Bombay High Court
Yashodhan Industrial Investment Co. ... vs Income Tax Officer. on 11 March, 1993
Equivalent citations: (1993)47TTJ(MUMBAI)152
ORDER
S. P. KAPUR, J. M. :
The assessee appeals for the asst. yr. 1984-85. The order impugned is dt. 13th March, 1989 and has been made by the learned CIT, Karnataka II, Bangalore, under S. 263 of the IT Act, 1961.
2. The assessment order is dt. 9th Feb., 1987. The said order was a subject-matter of appeal by the assessee and the order of the learned first appellate authority bears the date 31st July, 1987. The order of the learned Commissioner presently impugned in this appeal, as mentioned earlier, is of 13th March, 1989.
3. In view of the finding of the Honble jurisdictional High Court in the case reported as CIT vs. International Computers Indian Manufacture Ltd. (1991) 187 ITR 580 (Bom), the impugned order stands cancelled with consequences flowing out of the above finding to follow. The decision of the Honble jurisdictional High Court is in the following terms :
"It is held that the amendment is retrospective w.e.f. 1st June, 1988, which means that it will cover only those orders which became the subject-matter of appeal after that date."
The assessee succeeds and the appeal stands allowed.
R. N. SINGHAL, A. M. :
Regretting my inability to persuade myself to the view taken in the order of my learned brother, I proceed to write a dissenting order.
2. This appeal by the assessee is directed against order under S. 263 dt. 13th March, 1989 passed by the CIT, Karnataka-2, Bangalore. First two grounds of appeal taken are as follows :
1. "On the facts and in the circumstances of the case, the learned CIT erred in invoking provisions of S. 263 particularly when the order of the ITO has merged with the order of the CIT(A) and thereby the learned Commissioner was divested of his jurisdiction under S. 263."
2. "The learned CIT further erred in holding that the decision relied on by the assessee has no bearing after the amendment to S. 263 by the Finance Act, 1988 and has erroneously relied on the Finance Bill, 1989 which has not been passed as an Act."
Thus, they deal with the aspect of merger of the assessment order dt. 9th Feb., 1987 with that of the appellate order dt. 31st July, 1987 passed by the CIT(A).
3. Learned advocate for the assessee relied very heavily on the Bombay High Court decision in CIT vs. International Computers Indian Manufacture Ltd. (1991) 187 ITR 580 (Bom) to say that even after the retrospective amendments effected in S. 263 by the Finance Acts of 1988 and 1989, the full merger of the assessment order with the appellate order would be operative in accordance with the Bombay High Court decision in CIT vs. P. Muncherji & Co. (1987) 167 ITR 671 (Bom), except in respect of those orders which became the subject-matter of appeal after 1st June, 1988. He pleaded that since in this case, the CIT(A) had passed order on 31st July, 1987 (i.e., before 1st June, 1988), the amendment effected by Finance Acts of 1988 and 1989 would not be operative or applicable.
4. On the other hand, the learned Departmental Representative submitted that in the case of CIT vs. International Computers Indian Manufacture Ltd. (supra), the Honble Bombay High Court merely derived support from its earlier decision in the case of Ritz Ltd. vs. Union of India (1990) 184 ITR 599 (Bom). He very emphatically relied on the conclusion reached in that decision and specifically recorded towards the end of the penultimate para on page 182 of 83 CTR and page 603 of 184 ITR in the following terms :
"... Thus, only in cases where action under S. 263 is taken after 1st June, 1988, the merger of the assessment order will be treated as confined to the issue actually considered and decided in appeal in terms of Expln. (c). In my judgment, the construction placed herein is based on sound logic, namely, irrespective of the language in which the amending provisions are couched, the amendment cannot be retrospective with effect from a date earlier to the date on which the provision sought to be amended itself was brought on the statute book."
He submitted that in the case of Ritz Ltd. & Anr. vs. Union of India (supra), the Honble Bombay High Court has considered this aspect in very great detail and then come to the conclusion that in the cases where action under S. 263 is taken on or after 1st June, 1988, full merger would not take place.
