Commissioner of Income-tax, Bombay vs M/S. Amritlal Bhogilal and Co

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 128 of 1955

Decision Date: 28 April 1958

Coram: P.B. Gajendragadkar, A.K. Sarkar

In the matter titled Commissioner of Income-Tax, Bombay versus M/s Amritlal Bhogilal & Co, the Supreme Court delivered its judgment on 28 April 1958. The bench comprised Justice P. B. Gajendragadkar, Justice A. K. Sarkar and Justice T. L. Venkatarama Sarkar. The dispute arose under the Indian Income-Tax Act, 1922 (XI of 1922) and involved sections 26A, 31 and 33B(1). The respondent firm had been assessed to income tax for the assessment years 1947-48, 1948-49 and 1949-50 pursuant to section 23(3). Subsequently, the Income-Tax Officer renewed the firm’s registration under section 26A and, exercising authority under section 23(6), allocated the individual shares of the partners. The firm challenged the assessment orders before the Appellate Assistant Commissioner. On 4 November 1950 the Assistant Commissioner partially allowed the appeals concerning the years 1947-48 and 1948-49, leaving the appeal for 1949-50 unresolved. During the pendency of the latter appeal, the Commissioner, invoking section 33B(1), issued a notice, conducted a hearing and on 5 June 1952 cancelled the registration granted under section 26A on the basis that one partner was a minor. The Commissioner also directed the Income-Tax Officer to make fresh assessments for all three years. The firm appealed this cancellation to the Appellate Tribunal, which set aside the Commissioner’s order. The Tribunal, on an application by the Commissioner, referred three questions to the High Court of Bombay under section 66(1) of the Act. The High Court held that for the years 1947-48 and 1948-49 the registration orders of the Income-Tax Officer had merged into the appellate orders of the Assistant Commissioner, thereby precluding any revisional power of the Commissioner under section 33B(1). Regarding the renewal of registration for 1949-50, the High Court concluded that the Commissioner could not exercise his revisional power because the propriety of the registration order was still open to review by the Assistant Commissioner in the pending appeal.

The Commissioner subsequently obtained special leave to appeal the High Court’s decision. The Supreme Court examined whether the Commissioner possessed authority under section 33B(1) to set aside the registration orders made by the Income-Tax Officer. The Court observed that an order of registration issued by the Income-Tax Officer is not appealable before the Appellate Assistant Commissioner; such an order may be revoked by the Commissioner in exercise of his revisional powers under section 33B(1). However, the Court clarified that the Appellate Assistant Commissioner does not have the power to cancel a registration order even while dealing with an appeal filed by an assessee. Consequently, the Commissioner’s power to cancel the registration remained intact, but his revisional jurisdiction could not be employed to nullify the assessment orders themselves. The Court further noted that the Commissioner’s intention in cancelling the registration was not to overturn the assessments but to direct the Income-Tax Officer to make appropriate procedural adjustments for the recovery of tax due. It was emphasized that the existence or absence of registration does not alter the calculation of taxable income; rather, registration governs the method of tax recovery.

