COMMISSIONER OF WEALTH TAX VS UTTAM CHAND JAIN
2001 P T D 1529
[245 I T R 838]
[Delhi High Court (India)]
Before Arijit Pasayat, C. J. and D. K. Jain, J
COMMISSIONER OF WEALTH TAX
versus
UTTAM CHAND JAIN
Wealth Tax Reference No.30 of 1980, decided on 07/07/2000.
(a) Wealth tax‑‑‑
‑‑‑‑Appeal‑‑‑Doctrine of merger of order of Wealth Tax Officer in appellate order‑‑‑No merger where issue was not subject‑matter of appeal‑‑ ‑Indian Wealth Tax Act, 1957, S.24.
(b) Wealth tax‑‑‑‑
‑‑‑‑Revision‑‑‑Appeal‑‑‑Order , of Wealth Tax Officer, which has not merged in appellate order can be revised‑‑‑Indian Wealth Tax Act, 1957, S.25(2).
The principles relating to the doctrine of merger are as follows: (i) The. application of the doctrine of merger cannot be rendered inapplicable by drawing a. distinction between an application for revision and an appeal; (ii) the application of the doctrine of merger depends oh the nature of the appellate or revisional order in each case and on the scope of the statutory provisions conferring the appellate or revisional jurisdiction. The doctrine of merger is not a doctrine of rigid and universal application. Whether there is fusion or merger‑of the order of the inferior Tribunal into an order by a superior Tribunal will have to be determined by finding out the subject matter of the appellate or revisional order and. the scope of the appeal or revision contemplated by the particular statute; (iii) ordinarily, a judgment pronounced in appellate or revisional jurisdiction after issuing a notice of hearing to both the parties would replace the, judgment of the lower Court thus constituting the appellate or revisional judgment the only final judgment; (iv) the doctrine of merger does not apply where an appeal is dismissed (a) for default, (b) as having abated by reason of the omission of the appellant to implead the legal representatives of a deceased respondent; (c) as barred by limitation; (v) an appeal dismissed in limine on the ground of the bar of limitation may still be an order in appeal for the purpose of determining whether a right of further appeal would be available or not but that does not amount to saying that the order appealed against merges into the appellate order dismissing the appeal .in limine as barred by time.
In respect of an issue which is not the subject‑matter of challenge before any higher forum, the doctrine of merger would have no application.
The assessee had filed a return of his wealth on September 8, 1972,' declaring a wealth of Ies.4,56,376 for the assessment year 1972‑73. Subsequently, he made a voluntary disclosure of his additional wealth and in the revised return declared a net wealth of Rs.6,80,826. On the basis of the revised return the assessment was completed on March 31, 1976, on a net wealth of Rs.7,53,087. The assessee was the owner of a half share in a flat at Delhi. In both the original and revised returns, the value was shown at Rs,60,000. This value was not included in the net wealth of the assessee in the assessment made by the Assessing Officer. Subsequently, an order under section 35 of the Wealth Tax Act, 1957, was passed on December 14, 1977, including the aforesaid sum of Rs.60,000 and thereby finally the total wealth was determined at Rs.8,03,037. Several appeals including that relating to the assessment year 1972‑73 were taken up together. The Appellate Assistant Commissioner by order, dated March 22, 1977, accepted the plea of the assessee in respect of certain deductions and directed allowance of these liabilities. On March 18, 1978, the Commissioner of Wealth Tax issued a notice to the assessee under section 25(2) of the Act to show cause as to why the value of the flat should not be enhanced. The assessee filed objections to the proposed action on various grounds. The main stand was that the Commissioner had no jurisdiction to take recourse to section 25(2) of the Act, inasmuch as the order of the Wealth Tax Officer had merged in the order of the Appellate Assistant Commissioner. The Commissioner of Wealth Tax rejected the contention, but the Tribunal upheld it. On a reference.
Held, that the point in issue was not the subject‑matter of appeal and, hence, the doctrine of merger of the order of the Wealth Tax Officer in that of the Appellate Assistant Commissioner was not applicable. The Commissioner of Wealth Tax had jurisdiction to revise the order.
CIT v. Eurasia Publishing House (P.) Ltd. (1998) 232 ITR 381 (Delhi); State of Madras v. Madurai Mills Co. Ltd. (1967) 19 STC 144; AIR 1967 SC 681 and State of Orissa v. Krishna Stores (1997) 104 ITR STC 594 and (1997) 3 SCC 246 ref.
Sanjiv Khanna with Ms. Prem Lata Barisal and Ajay Jha for the Commissioner.
Nemo for the Assessee.
JUDGMENT
ARIJIT PASAYAT, C.J.‑‑‑On being moved by the Revenue, the Income‑tax Appellate Tribunal, Delhi Bench "D" (for short "the Tribunal"), has referred the following question under section 27(1) of the Wealth Tax Act, 1957 (for short "the Act"), for the opinion of this Court:
"Whether, on the facts and in the circumstances of the case., the Tribunal eras legally correct in holding that the Commissioner of Wealth Tax had no jurisdiction to pass an order under section 25(2) of the Wealth Tax' Act, 1957?"