5. We have considered the rival submissions. As already noted, in this case, order of the CIT(A) was passed on 31st July, 1987, i.e., before 1st June, 1988 and the revisional order under S. 263 was passed on 13th March, 1989 (even the first show cause notice was issued on 16th Jan., 1989), i.e., after 1st June, 1988. It is also an admitted position that the point considered in order under S. 263 was not at all involved or considered in the appellate proceedings before the CIT(A). Thus, in this case, if the crucial date of 1st June, 1988 is considered as applicable to the appellate order, the assessee has to succeed, but if that date of 1st June, 1988 is to be considered as applicable to revisional proceedings under S. 263, the Department has to succeed.
6. Indeed, in the detailed order given in Ritz Ltd. (supra), it was held that the said date of 1st June, 1988 is for the proceedings under S. 263. But we have also the subsequently delivered brief decision in CIT vs. International Computers Indian Manufacture Ltd. (supra). Therein, the Honble Bombay High Court has first noted the background commencing from the decision in the case of CIT vs. P. Muncherji & Co. (supra) and then considered the various amendments effected in S. 263. Then on page 582 of the Reports (187 ITR) page 124 of 90 CTR, the Honble High Court has recorded inter alia as under :
"... Our Court has examined the effect of Expln. (c) as retrospectively amended in the case of Ritz Ltd. vs. Union of India (1990) 184 ITR 599 (Bom). One of us T. D. Sugla. J., had decided the petition. It is held that the amendment is retrospective w.e.f. 1st June, 1988, which means that it will cover only those orders which became the subject-matter of appeal after that date. It is further held that Expln. (c) itself having been inserted w.e.f. 1st June, 1988, any kind of amendment therein, whether retrospective or otherwise, could not be with effect from a date earlier to the date of insertion of Expln. (c). We are in complete agreement with the conclusion in that case."
The last sentence of the above para is very significant. It says in terms that while rendering the later decision in International Computers Indian Manufacture (supra), the Honble High Court is in complete agreement with the conclusion reached in the earlier decision of Ritz Ltd. (supra). Moreover, even in the earlier part of the above extracted para of the later decision in International Computers Indian Manufacture (supra), the Honble Bombay High Court have noted and specifically indicated that they are following the earlier decision, i.e., in the case of Ritz Ltd. (supra). Only in one sentence, while indicating what the decision in Ritz Ltd. (supra) means, it is stated that the retrospective amendment w.e.f. 1st June, 1988 will cover only those orders, which became the subject-matter of appeal after that date. Thus, this aspect is being debated only because, while noting the ratio of the earlier decision in the case of Ritz Ltd. (supra), the Bombay High Court in their later decision in International Computers Indian Manufacture (supra), have said that amendments would cover only those orders which became subject-matter of appeal after that date.
7. Even at the cost of repetition, it may be mentioned that the decision in Ritz Ltd. (supra) is a detailed one and the decision in International Computers Indian Manufacture (supra) is not only brief, but also specifically expresses complete agreement with the conclusion reached in Ritz Ltd. (supra) case. Further, in the case of International Computers Indian Manufacture Ltd. (supra), both the orders, viz., appellate order as well as the revisional order were of the calender year 1983, i.e., much before 1st June, 1988, Hence, this distinction of the appellate order or the revisional order being of 1st June, 1988 or any later date did not make any difference in the conclusion reached in the case of International Computers Indian Manufacture Ltd. (supra). It means that even if the Court had recorded in International Computers Indian Manufacture Ltd. (supra) that retrospective amendment w.e.f. 1st June, 1988 would cover only those orders which became the subject-matter of revision after that date, the High Courts decision on the facts of that case would not have been different at all. Yet another aspect of the matter is that the decision in CIT vs. International Computers Indian Manufacture Ltd. (supra) is rendered for rejection of Departments application under S. 256(2) for seeking statement of the case from the Tribunal to the Honble High Court and, strictly speaking, it is not a decision on merits. Rejection of SLP by the Supreme Court or application under S. 256(2) by the High Court does not always carry the same weight as of a decision rendered on merits.