The Court observed that the principle whereby the order of a tribunal is merged into the order of an appellate authority did not extend to the order of registration issued by the Income-tax Officer. In support of this view, it referred to Commissioner of Income-tax, Bombay North v. Tejaji Farasram Kharawala, reported in 1953 at 23 I.T.R. 412. It noted, however, that the earlier decision in Durgabati and Narmadabala Gupta v. Commissioner of Income-tax, reported in 1956 at 30 I.T.R. 101, was expressly disapproved. The Court then clarified that, while exercising his revisional jurisdiction under section 33B(1) of the Income-tax Act, the Commissioner does not possess the power to set aside assessment orders. In the present matter, the Commissioner’s intention was not to overturn the assessments themselves; rather, he sought to direct the Income-tax Officer to make appropriate consequential amendments concerning the machinery or procedure to be employed in recovering the tax liability of the respondent. The Court emphasized that whether a firm is registered or not does not influence the calculation of its taxable income; registration merely determines the procedure to be followed for the recovery of tax that is found due. To illustrate this principle, the Court referred to Shapurji Pallonji v. Commissioner of Income-tax, Bombay, reported in 1945 at 13 I.T.R. 113. The judgment proceeded under civil appellate jurisdiction, being Civil Appeal No. 128 of 1955, filed by special leave against the Bombay High Court judgment and order dated 5 March 1953 in I.T.R. No. 40 of 1952. For the appellant, the counsel included the Additional Solicitor-General of India together with two other advocates, while the respondent was represented by counsel. The appeal was decided on 28 April 1958, and the judgment was delivered by Justice Gajendragadkar. The case raised a concise question of law under section 33B of the Income-tax Act. The respondent, who was the assessee, had been registered as a firm under section 26A of the Act for the financial year 1946-47. For the assessment years 1947-48, 1948-49 and 1949-50, the Income-tax Officer made assessments on 7 June 1949 (twice) and on 23 September 1949 respectively, invoking section 23(3) of the Act. In each case the Officer estimated the respondent’s profit pursuant to the proviso of section 13 and computed total incomes of Rs 95,053, Rs 93,430 and Rs 83,752 for the three years. The respondent subsequently applied for and obtained a renewal of the firm’s registration, and the Officer also issued an order under section 23(6) allocating the shares of the various parties. The respondent challenged those assessment orders by filing an appeal before the Appellate Assistant Commissioner. On 4 November 1950, the Appellate Assistant Commissioner reduced the estimated profit by Rs 28,250 for the year 1947-48 and by Rs 19,000 for the year 1948-49. The appeal relating to the assessment year 1949-50 remained pending before the same Commissioner. During this period the Commissioner of Income-tax became aware that the firm, although having received a renewal of registration from the Income-tax Officer, was not a firm that could lawfully be registered under the Act because one of its partners was a minor.

It was discovered that one of the partners of the firm was a minor, which meant the firm could not be legally registered under the statute. Consequently, the Commissioner of Income-Tax invoked section 33B(1) of the Act and issued a notice requiring the respondent to explain why the assessments made pursuant to section 23(3) and the registration granted under section 26A should not be cancelled. After hearing both sides, the Commissioner, on 5 June 1951, cancelled the firm’s registration under section 26A and directed the Income-Tax Officer to make fresh assessments against the respondent as an unregistered firm for each of the three assessment years in question.

Following the Commissioner’s revisional order, the Income-Tax Officer issued fresh assessment orders. The respondent then filed five separate appeals before the tribunal: two appeals challenged the orders of the Appellate Assistant Commissioner made under section 31 and relating to the assessment years 1947-48 and 1948-49; the remaining three appeals contested the Commissioner’s orders issued under section 33B(1) and concerned the assessment years 1947-48, 1948-49 and 1949-50. In those three appeals the respondent argued that the Commissioner lacked legal competence to set aside an assessment that had already been confirmed or modified by the Appellate Assistant Commissioner; that the Commissioner’s orders under section 33B(1) were legally defective because they directed the Income-Tax Officer to prepare an order in a prescribed manner; and that the Income-Tax Officer’s subsequent orders were unlawful because they were made without giving the respondent notice or an opportunity to be heard, as required by the Act.

The tribunal, on 2 January 1952, accepted the respondent’s contentions and allowed the three appeals. The appellant then invoked section 66(1) of the Act, requesting that the tribunal refer certain questions to the High Court for its opinion. The tribunal formulated three specific questions and referred them to the High Court of Bombay: (1) whether, in the facts of this case, the Commissioner acting under section 33B(1) could set aside the orders of the Appellate Assistant Commissioner for the assessment years 1947-48 and 1948-49; (2) whether the Commissioner’s order dated 5 June 1951 was ultra vires because it directed the Income-Tax Officer to issue an order in a particular manner; and (3) whether the Income-Tax Officer’s orders dated 21 June 1952 were invalid because no fresh notices, as required by sections 22 and 23 of the Income-Tax Act, were served on the assessee. The High Court heard these matters on 5 March 1953 and proceeded to consider the issues concerning the assessments for the years 1947-48 and 1948-49.

