning food and health food in Pakistan and giving up these registered user and other rights in certain trade marks. The receipt was not offered to tax. This item is liable to tax as receipt earned in the course of business.

In view of the position explained above I have reason to believe that your income for assessment year 1987-88 has been under assessed. You are, accordingly, requested to explain as to why action under section 65 of the Income Tax Ordinance, 1979, for above-mentioned assessment year should not be taken in your case.

The date of compliance is hereby fixed on 30-4-1989.

(Riaz Nasir Kazmi)

Inspecting Assistant Commissioner/

Chairman Panel-04, Companies II, Karachi'

3. The appellant submitted his explanation that Rs.130 million was received on the sale of technical and marketing know how and sale of their rights in the trade mark and related goodwill. It denied that it was an income liable to tax. However, by an assessment order dated 24-6-1989 this receipt was brought to tax as capital gains. The appellant filed an appeal but it was dismissed. A further appeal before the Tribunal was filed which was allowed and it was held that proceedings initiated under section 65 of the Ordinance were illegal and without jurisdiction. Consequently the assessment made by reopening the case under section 65 was cancelled and the original assessment order passed by the ITO was restored. Thereafter, Respondent No.1 served or the appellant a notice under section 66-A of the Income Tax Ordinance dated 18-3-1991 which reads as follows:--

"To

M/s. Glaxo Laboratories (Pak) Ltd., Karachi.

Sub: Notice u/s 66-A--Assessment Year 1987-88.

Kindly refer to your assessment for the year 1987-88:--

Your assessment for the year 1987-88 (year ended 30-6-1987) was finalized under section 62 (total audit of the Income Tax Ordinance, 79 on 31-5-1988 on total income oaf Rs. 6,25,41;032 by the` ITO, Co. Circle B-1, Central Zone, Karachi.

This order was reopened under section 65 of the Income Tax Ordinance, 1979, on 23-4-1989 as ITO had completely missed to- tax, the receipt of Rs. 130 million, shown as extraordinary receipt in the audited accounts, on sale of technical know how, marketing know how, Glaxo Rights in Trade Mark and related goodwill. This receipt was brought to tax by Panel-04 Companies II, Karachi, as capital gains by the assessment order dated 24-6-1989.

You preferred appeal against the said additional assessment framed by Panel. The assessment was confirmed by CTT(A). On further appeal to Tribunal, the learned Tribunal held that proceedings initiated under section 65 of the Income Tax Ordinance, 1979, were illegal and without proper jurisdiction as reopened proceedings tantamount to change of opinion. As such the Tribunal cancelled the assessment of the Panel and restored the assessment order passed by the I.T.O. The Tribunal did not go into the merits of the case as far as the nature of receipt of Rs. 130 million was concerned, whether it was revenue income or capital gains.

The assessment framed by the ITO is erroneous in law in so far it is prejudicial to the interests of revenue as it had failed to tax receipts of Rs. 130 million which is the income of the assessee company and is chargeable to tax.

I, therefore, intend to cancel the assessment under section 66-A of the Income Tax Ordinance, 1979, and get an assessment passed which the circumstances of the case justify. Please let me know what explanation you have to offer against the proposed action. Your reply is awaited by 23-3-1991.

(Shahid Jamal)

Inpecting Assistant Commissioner of Income Tax,

Range-1, Companies-11, Karachi"

3. The appellant challenged the legality of the notice by filing a Constitution petition which was dismissed by the impugned judgment. The learned Judges in the impugned judgment observed that `although the receipt of Rs.130 million was disclosed to the ITO in the tax returns filed by the appellants but he failed to subject the same to income tax. The question of this being subjected to tax was neither raised nor considered by the Commissioner of Income Tax in his appellate order.' In these circumstances after discussing a large-number of the judgments cited at the Bar and relying on Amritlal & Bhogilal & Company, AIR 1958 SC 808 and Madhurai Mills Limited, AIR 1967 SC 681, it was held that the order of Income Tax Officer had not merged with the order of the Commissioner or the Tribunal and further observed as follows:--

"We would further like to add that before the said doctrine of merger can be extended to cases arising out of the decision given by the Income-tax Authorities, it must first be considered, whether the decision was reached after holding of a proper inquiry 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 by our Supreme Court in the case of Commissioner of Income Tax v. Wahiduzzaman, 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."