8. For all these reasons, on a combined reading and harmonious construction of both these decisions, one should apply and adopt the specific conclusion reached in the case of Ritz Ltd. (supra) rather than an observation recorded in International Computers Indian Manufacture Ltd. (supra) while attempting to clarify the meaning of the decision in Ritz Ltd.s case (supra). In this particular case, revisional order under S. 263 is not only passed after 1st June, 1988, but even the show-cause notice is issued after that date. The retrospective amendments would be operative. Therefore, the technical objections taken in first two grounds of the assessees appeal deserve to be rejected. I would do so.
ORDER OF REFERENCE UNDER S. 255(4) OF THE IT ACT, 1961.
Following point of difference emerging from the proposed orders of the Members constituting the Bench in ITA No. 735/Bom/89 in the case of Yashodhan Industrial Investment Co. Ltd. vs. ITO, involving asst. yr. 1984-85, is being referred to the Honble President of the Tribunal for making reference to Third Member as provided for in S. 255(4) of the IT Act, 1961:
"Whether, on the facts and in the circumstances of the case, the CIT had jurisdiction to pass order under S. 263 on 13th March, 1989 when CIT(A) had rendered his decision on 31st July, 1987, though on altogether different points."
11th March, 1993.
CH. G. KRISHNAMURTHY, PRESIDENT (AS THIRD MEMBER) This is an appeal referred to me for my opinion under S. 255(4) of the IT Act on the following point of difference of opinion that arose between the Members of the Tribunal, A Bench, Bombay, who heard this appeal for the first time :
"Whether, on the facts and in the circumstances of the case, the CIT had jurisdiction to pass order under S. 263 on 13th March, 1989 when CIT(A) had rendered his decision on 31st July, 1987, though on altogether different points."
The learned Judicial Member, applying the decision of the Bombay High Court in the case of CIT vs. International Computers Indian Manufacture Ltd. (1991) 187 ITR 580 (Bom), held in favour of the assessee and against the Revenue. The learned Accountant Member, following an earlier decision of the Bombay High Court in the case of Ritz Ltd. vs. Union of India (1990) 184 ITR 599 (Bom), held in favour of the Revenue. According to the learned Accountant Member, the earlier decision of the Bombay High Court in the case of Ritz Ltd. (supra) had only been affirmed and approved by the same High Court in a later decision reported in (1991) 187 ITR 680 (Bom) and did not decide the matter in a different way and, therefore, even applying the later decision reported in (1991) 187 ITR 580 (Bom), the matter should have been decided in favour of the Revenue. That is how the difference of opinion arose and referred to me as a Third Member. Before I express my opinion on the controversy, I shall briefly refer to the relevant facts.
2. The assessee, in the relevant assessment year, filed a return disclosing a loss of Rs. 12,27,454 which included a claim for investment allowance under S. 32A of the IT Act amounting to Rs. 2,33,057. The ITO disallowed this claim on the sole ground that the machinery in respect of which this claim was made was not used in the manufacturing activities of the assessee-company. The assessment was completed by making certain other disallowances. Against these disallowances, the assessee filed an appeal before the CIT(A), who found that even though the assessee had not used the machinery in its own business, yet it was leased out and the lessee had used the machinery for the purposes of the business and that user amounted to user of the machinery by the assessee and, therefore, the assessee was entitled to the allowance of investment allowance. Following the decision of the Special Bench of the Tribunal in the case of ITO vs. First Leasing Company (1985) 23 TTJ (Mad) 469 (SB) : (1985) 13 ITD 234 (Mad) (SB), he allowed the assessees claim. There was another point regarding refusal to carry forward of loss which was disapproved by the CIT(A) on appeal. Subsequently, the CIT (Admn.) had occasion to peruse the records of the assessee and found that the ITO had allowed an investment loss