The factual position in a‑nut‑shell is as follows:
The assessee had filed a return of his wealth on September 8, 1972, declaring a wealth of Rs.4,56,376 for the assessment year 1972‑73, Subsequently, he made a voluntary disclosure of his additional wealth and in the revised return filed, declared a net wealth of Rs.6,80,826. On the basis of the revised return the assessment was completed on March 31, 1976, on a net wealth of Rs.7,53,087. The assessee was the owner of a half share in a flat in Himalya House at Delhi. In both the original and revised returns, the value was shown at Rs.60,000. This value was not included in the net wealth of the assessee in the assessment made by the Assessing Officer. Subsequently, an order under section 35 of the Act was passed on December 14, 1977, including the aforesaid sum of Rs.60,000 and thereby finally the total wealth was determined at Rs.8,03,037. Several appeals, including that relating to the assessment year 1972‑73 were taken up together. The Appellate Assistant Commissioner ("the AAC" in short), by order, dated March 22, 1977, accepted the plea of the assessee in respect of certain deductions and directed allowance of these liabilities. On March 18, 1978, the Commissioner of Wealth Tax (in short "the Commissioner") issued a show cause to the assessee under section 25(2) of the Act as to why the value of the flat in Himalya House should not be enhanced. The assessee filed objections to the proposed action on various grounds. The main stand was that the Commissioner had no jurisdiction to take recourse to section 25(2) of the Act, inasmuch as the order of the Wealth Tax Officer had merged in the order of the Appellate Assistant Commissioner. Several other objections with which we presently are not concerned were raised. The Commissioner rejected the contentions, set aside the assessments and directed the Assessing Officer to make fresh assessment after working out the fair market value of the property in accordance with the relevant provisions of the Act and Wealth Tax Rules, 1957 (in short "the Rules"). Against such order of the Commissioner, an appeal was filed before the Tribunal. The stand of the assessee regarding lack of jurisdiction was pressed into service before the Tribunal. In essence it was submitted that the order of assessment did not survive after the appeal was disposed of by the First Appellate Authority. The Tribunal accepted this plea. On being moved for making a reference, the question has been referred for our opinion.
We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessee in spite of the notice.
The main point for adjudication is whether a point which was not the subject‑matter of appeal can be said to have been decided and the doctrine of merger would apply also in respect of such an issue.
The principles relating to the doctrine of merger have been elaborated in various judgments. The principles as culled out from those decisions are as follows:
"(i) the application of the doctrine of merger cannot be rendered inapplicable by drawing a distinction between an application for, revision and an appeal;
(ii) the application of the doctrine of merger depends on the nature of the appellate or revisional order in each case and on the scope of the statutory provisions conferring the appellate or revisional jurisdiction. The‑ doctrine of merger is not a doctrine of rigid and universal application. Whether there is fusion or merger of the order of the inferior Tribunal into an order by a superior Tribunal shall have to be determined by finding out the subject‑matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute;
(iii) ordinarily, a judgment pronounced in appellate or revisional jurisdiction after issuing a notice of hearing to both the parties would replace the judgment of the lower Court thus, constituting the appellate or revisional judgment the only final judgment;
(iv) the doctrine of merger does not apply where an appeal is dismissed (a) for default, (b) as having abated by reason of the omission of the appellant to implead the legal representatives of a deceased respondent; (c) as barred by limitation;
(v) an appeal dismissed in limine on the ground of the bar of limitation may still be an order in appeal for the purpose of determining whether a right of further appeal would be available or not but that does not amount to saying that the order appealed against merges into the appellate order dismissing the appeal in limine as barred by time."
These principles were noted by this Court in CIT v. Eurasia Publishing House (P.) Ltd. (1998) 232 ITR 381.
In State of Orissa v. Krishna Stores (1997) 104 STC 594; (1997) 3 SCC 246, 252, the apex Court observed as follows (page 600 of 104 STC):
"In the case of State of Madras v. Madurai Mills Co. Ltd. (1967) 19 STC 144; AIR 1967 SC 681, this Court, however, observed that the doctrine of merger was not a. doctrine of rigid and universal application. The application of the doctrine depends on the nature of the appellate or revisional order in each cases and the scope of the statutory provision conferring the appellate or revisional jurisdiction. Basically, therefore, unless the appellate authority has applied its mind to the original order or any issue arising in appeal while passing the appellate order, one should be careful in applying the doctrine of merger to the appellate order."
The inevitable conclusion is that in respect of an issue which is not the subject‑matter of challenge before any higher forum, the doctrine of merger would have no application.
We, therefore, answer the question referred in the negative, in favour of the Revenue and against the assessee.
The reference is disposed of accordingly.
M.B.A./487/FCOrder accordingly.