Leave to appeal was granted to consider the following questions:--

(1) Whether upon the appellate order being made on the appeal from the original assessment order the respondents have jurisdiction under section 66-A of the Income Tax Ordinance, 1979 to revise the original assessment order. .

(2) Whether upon the appellate order being made the original assessment order merged with the appellate order according to the doctrine of merger with the consequence that there is then no longer available an order of the Income Tax Officer capable of revision under section 66 A of the Income Tax Ordinance, 1979.

4. The main contention of the learned counsel for the appellant is that after the orders passed by the Commissioner of Income Tax (Appeals) and the Tribunal the order of assessment passed by the Income Tax Officer was merged in those orders and, therefore, section 66-A could not be invoked. Section fib-A reads as follows:--

"66-A. Powers of Inspecting Assistant Commissioner to revise lncomc' Tax Officer's order.

(1) The Inspecting Assistant Commissioner may call for and examine the record of any proceedings under this Ordinance, and if he considers that any order passed therein by the ITO is erroneous in so far as it is prejudicial to the interest of revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made, such enquiry as he deems necessary pass such order thereon as the circumstances of the case justify. including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment to be made.

(I-A) The provisions of subsection (1) shall in like manner, apply,--'

(a) Where an appeal has been tiled under sections 129, 134 and 137 or a reference has been made under section 136, against an order passed by the ITO; 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.

(2) No order under subsection (1) shall be made after the expiry of four years from the date of the order sought to be revised."

It may be clarified that subsection (1-A) was inserted by Finance Act, 1991, after the impugned notice under section 66-A had been issued by the IAC. Subsection (1) of section 66-A authorises Inspecting Assistant Commissioner to issue a notice for reopening the case if he considers that any order passed by the Income Tax Officer is erroneous causing prejudice to the interest of the revenue. A mere erroneous order of the Income Tax Officer without causing any prejudice to the interest of the revenue will not authorise Inspecting Assistant Commissioner to exercise power under section 66-A. These twoingredients must be satisfied before invoking it.

5. The present controversy revolves round the question whether Inspecting Assistant Commissioner (IAC) can invoke section 66-A in cases where before taking such action the appellate/revisional authority has passed order confirming or setting aside the assessment made by the ITO. Mr. Fateh Vellani, the learned ASC for the appellant, has contended that after the appellate authority has passed the order, the order of the Income Tax Officer merges into the appellate order and, therefore, the IAC could not have initiated action under Section 66-A. According to Mr. Shaikh Haider, the learned counsel for the respondent as none of the authorities have considered the question of Rs.130 million for the purposes of taxation as the same was not disclosed in the return the question of merger does not arise. The first question which attracts our attention is whether the appellate authority at any stage had applied its mind to the question of taxability of Rs.130 million. The appellant's contention is that it was not an ordinary case in which assessment order was passed under the self-assessment scheme in a routine manner but it was a case which was chosen for total audit. This term denotes that the return filed by the appellant was taken out for consideration and assessment order was to be passed after due consideration and deliberation. Mr. Shaikh Haider has emphatically contended that in the return the columns relating to income not subjected td tax or exemption claimed by the assessee' have been left blank. He further contended that no other document was produced in which any reference was made to Rs.130 million. This factual aspect was vehemently denied by Mr. Vellani. According to him the entire balance sheet and profit and loss account was submitted alongwith the income tax return and it mentioned the sum of Rs.130 million which was considered by the Income Tax Officer. The allegation that the profit and loss account, balance-sheet and report of the directors were not produced at any stage does not seem to be correct. If the documents would not have been filed in the normal course, the assessment could not have been completed and the appellant would have been required to produce them. Mr. Shaikh Haider has filed a supplementary paper book containing the return and orders. Strangely enough in this paper book the disputed documents namely profit and loss account and the directors' report are available and the learned counsel has not been able to explain how and from where the respondents obtained them. From the order of the Tribunal it seems that these documents were available on record while the case was heard and judgment was pronounced. While cancelling the assessment framed in pursuance of notice under section 65 the Tribunal pointed out that at four places the amount of Rs.130 million was mentioned. The Tribunal had taken pains to quote all those entries and statement and observed as follows:--

"The above quotations leave no doubt in our mind that the extra ordinary receipt was not only disclosed in the profit and loss account it was rather displayed very prominently in the Reports of Directors and Managing Directors."