in share dealings of Rs. 9,93,481 which the ITO had allowed in making the assessment. He considered that the allowance of this sum was not in accordance with law and, therefore, it had caused prejudice to the interests of Revenue. Invoking his power under S. 263 of the IT Act on 16th Jan., 1989, he gave a notice to the assessee to show-cause why the assessment made by the ITO should not be corrected by disallowing this loss. In response to his notice, the assessee submitted its objections on 14th Feb., 1989 on various counts, the chief of which was that the CIT had no jurisdiction to invoke the provisions of S. 263 to set aside the assessment by pointing out that the order passed by the ITO had merged in the order passed by the CIT(A) as held by the Karnataka High Court in the case of Addl. CIT vs. Vijayalakshmi Lorry Service (1986) 157 ITR 327 (Kar) and thus the jurisdiction of the CIT under S. 263 of the Act was ousted. The CIT rejecting these contentions, held that he had the necessary jurisdiction to interfere under S. 263. By referring to Expln. (c) to S. 263 as amended by the Finance Act, 1989, with retrospective effect from 1st June, 1988, he held that his power to interfere under S. 263 is specially conferred in respect of those matters which had not been considered and decided in an appeal by the CIT. In other words, there was no complete merger as was the law before 1st June, 1988 and that there was only partial merger after 1st June, 1988. By partial merger, he even held that he could interfere in respect of those matters which were not the subject-matter of appeal before the CIT(A). Since the issue of disallowing the loss was not a subject of appeal before the CIT(A), he could interfere with the matter and, therefore, he had the necessary jurisdiction to pass orders under S. 263. With these and other observations, he set aside the order passed by the ITO and directed him to disallow the loss of Rs. 9,93,481 claimed as value of investment written off.
3. Aggrieved by this order, the assessee filed an appeal before the Tribunal contending that as a consequence of the amendment made by the Finance Act of 1989, even though with retrospective effect from 1st June, 1988, the decision of the Bombay High Court in CIT vs. International Computers Indian Manufacture Ltd. (supra), protected the assessees right as there was a full merger of the order passed by the ITO in the CIT(A)s order, the CIT had no jurisdiction to interfere. In other words, the point urged before the Tribunal was that, according to the decision of the Bombay High Court reported in (1991) 187 ITR 580 (Bom), the power of the Commissioner to invoke S. 263 was not available in respect of orders passed by the CIT(A) prior to 1st June, 1988. This interpretation was accepted by the learned Judicial Member and he allowed the appeal. In particular, he referred to a portion of the judgment in (1991) 187 ITR 580 (Bom), which was in the following terms, to support his view :
"It is held that the amendment is retrospective w.e.f. 1st June, 1988, which means that it will cover only those orders which became the subject-matter of appeal after that date."
According to the Judicial Member, this observation meant that the jurisdiction of the CIT under S. 263 would not be available to orders passed before 1st June, 1988 and it will be available only to those orders which became the subject-matter of appeals after that date. As I pointed out earlier, the learned Accountant Member, however, did not agree with this view and, quoting extensively from an earlier judgment of the same Bombay High Court on more or less identical issue reported in Ritz. Ltd. vs. Union of India (supra), held that the ratio of both the decisions was same and that was as a result of the insertion of Expln. (c) in S. 263 by the Finance Act of 1989 with retrospective effect from 1st June, 1988 that the CIT can exercise revisional jurisdiction only in cases of partial merger, irrespective of the date when the CIT(A) passed the order. Since in this case the revisional order under S. 263 was passed after 1st June, 1988, the power of the CIT to interfere was available as there was only a partial merger available.
