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PETITIONER: M/S HINDUSTAN AERONAUTICS LTD., BANGALORE

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX, KARNATAKA-I, BANGALORE

DATE OF JUDGMENT:       11/05/2000

BENCH: Y.K.Sabhaewal, S.R.Babu

JUDGMENT:

     RAJENDRA BABU, J.  :

     The  appellant before us is M/s Hindustan  Aeronautics Ltd.,  which is a wholly centrally owned Government  Company engaged in the manufacture of aeroplanes and its parts.  For the assessment year 1970- 71, the appellant filed its return before  the concerned ITO who by an order made on March  15, 1973  completed  the  assessment   by  disallowing   certain deductions  claimed  by  the appellant on  various  grounds. Against  the assessment order of the ITO, the assessee filed an appeal before the Appellate Assistant Commissioner who by an  order made on October 27, 1976 partly allowed the  same. By  the order of the Appellate Assistant Commissioner,  both the Revenue and the assessee preferred second appeals before the  Income Tax Appellate Tribunal, Bangalore to the  extent each  one  of them was aggrieved.  However, on May 9,  1977, the  assessee  withdrew its appeal before the Tribunal  with liberty  reserved  to  it to approach  the  Commissioner  of Income Tax (Commissioner) in a revision under Section 264 of the  Income  Tax Act, 1961 [hereinafter referred to as  ‘the Act’].   On  May 20, 1978, the Tribunal, however,  dismissed the  appeal  filed by the Revenue on merits.   The  assessee filed revision petition on May 19, 1977 under Section 264 of the  Act to the extent of the grievance projected before the Tribunal  earlier.   On 22.12.78 the Commissioner  dismissed the  revision petition on the ground that he has no power to revise  any  order under Section 264 as the order  had  been made the subject to an appeal to the Appellate Tribunal.

     A  writ  petition [No.4803/79] was  filed  challenging this  order  made by the Commissioner.  The  learned  Single Judge,  who considered the matter, directed the Commissioner to  entertain the revision petition filed by the assessee in terms of Circular No.  XVI/11/69 issued by the Central Board of Direct Taxes [hereinafter referred to as ‘the Board’] and examine  its  case on merits.  Aggrieved by that  order,  an appeal was preferred by the Commissioner before the Division Bench.   The  Division Bench following a decision in CIT  v. Hindustan Aeronautics, 157 ITR 315, of the Full Bench of the High  Court  held  that the revision petition filed  by  the appellant  could not be maintained and the Commissioner  was justified  in dismissing the same.  The question  considered by the Full Bench was as follows :  "Can the Commissioner of Income  Tax  entertain  assessee’s revision  petition  under Section  264  of the Income Tax Act, 1961, preferred from  a

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part  of  order of the Appellate Commissioner against  which the  assessee is aggrieved during the pendency or after  the disposal,  as  the case may be, of the  Department’s  Second appeal  before the Income - Tax Appellate Tribunal preferred against  another  part of the same order where  the  subject matter  of the appellate and revisional proceedings are  not the same but relates to distinct matters."

     The  said question was answered in the negative.  This view   is   a  reiteration  of   earlier  view   stated   in Vijayalakshmi  Lorry  Service  case, ITRC 37 of  1973.   The Commissioner  had in fact followed the decision of the  High Court  in  Vijayalakshmi  Lorry  Service case.   It  is  not necessary  for us to dilate on this aspect of the matter any further  because  this Court in CWT vs.  Kasturbai, 177  ITR 188,  has held that the Commissioner has no power to  revise any  order  under  Section 264 if the order "has  been  made subject  to an appeal to the Appellate Tribunal, even if the relief  claimed in the revision is different from the relief claimed  in the appeal and irrespective of the fact  whether the  appeal is by the assessee or by the Department".   That is  because  Section 264(4) provides that  the  Commissioner shall  not  revise  any order under this section in  a  case where  the  order has been made the subject of an appeal  to the  Appellate  Tribunal.   What  becomes final  in  such  a proceeding is the order made by the Appellate Tribunal which is  a  superior forum than that of the Commissioner and  the order  which  is the subject matter of an appeal  cannot  be divided  into two parts - one which is the subject matter of the  appeal  and  the other which was not in  issue  in  the appeal  before  the  Tribunal.  What becomes merged  in  the order  of  the Tribunal is the order made by  the  Appellate Assistant  Commissioner  in  its entirety and not  in  part. Indeed  where the legislature intended to make a distinction in  such circumstances where there will be no merger in such cases is expressly provided.  We may notice that Section 263 of  the  Act  where a revision is permissible  in  cases  of orders which are prejudicial to the interest of the Revenue, in  the  Explanation (c) thereof it has been provided  where any  order referred to in this sub-section and passed by the Assessing  Officer had been the subject-matter of any appeal the  powers of the Commissioner under this sub-section shall extend  to  such  matters  as had not  been  considered  and decided in such appeal.  Where the legislature intended that the  scope of revision should extend to a part of the  order which  had not been considered and decided in an appeal  and thereby  does  not merge is explicitly provided.   When  the legislature  does not make such a distinction in the  scheme of  Section 264 of the Act the view taken by the High  Court appears to us to be correct.

     However,  the learned counsel for the appellant relied on the decisions in Navnitlal C.  Javeri v.  K.K.Sen, AAC of Income  Tax, 56 ITR 198, Ellerman Lines Ltd.  vs.  C.I.T, 82 ITR  913 and K.P.Varghese vs.  ITO, 131 ITR 597, to  contend that  the circular issued by the Board under Section 119  of the  Act is binding on the Commissioner in terms of which he was bound to examine the revision of the appellant on merits and  the  order  of the learned Single  Judge  merely  gives effect to such a course.  Dr.  Gauri Shankar, learned senior advocate  for the Revenue, however, pointed out by referring to  several  decisions of this Court to the effect that  the circulars  or  instructions given by the Board are no  doubt binding in law on the authorities under the Act but when the Supreme  Court or the High Court has declared the law on the

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question  arising for consideration it will not be open to a Court  to  direct that a circular should be given effect  to and  not  the  view expressed in a decision of  the  Supreme Court  or  the  High  Court.  We find great  force  in  this submission  made  by  the learned senior  advocate  for  the Revenue  and find absolutely no merit in this appeal and the same stands dismissed, but in the circumstances of the case, there shall be no orders as to costs.