In the hearing before the High Court, the bench held that the issue raised by the appellant had already been decided by the earlier judgment of the High Court in Commissioner of Income-Tax, Bombay North v. Tejaji Farasram Kharawala (1). That precedent explained that where a tribunal decision is appealed and the appellate court, after hearing the appeal, issues its own order, the original tribunal order ceases to exist and is merged into the appellate order; consequently, even if the appellate court merely confirms the tribunal’s decision, the operative order is the one issued by the appellate court and not the tribunal’s original order. Applying that principle, the High Court concluded that the Income-tax Officer’s order (1) [1953] 23 I.T.R. 412 granting registration to the respondent was subsumed in the appellate order, and therefore the Commissioner of Income-Tax could not exercise his revisional power in respect of that order. The same reasoning was adopted by the Patna High Court in the majority judgment of Durgabati and Narmadabala Gupta v. Commissioner of Income-tax (1). Regarding the Income-tax Officer’s order which renewed the respondent’s registration for the year 1949-50, the High Court similarly held that the Commissioner’s revisional jurisdiction could not be invoked because the propriety of that renewal order was open to consideration by the Appellate Assistant Commissioner in the pending appeal, as discussed in Commissioner of Income-tax v. Amritlal Bhogilal (subnom) (2). For this particular order, the High Court formulated an additional question: “Whether the order of the Commissioner acting under s. 33B(1) setting aside the order of the Income-tax Officer where an appeal against that order was pending before the Appellate Assistant Commissioner was valid?” The bench answered this ancillary question in favour of the assessee, thereby concluding that the Commissioner’s order cancelling the respondent’s registration for all three assessment years was invalid. Because of this conclusion, the High Court considered it unnecessary to answer the remaining two questions originally framed by the tribunal. Subsequently, the appellant’s application to the High Court for a certificate under s. 66A(2) was rejected. The appellant then obtained special leave to appeal before this Court on 22 March 1954. In the present appeal, the appellant contended that the High Court’s view—namely, that the Commissioner could not exercise revisional power over the Income-tax Officer’s order granting registration for the three years—was based on a misinterpretation of the relevant provisions of s. 33B of the Act. Section 33B(1), which confers revisional power on (1) [1956] 30 I.T.R. 101. (2) [1953] 23 I.T.R. 420, provides that the Commissioner may call for and examine the record

The Commissioner may, under the provisions of section 33B(1) of the Act, require the records of any proceeding conducted under the Act to be produced and examined. If, after such examination, he is of the opinion that an order issued by an Income-tax Officer is erroneous to the extent that it prejudices the revenue, the Commissioner is empowered to take further action. Before taking any such action he must grant the assessee an opportunity to be heard, and he may also order any inquiries that he deems necessary. Depending on the facts of the case, the Commissioner may then issue an order that could enhance or modify the assessment, cancel the assessment, or direct that a fresh assessment be made. Section 33B(2) stipulates that orders of re-assessment made under section 34 are not subject to revision under section 33B(1) and further provides that the revisional power cannot be exercised after two years have elapsed from the date of the order that is sought to be revised. Section 33B(3) confers upon the assessee the right to file an appeal to the appellate tribunal against any revisional order of the Commissioner within the time prescribed by law, while section 33B(4) sets out the procedure for filing such an appeal. In the present proceedings the Court was required to resolve two specific questions framed under section 33B(1). The first question asked whether an order granting registration to the assessee firm, issued by the Income-tax Officer, continues to exist as a separate order of the Income-tax Officer even after the assessee’s appeal against the assessment—made on the basis that the firm was a registered entity—has been finally disposed of by the Appellate Assistant Commissioner. In other words, the Court considered whether, once the Appellate Assistant Commissioner has heard and decided the appeal against the assessment, the original registration order together with the subsequent assessment order merge into the appellate order. If, as a matter of law, the registration order is deemed to merge into the final appellate order, then the Commissioner’s revisional power could not be exercised with respect to that registration order. This issue arose with respect to the registration orders concerning the assessment years 1947-48 and 1948-49. The second question was whether the registration order relating to the assessment year 1949-50 could be the subject of the Commissioner’s revisional power even though, at the relevant time, the assessee’s appeal against the assessment for that year remained pending before the Appellate Assistant Commissioner. The Court noted that, where a statutory appeal exists against a tribunal’s order, the decision of the appellate authority becomes the operative legal decision. When the appellate authority modifies, reverses, or even simply confirms the tribunal’s decision, that appellate decision is the one that is enforceable, and the original tribunal decision merges into it. Consequently, the original order ceases to have independent effect and is subsumed within the appellate decision.