4. Now, appearing on behalf of the assessee, the learned counsel for the assessee, Shri Rotho, submitted, advocating the view adopted by the learned Judicial Member, that on a careful reading of the Expln. (c) to S. 263 on the interpretation placed upon it by the Bombay High Court, it would appear that the power of revision would be available only in respect of those appellate orders which had not become final and are still pending on or after 1st June, 1988 and not to those orders which had become final prior to or by 1st June, 1988. He also submitted that the legislature had given retrospective effect to this provision only w.e.f. 1st June, 1988 and that the retrospective effect cannot be construed to have the effect of applying to any order at any point of time infinitely. Any retrospective amendment made by the legislature must have a date fixed for it. In this case, there is no date fixed for it even though the date of 1st June, 1988 was mentioned. That date must, therefore, be interpreted to mean as a date by which the orders passed by the Appellate Commissioner had become final. Had the intention of the legislature been otherwise, they would have used some other words like "appeals whenever filed" in Expln. (c). The absence of those words are very significant and cannot have the meaning on the intention of the legislature that the orders passed by the Appellate Commissioner, which had become final by 1st June, 1988, would not be available to the revisional jurisdiction of the CIT under S. 263. To put it differently, in respect of appellate orders which had become final by 1st June, 1988, the doctrine of complete merger would apply and the doctrine of partial merger would apply only to those appellate orders which are pending as on 1st June, 1988 or passed subsequently. This is the ratio of both the decisions of the Bombay High Court. The learned Judicial Member had correctly appreciated the import of the decision of the Bombay High Court and applied it. The learned Accountant Member had not properly appreciated the ratio of the Bombay High Court decision and came to an erroneous conclusion and, therefore, that opinion should not be approved. He also contended on the merits that the assessee has a very strong case and the Department should not have interfered as that would not result in any advantage to the Revenue.
5. On the other hand, the learned Departmental Representative, Shri Keshav Prasad, taking me through the decisions of the Bombay High Court both reported in (1990) 184 ITR 599 (Bom) (supra) and (1991) 187 ITR 580 (Bom) (supra), submitted that there was no controversy between those two decisions. The ratio laid down in (1990) 184 ITR 599 (Bom) (supra) was fully approved of in the later decision in (1991) 187 ITR 580 (Bom). The ratio laid down in these two decisions was that the doctrine of complete merger is no more available to the Commissioners to interfere under S. 263 w.e.f. 1st June, 1988. In other words, the CIT can apply S. 263 in respect of only those matters which have not become the subject-matter of appeal before the CIT(A). This power was available only w.e.f. 1st June, 1988. For orders passed under S. 263 or to be passed after 1st June, 1988, the theory of complete merger was dispelled. The CIT had been specifically vested with the power of interfering with those points which were not considered and decided by the CIT(A). This power was available only w.e.f. 1st June, 1988. This is what was meant by the retrospective nature of the amendment. The retrospective nature of the amendment was not available to the CIT(A) as was urged on behalf of the assessee. The Bombay High Court had categorically pointed out that the amendment applies to actions taken by the CIT under S. 263 and not to orders passed by the CIT(A). This distinction was clearly brought out by the order of the Accountant Member which was missed by the order passed by the learned Judicial Member. Therefore, the order passed by the learned Judicial Member does not represent the correct statement of law or interpretation of the Bombay High Court decision. There is no merit, according to him, in the submission made on behalf of the assessee that the amendment will apply only to those appellate orders which had become final by 1st June, 1988 and not otherwise. If this interpretation is accepted, that would not give full and complete meaning to all the words used in Expln. (c) to S. 263. It is also not correct to urge that the legislature had not fixed a date from which the retrospective nature of the amendment was available. The date of 1st June, 1988 mentioned in the Explanation is the date from which the CIT could take action under S. 263 in cases of partial mergers of the orders and that was the very purpose of the amendment of Expln. (c). It is, therefore, not correct to contend that the legislature had misfired.
6. I have considered the arguments addressed to me, perused the Bombay High Court decisions, the orders passed by my learned Members and the records. In my opinion, the view expressed by the learned Accountant Member is the correct view and it is in accord with the legislative intention. Sec. 263 is a section which confers powers upon the CIT to call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after making such inquiry as he may deem necessary, pass such order thereon as the circumstances of the case justify. He may enhance or modify the assessment or even cancel the assessment and direct a fresh assessment. The question arose whether when an order passed by the Assessing Officer became the subject-matter of appeal before the AAC or the CIT(A), as the case may be, he would still have the jurisdiction to call for and examine the record because the power vested under this section is only to call for and examine the record and to consider any order passed therein by an "Assessing Officer" and not an Appellate Authority. Since the power of revision vested under this section on a CIT does not extend to appellant orders, he became more or less powerless to interfere with such orders. At that time, a controversy was raging as to when an order passed by an Assessing Officer is made subject to an appeal to the CIT(A) the entire order of the Assessing Officer would merge in the order of the CIT(A) although the appeal was on even one point and what remains holding the field is the order passed by the CIT(A) and not of the Assessing Officer and, therefore, the CIT would not be justified in law in revising that order as that order ceased to be the order of the Assessing Officer. But, Courts have taken the view that even though there are certain points which had not become the subject-matter of appeal before an appellate authority, still, even in respect of those points, the CIT would not have the power to revise by invoking the provisions of S. 263, even though there was prejudice caused to the interests of the Revenue even on those points. To overcome this difficulty, Expln. (c) was added by the Finance Act, 1989 with retrospective effect from 1st June, 1988. The Expln. (c) as inserted by the Finance Act, 1989 is in the following terms :
"(c) where any order referred to in this sub-section and passed by the Assessing Office and been the subject-matter of any appeal, filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal."