The Tribunal then noticed that it was a case of total audit because the return was not accepted under self-assessment scheme and the name of the appellant was picked up for detailed scrutiny through random ballot for total audit as contained in Circular No.9 of 1987 issued by the Central Board of Revenue, dated 26th October, 1987, which provides a procedure for total audit. Finally the Tribunal observed as follows:--

"We have mentioned above that receipt of Rs.13,00,00,000 was disclosed to the ITO in very, clear manner and at more than one places. In other words it has not hidden under any cover or jumbled up with other pieces of information. As a matter of fact this receipt has been highlighted in the review of annual operations made by the Managing Directors which was printed on pages 4 and 5 of the accounts and also forms a significant part of the one-page Report of the Directors which is printed on page 6. Study and analysis of Profit and Loss Account and balance-sheet forms the foundation stone of any assessment proceedings. Without examining these financial statements income from business cannot be determined. In the case under our consideration the ITO who completed assessment under section 62, computed taxable income with the help of Accounting Profit disclosed by the Profit & Loss Account, which lists this receipt of Rs.13 crores. It may also be noticed that the cases selected for total audit are subjected to scrutiny, which is more in depth as compared with other assessments. As a matter of fact the words `Total Audit' which are used for such assessment, also indicate that such assessments are to be made with special care and attention. When we keep both these sets of facts in view (namely the clear manner of presenting the information to the ITO and special nature of assessment proceedings) we cannot agree with Mr. Shahid Jamal that this item was not considered0 by the ITO at the time of making assessment under section 62. We have taken into consideration arguments of Mr. Shahid Jamal. If the issue has not been discussed in the original order it does not necessarily prove that was not considered becuse in this case there are innumerable items of receipt and expenses, which have been accepted by the ITO but have not been discussed in the assessment order. Similarly, if there was no inquiry, in writing, on the subject this does not necessarily prove that the nature of this receipt was not examined by the ITO. We are unable to agree with the contention of Mr. Shahid Jamal for the following reasons:-

(a) The information about extraordinary receipt of Rs.13 crores was displayed very prominently in the Accounts submitted before the ITO.

(b) The amount of receipt is so big that it could not possibly escape attention of the 1T0.

(c) The assessment was completed under the `total audit' manner which, as the name suggests, is more intensive than a normal assessment:'

These observations of the Tribunal leave no doubt that the figure of Rs.130 million was disclosed and that the case was scrutinised under total audit, the department did not challenge this judgment of the Tribunal in the High Court and has, thus, accepted it. In this background the respondent initiated action under section 66-A by issuing the notice reproduced above. It was contended that the Tribunal did not go into the merits of the case or the nature of receipt of Rs.130 million whether it was revenue income or capital gains. It was also contended that the assessment framed by the ITO was erroneous in law in so far it is prejudicial to the interest of revenue and the ITO had failed to tax receipt of Rs.130 million which is the income of the assessee company chargeable to tax. It is true that the Tribunal did not enter into the merits as to whether Rs.130 million is taxable income, it, however, considered in detail that this amount was disclosed and must have been considered by the Income Tax Officer in the normal course of assessment.

6. Section 66-A authorises IAC to examine and initiate action if the order passed by the ITO is erroneous in so far as it is prejudicial to the revenue. The IAC did not have the jurisdiction or power to initiate same action in respect of the orders passed by the appellate authorities or the Tribunal. However, as observed above such power has now been vested in JAC from the year 1991. The controversy is whether after the appellate authority has passed the order does the order of the 1T0 merge in it and IAC cannot reopen it under section 66-A. In Corpus Juris Secundum, Volume 57, at page 1067 words `Merge' and `Merger' have been defined as follows:--

"The verb `to merge' has been defined as meaning to sink or disappear in something else, to be lost to view or absorbed into something else, to become absorbed or extinguished, to be combined or be swallowed up.