In this case the Court considered whether the legal principle that an appellate decision becomes the sole operative order, capable of enforcement, can also be applied to the order issued by an Income-tax Officer that grants registration to a firm. To answer that question it was first necessary to examine the statutory provisions governing the grant of registration under the Income-Tax Act. Section 26A of the Act prescribes the procedure for registration of firms; a firm must file an application that contains the particulars specified in that section and in the material rules made thereunder. When the Income-tax Officer grants registration, the Officer is then authorised to follow the procedure laid down in section 23(5)(a) for issuing assessment orders against the registered firm. Conversely, if a firm is not registered, the Officer must apply the procedure of section 23(5)(b) when making assessment orders against an unregistered firm. Regardless of whether registration has been obtained, a firm remains an assessee within the meaning of section 2(2) of the Act. The statute does not impose any duty on firms to apply for registration, nor does it define the legal effect of registration or enumerate any specific rights that accrue to a firm upon registration. Sections 23(5)(a) and (b) merely provide the machinery for the collection or recovery of tax and cannot be interpreted as charging provisions. Consequently, even when a firm is registered pursuant to an application made under section 26A, the firm’s liability for tax and that of its individual partners is determined in the same manner as any other assessee, based on the total income assessed by the Income-tax Officer under sections 3 and 4 of the Act. The computation of taxable income is therefore unaffected by the procedural mechanism described in section 23(5). The Court noted that the decision in Shapurji Pallonji v. Commissioner of Income-Tax, Bombay, which was relied upon by counsel, clearly supports this view. It is true that the Income-tax Officer may employ the two different methods prescribed in sections 23(5)(a) and (b) to determine the tax payable by registered and unregistered firms respectively, and to issue the corresponding demand for tax. However, the choice of method does not alter the way taxable income is calculated. It is essential to recognise that the order granting registration to a firm is an independent and separate order; its sole effect is to dictate the procedural route that will be used in collecting or recovering any tax that is subsequently assessed as due. The Court also observed that the registration granted by the Income-tax Officer may be withdrawn by the Officer either under section 23(4) of the Act or under rule 6B of the Income-Tax Rules. Moreover, the Commissioner has the power to cancel the registration order under section 33B(1). The respondent’s argument, however, was that as a consequence of the appeal filed against the assessment order, the registration order should no longer be considered an order of the Income-tax Officer in the same sense.

When the appellant filed an appeal against the Income-tax Officer’s assessment order, the registration order that the Officer had earlier issued in favour of the respondent ceased to remain an operative order of the Officer. Consequently, the Court had to examine whether, in such circumstances, the department could challenge the registration order before the Appellate Assistant Commissioner while the assessee firm was pursuing its appeal against the assessment. The answer to this issue depended on the provisions governing appeals to the Appellate Assistant Commissioner and on the powers that the Commissioner was authorised to exercise under those provisions.

Section 30(1) of the Act confers upon the assessee the right to prefer appeals against the specific orders listed in that section. For example, the firm may contest the amount of income that has been assessed under section 23 or under section 27. The firm may also challenge an order of the Income-tax Officer that refuses to register it under section 23(4) or under section 26A, and it may likewise dispute an order that cancels a registration that was previously granted under section 23(4). It is noteworthy that while the statute permits an appeal against orders issued by the Income-tax Officer under section 23(4) or section 26A—orders that either refuse to register the firm or cancel an existing registration—it does not allow the department to file an appeal against an order that grants registration.

In other words, the scheme of the Act regarding appeals to the Appellate Assistant Commissioner is expressly designed to give only the assessee the right to appeal; the department is not accorded a similar right. Therefore, there can be no doubt that an order granting registration to a firm by the Income-tax Officer cannot be converted into the subject-matter of an appeal before the Appellate Assistant Commissioner.

The Court then turned to the next question: whether the department could challenge the registration order during the hearing of the firm’s appeal against the final assessment order made by the Income-tax Officer. The powers of the Appellate Assistant Commissioner are enumerated in section 31 of the Act. Under section 31(3)(a), the Commissioner is empowered to confirm, reduce, enhance, or annul the assessment that is under appeal. Section 31(3)(b) expands the Commissioner’s authority, allowing the appellate authority to set aside the assessment or to direct the Income-tax Officer to make a fresh assessment after conducting any further inquiry that the Officer deems appropriate or that the Commissioner himself directs. Moreover, the Commissioner is also authorised, in cases involving an order that cancels registration under sub-section (4) of section 23, an order that refuses registration under sub-section (4) of section 23 or under section 26A, or an order that requires a fresh assessment under section 27, to confirm such an order.