This would show that where any order referred to in the sub-section meaning an order passed by the Assessing Officer and being the Subject-matter of any appeal filed on or before or after 1st June, 1988, the powers of the CIT, would be available to such matter as had not been considered and decided in such appeal. A plain reading of this Explanation would show that the power of the CIT would be available in respect of appeals filed either on 1st June, 1988 or before 1st June, 1988 or after 1st June, 1988. In other words, any appeal filed at any point of time before 1st June, 1988 would be amenable to the jurisdiction of the CIT under S. 263 subject to the condition that the power shall be available only on such matters as had not been considered and decided in those appeals. This power conferred upon the CIT by this amendment cannot be read to mean that this is available only in respect of appeals which are pending on 1st June, 1988 as was urged on behalf of the assessee. If that were so, than we would not be giving any meaning or effect to the word "before". The use of the word "before" clearly postulates that this power is available to the Commissioner even in respect of appeal filed before 1st June, 1988 but the date of 1st June, 1988 was mentioned only as a power conferring jurisdiction upon the CIT to invoke the jurisdiction under S. 263 with effect from that date, that is to say, the CIT will not be able to initiate proceedings under S. 263 before 1st June, 1988 in respect of matters which had not been considered and decided in an appeal filed either on or before or after 1st June, 1988. This appears to be the plain meaning of this Explanation on first reading. This very point had come up for consideration before the Bombay High Court in the case of Ritz Ltd. & Anr. vs. Union of India (supra) and this is by way of a writ petition under Art. 226 of the Constitution. Justice Sugla, who disposed of this petition, held, after referring to the insertion of the Finance Act of 1989, that "The insertion of the words at two places as well as the fact that the insertion is made retrospective from the date on which the Explanation itself was inserted, namely, 1st June, 1988, can all be given proper meaning if it is held that these words are to be read in the Explanation right from the date the Explanation itself was inserted. Thus, only in cases where action under S. 263 is taken from 1st June, 1988, the merger of the assessment order with the appellate order will be treated as confined to the issue actually considered and decided in appeal in terms of Expln. (c) to S. 263(1). Thus, there is a clear exposition of the law that the power under S. 263 can be taken only after 1st June, 1988 in respect of matters which are not actually considered and decided in appeals. Earlier to that date, the CIT does not have this power and he cannot even interfere in respect of those matters even not considered and decided in appeal. In other words, the theory of complete merger was replaced by the doctrine of partial merger. This is the decision given in Ritz Ltd. & Anr. (supra). The learned advocate for the assessee, however, submitted that after this sentence, which appears in the body of the judgment [(1990) 184 ITR 599 (Bom)] at page 603, there was another sentence which immediately followed which, according to him, laid down the rule that this amendment would apply only to appeals which were finally decided prior to 1st June, 1988 and not otherwise. The sentence referred to is "In my judgment, the construction placed herein is based on sound logic, namely, irrespective of the language in which the amending provisions are couched, the amendment cannot be retrospective with effect from a date earlier to the date on which the provision sought to be amended itself was brought on the statute book". The learned advocate for the assessee tries to read into the sentence a view that this amendment has the retrospective effect from a date earlier to the date of 1st June, 1988 and hence it will not apply to appeals decided prior to that date. But, I am unable to read the sentence in that light nor I am able to subscribe to that view. This sentence only amplifies what was said earlier, namely, that only in cases where action under S. 263 is taken after 1st June, 1988, the merger of the assessment order will be treated as confined to the issues actually considered and decided in appeal in terms of Expln. (c). The retrospectivity spoken in the next sentence refers only to the date from which the CIT is empowered