`Merger' is defined generally as the absorption of a thing of lesser importance by a greater, whereby the lesser ceases to exist, but the greater is not increased, an absorption or swallowing up so as to invlove a loss of identity and individuality."

It is well-settled principle that on appeal the original order merges in the appellate order. The Commissioner of Income-tax v. Farrokh Chemical Industries, 1992 SCMR 523 it was observed that `the order of the ITO upon appeal merged in the order of the Income Tax Appellate Tribunal' Here the assessment order made by ITO was reopened under section 65 and a revised assessment was framed which has been set aside by the Tribunal. Thus, the order of the ITO has merged in the order of the Tribunal which holds the field.

7. The respondent has referred to Amritlal Bhogilal & Company, (1958) 34 ITR 130-(AIR 1958 SC 868) which has been relied upon by the learned Judges of the Division Bench. In this judgment it was observed that the order of Registration made by the ITO did not merge in the appellate order of the Appellate Commissioner because the registration was not the subject-matter of appeal before the appellate authority. In this case the Income Tax Officer had passed the order of assessment and also order for registration of the firm. The assessee appealed against the order of the assessment passed by the ITO. As the Department did not have the right to file an appeal against the order granting registration of the firm no appeal was filed and this order was not subject-matter of the consideration by the appellate Court in the appeal filed by the assessee. In appeal filed by the assessee relief, was granted to it by the Appellate Assistant Commissioner. Subsequently the Commissioner of Income-tax noted that as one of the partners of the firm was minor registration under section 26-A of the Income Tax Act should not have been granted. He initiated action under section 33-B(1) of the Act and cancelled the order of granting registration. He directed the ITO to make fresh assessment against the assessee as an unregistered firm. In pursuance with this revisional order the ITO passed fresh orders. In appeal the assessee challenged that the Commissioner was not competent to set aside the assessment order, which had been confirmed or modified by the Appellate Assistant Commissioner. The Supreme Court of India observed that the `original decision merges in the appellate decision and it is the appellate decision which subsists and is operative and capable of enforcement'. It proceeded to consider the nature of order passed under section 26-A of the Act and observed:--

"It is important to bear in mind that the order granting registration to an assessee firm is an independent and separate order and it merely affects or governs the procedure to be adopted in collecting or recovering the tax found due."

Further it was held:--

"It is true, that in dealing with the assessee's appeal against the order of assessment, the Appellate Assistant Commissioner may modify the assessment, reverse it or send it back for further enquiry; but any order that the Appellate Assistant Commissioner may make in respect of any of the matters brought before him in appeal will not and cannot affect the order of registration made by the Income Tax Officer. If that be the true position, the order of registration passed by the Income Tax Officer stands outside the jurisdiction of the Appellate Assistant Commissioner and does not strictly form part of the proceedings before the appellate authority. Even after the appeal is decided and in consequence the appellate order is the only order which is valid and enforceable in law, what merges in the appellate order, is the ITO's order under appeal and not his order of registration which was not and could never become the subject-matter of an appeal before the appellate authority. The theory that the order of the Tribunal merges in the order of the appellate authority cannot, therefore, apply to the order of registration passed by the ITO in the present case."

