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Doctrine of merger



( Before : Dr. Arijit Pasayat, C.J; D.K. Jain, J )




WTR No.30 of 1980

Decided on : 07-07-2000

Wealth Tax Act, 1957 – Section 25(2), Section 27(1)

Cases Referred

State of Orissa and others Vs. M/s. Krishna Stores, AIR 1997 SC 871 : (1997) 84 CLT 718 : (1997) 1 JT 667 : (1997) 1 SCALE 411 : (1997) 3 SCC 246 : (1997) 1 SCR 436 : (1997) 104 STC 594 : (1997) AIRSCW 748 : (1997) 2 Supreme 128
Commissioner of Income Tax Vs. Eurasia Publishing House (P.) Ltd., (1998) 232 ITR 381 : (1998) 101 TAXMAN 125


Arijit Pasayat, C.J.—On being moved by the Revenue, Income Tax Appellate Tribunal, Delhi Bench “D” (for short Tribunal), has referred the following question u/s 27(1) of the Wealth-tax Act, 1957 (for short the Act), for opinion of this Court :

“Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the Commissioner of Wealth-tax had no jurisdiction to pass an order u/s 25(2) of Wealth-tax Act, 1957?”

2. Factual position in a nut-shell is as follows :

assessed had filed a return of his wealth on 8.9.1972 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 revised return filed, declared net wealth of Rs. 6,80,826/-. On the basis of the revised return assessment was completed on 31.3.1976 on a net wealth of Rs. 7,53,087/-. assessed was owner of half share in a flat in Himalya House at Delhi. In both the original and revised returns, value was shown at Rs. 60,000/-. This value was not included in the net wealth of the assessed in the assessment made by the assessing officer. Subsequently, an order u/s 35 of the Act was passed on 14.12.1977, 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 assessment year 1972-73 were taken up together. The Appellate Assistant Commissioner (AAC in short), by order dated 22.3.1977 accepted the plea of assessed in respect of certain deductions and directed allowance of these liabilities. On 18.3.1978 the Commissioner of Wealth-tax (in short the Commissioner) issued a show cause to the assessed u/s 25(2) of the Act as to why the value of the flat in Himalya House should not be enhanced. assessed 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 AAC. Several other objections with which we presently are not concerned were raised. The Commissioner rejected the contentions, set aside the assessment 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 Commissioner, appeal was filed before the Tribunal. Stand of the assessed 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. Tribunal accepted this plea. On being moved for making a reference, the question has been referred for our opinion.

3. We have heard the learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of the notice.

4. Main point for adjudication is whether a point which was not 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.

5. The principles relating to 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 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 revision al 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 as the only final judgment;

(iv) the doctrine of merger does not apply where an appeal is dismissed (i) for default, (ii) as having abated by reason of the omission of the appellant to implead the legal representatives of a deceased respondent; (iii) as barred by limitation;

(v) an appeal dismissed in liming 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 liming as barred by time.”

6. These principles were noted by this Court in Commissioner of Income Tax Vs. Eurasia Publishing House (P.) Ltd., .

7. In State of Orissa and others Vs. M/s. Krishna Stores, , the Apex Court observed as follows:

“In the case of State of Madras Vs. Madurai Mills Co. Ltd. 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 case 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 doc trine of merger to the appellate order.”

8. 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.

9. We, Therefore, answer the question referred in the negative, in favor of the Revenue and against the assessee.

10. The reference is disposed of accordingly.

(2000) 163 CurTR 211 : (2000) 245 ITR 838 : (2000) 113 TAXMAN 11

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