to interfere under S. 263 in case of partial merger and it has no reference whatsoever to orders passed by the CIT(A) and became final before 1st June, 1988. If that were so, then the Expln. (c) will not be having a full value in the sense that the CIT will never be having a case where matters are considered and decided in the appeal. Unless an appeal is decided, one cannot say that a particular matter was decided by the CIT or not. Since the power of the CIT was only to interfere in respect of those matters which had not been decided in the appeal, the decision of the appeal has become absolutely essential for the purpose of invocation of the jurisdiction. Therefore, the question of appeals being pending on 1st June, 1988 and decided later on will not advance the assessees case. The date referred to here is the date from which the CIT can exercise his jurisdiction under S. 263 and the expression "filed on or before or after the 1st day of June, 1988" refer only to the description of the appeals arising out of the orders passed by the Assessing Officer as a point of reference for the exercise of the power of revision under S. 263. It may be that in a case relating to the remote assessment order, there may be certain points decided by the CIT(A) or the AAC, as the case may be, and some points left open or undecided. Those points may be causing grave prejudice to the interest of the Revenue. Even in respect of those matters, the CIT can after 1st June, 1988, interfere and pass orders under S. 263 provided they are found to be erroneous and prejudicial to the interests of Revenue and after following the procedure prescribed in S. 263. What was said in the later decision of the Bombay High Court in CIT vs. International Computers Indian Manufacture Ltd. (supra) was only reiteration of the earlier view expressed in Ritz Ltd. vs. Union of India (supra). In this case, the High Court found that the CIT(A) had passed the order in appeal on 3rd Sept., 1983 and the CIT had passed the order under S. 263 on 7th Sept., 1983. Both these events occurred before the insertion of Expln. (c) under S. 263. Since that was a case of a complete merger and not a partial merger, the High Court held that the Tribunal was right in law in holding that the order of the CIT(A) could not be revised by the CIT. In coming to this conclusion, it followed and applied its earlier decision is Ritz Ltd. vs. Union of India (supra). It categorically held so in these words :
"It is held that the amendment is retrospective w.e.f. 1st June, 1988, which means that it will cover only those orders which became the subject-matter of appeal after that date. It is further held that Expln. (c) itself having been inserted w.e.f. 1st June, 1988, any king of amendment therein, whether retrospective or otherwise, could not be with effect from a date earlier to the date of insertion of Expln. (c). We are in complete agreement with the conclusion in that case."
When their Lordships referred to the expression "subject-matter of appeal after that date", it only means the partial merger, and the power of the Commissioner to interfere in such cases on and from 1st June, 1988. The expression "whether retrospective or otherwise" would indicate again the power of the CIT to interfere under S. 263 w.e.f. 1st June, 1988. Because in this case it was found that the orders were passed under S. 263 prior to 1st June, 1988 and because the amendment had no retrospective effect beyond 1st June, 1988, the High Court, agreeing with its earlier view in Ritz Ltd., held against the Revenue and in favour of the assessee. Thus, both the decisions of the Bombay High Court lead to the same conclusion that the power of the CIT to revise orders under S. 263 in respect of orders of partial merger is available only w.e.f. 1st June, 1988 and not earlier. It is, therefore, incorrect, in my opinion, on the part of the learned Judicial Member to say that the Bombay High Court in CIT vs. International Computers Indian Manufacture Ltd. (supra) had decided the case against the assessee (sic).
7. For the above reasons, I agree with the view expressed by the learned Accountant Member and hold that the CIT had jurisdiction and validly initiated action and passed his order under S. 263 on 13th March, 1989 and the passing of the order by the CIT(A) on 31st July, 1987 did not vitiate or oust the jurisdiction of the CIT to pass his order under S. 263.
8. The matter will now go before the regular Bench for disposal of the appeal on merits in accordance with opinion of the majority.