7-A. It may be noticed that in cases of partnership firms which apply for registration, while making assessment the Income Tax Officer passes two separate and independent orders. The first order is the assessment order and the second order which is completely separate is for registration of the firm. Therefore, there exist two separate orders in the same proceeding and if the assessee files an appeal against the assessment order the second order remains unchallenged and does not becomes subject-matter of the appellate order. In such a case the question of merger does not arise. But in the present case the situation is different. There is one order of assessment and the same was challenged in appeal by the appellant which was partly allowed against which the department and the appellant both had filed appeal. The department G withdrew its appeal which was dismissed. Then came the proceeding under section 65 in which same question was considered. The order of the ITO, thus, merged in the order of the Tribunal. In these circumstances Amritlat Bhogilal is completely distinguishable. It may be noticed that in the appeal filed by the appellant against the assessment order framed in pursuance of notice under section 65 notice was issued to the ITO concerned but he did not appear. The learned counsel for the respondent contended that against an assessment order no appeal has been provided to the department and, therefore, powers under sections 65 and 66-A are to be exercised to correct the errors and bring to tax such income which may have escaped. The fact that no appeal has been provided to the department against the assessment order does not lead to the conclusion that power under section 00-A as it stood before amendment in H 1991 could be exercised even in respect of orders passed by the appellate authority. In fact in the absence of right of appeal, section fib-A provided an opportunity to the IAC to reopen the case if the ITO has committed error prejudicial to the revenue provided his order has not merged in the appellate/revisional order. In cases where appeals are filed the department could be represented and in fact the department seems to have actively pursued the matter as it filed an appeal against the order of the Appellate Assistant Commissioner before the Tribunal but no ground was taken that receipt of Rs.130 million was taxable and has escaped assessment. This appeal was withdrawn. It seems that the respondent reopened the case under section 65 but with reference to receipt of Rs.130 million the Tribunal made observations quoted above.

8. The learned Judges of the High Court have also referred to State of Madras v. Madhurai Mills Limited Co. AIR 1967 SC 681 in which reference was made to Amritlal Bhogilal & Co. (supra) and it was observed that the `doctrine concerned is not a doctrine of rigid and universal application and it cannot be said that whenever there are two orders, one by the inferior Tribunal and the other by the superior Tribunal passed in appel or revision, there is 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! To support this observation reference was made to Amritlal Bhogilal & Company and it was observed that:--

"the order of assessment made by the ITO in that case was a composite order namely the order granting registration of the firm making the assessment on the basis of the registration."

With respect this observation does not seem to correctly refer the observations of Amritlal Bhogilal, which has been quoted above that both the orders of assessment and granting registration were independent and separate orders. It was further observed that:

"the order granting registration to an assessee firm is an independent seperate order and it merely affects or governs the procedure to be adopted in calculating or recovering the tax found due."

Therefore, the observation made in Madhurai Mills is not supported by Amritlal Bhogilal. The observation, with respect, seems to have been misunderstood and not correctly quoted. It is true that it is the nature and scope of the provision of law as provided for challenging an order in appeal or revision which determine the effect and scope of such order. But where such an order has been passed in exercise of such jurisdiction it becomes final and operative in respect of the order against which appeal or revision has been filed. The appeal provided under the Income Tax Ordinance is not of a limited nature. It is however, to be noted that if two separate orders in respect of two separate subjects/proceedings have been passed in a consolidated order which are severable and one of them is appealable while the other is not, then the appeal filed in such case will only affect that pact of the order which. is appealable. In Amritlal Bhogilal there were two separate orders and appeal was filed against the assessment order only. It was not a case where there was only one order which was appealable. In a case where there is only one order against which appeal has been provided, filed and decided then there does not seem to be a scope for argument that as some objections or pleas which did exist but have not been taken, pressed or considered, that part of the order which is covered by such plea do not merge in the appellate order. Such a view will create uncertainty and is bound to result in confusion and chaos. The law does not favour uncertainties in decision and in revenue matters one has to be very specific and certain. The Tribunal has considered the receipt of Rs.130 million at length and has come to the conclusion that it must have been taken into consideration by the ITO while making assessment under the total audit scheme. The result is that the order of the Income Tax Officer merged into the order of the Tribunal and, therefore, the IAC did not have the jurisdiction to initiate action under section 66-A of the Income Tax Ordinance for reopening the matter. In this case principles of res judicata will not apply as it is governed by the provisions of section 66-A which lays down the boundaries and parameters for exercise of jurisdiction under it. The fact that in 1991 subsection (1-A) was added authorising IAC to initiate action under section 66-A even if appellate and revisional order has been passed, supports the contention that such a power did not exist earlier. The question whether it is applicable to the present case is kept open and we refrain from expressing any opinion at this stage. We, therefore, allow the appeal and set aside the impugned judgment and consequently notice issued under section 66-A of the Income Tax Ordinance is declared as without jurisdiction and of no legal effect.

M.BA./G-361/S Appeal allowed.