Section 31 of the Act authorized the Appellate Assistant Commissioner either to cancel the registration order or to direct the Income-tax Officer to register the firm or to make a fresh assessment, as the circumstances required. The same provision further provided that, at the hearing of an appeal against any order of an Income-tax Officer, the Officer was entitled to be heard either personally or through a representative. Consequently, the statute conferred very wide powers on the Appellate Assistant Commissioner, but it also imposed a prerequisite that the Commissioner must first hear the Income-tax Officer or his representative before exercising any of those powers. Counsel for the respondent argued before the Court that, because of these provisions, the Appellate Assistant Commissioner, after hearing the Income-tax Officer or his representative, could set aside the registration order issued by the Income-tax Officer in an appropriate case. The Court was not prepared to accept that line of reasoning. The Court observed that, however extensive the powers of the Appellate Assistant Commissioner might be, they must be exercised only in respect of matters that are specifically made appealable under section 30(1) of the Act. If a particular order had been expressly excluded from the Commissioner’s jurisdiction, the appellate authority could not entertain a plea questioning the correctness, propriety, or validity of that order. To accept the respondent’s contention would, in effect, grant the department a right of appeal against the registration order, a result that was inconsistent with the legislative scheme, which did not intend to give the department a right of appeal to the Appellate Assistant Commissioner against any order of the Income-tax Officer. The Court noted that the registration order could be cancelled by the Income-tax Officer himself either under rule 6B or under section 23(4), and it could also be cancelled by the Commissioner exercising revisional powers under section 33B. However, the Appellate Assistant Commissioner could not cancel the registration order in the exercise of his appellate jurisdiction under section 31. While dealing with an assessee’s appeal against an assessment order the Appellate Assistant Commissioner might modify the assessment, reverse it, or remit it for further enquiry, any order that the Commissioner issued in respect of the matters raised in the appeal could not affect the registration order made by the Income-tax Officer. Accordingly, the registration order lay outside the jurisdiction of the Appellate Assistant Commissioner and did not form part of the proceedings before the appellate authority. Even after the appeal was decided and the appellate order became the only enforceable order, the only order that merged into the appellate order was the Income-tax Officer’s assessment order that was under appeal; the registration order, which was never within the appellate jurisdiction, could not and did not merge into the appellate decree.

The Court observed that the matter under consideration did not form the subject-matter of an appeal before the appellate authority. Consequently, the doctrine that an order of a tribunal merges into the order of the appellate authority could not be applied to the order of registration issued by the Income-tax Officer in the case before the Court. In examining the submissions, the Court referred to the argument advanced by counsel for the respondent, who had vigorously pressed the proposition that, when the Appellate Assistant Commissioner entertained the assessee’s appeal, he effectively recomputed the assessee’s total taxable income. According to that submission, the Commissioner, in discharging his duty, was entitled to consider every relevant and incidental question that arose in the course of the appeal. To support this line of reasoning, counsel cited the English decision in Rex v. The Special Commissioner of Income-Tax (ex parte Elmhirst) [1935] 20 Tax Cas 381. In that case the King’s Bench Division had been asked whether, after a notice of appeal had been filed, the appellant could withdraw the appeal; the Court had held that once the notice of appeal was given, the appellate authority was not only entitled but also bound to ensure that a true assessment of the taxpayer’s liability was arrived at. The Court expressed its inability to discern how that decision could assist the respondent in the present matter. While acknowledging that an appeal before the Appellate Assistant Commissioner required the Commissioner to examine the case afresh, the Court stressed that such fresh examination could not expand the scope of the appellate jurisdiction to include matters that the statute expressly omitted. The Court noted that if section 30(1) did not provide for an appeal against a particular order, the legislature must have intended that the correctness of that order could not be challenged before the appellate authority. Accordingly, the jurisdiction and powers of the appellate authority had to be determined strictly by the specific provisions of the Income-Tax Act that were applicable.

In order to illuminate the distinction between the powers available to the appellate authority and those available to the Commissioner on revision, the Court compared the revisional powers conferred by sections 33A and 33B of the Act. Under section 33A, the Commissioner’s revisional power could not be exercised to the prejudice of the assessee. This power could be invoked with respect to orders issued by any authority that was subordinate to the Commissioner, but the revisional order could never adversely affect the assessee. The Court highlighted that the explanation to section 33A expressly deemed the Appellate Assistant Commissioner to be an authority subordinate to the Commissioner. Consequently, when exercising this revisional power, the Commissioner could modify or reverse even the orders passed by the Appellate Assistant Commissioner in favour of the assessee. By contrast, the Court explained that the revisional power under section 33B operated differently. Section 33B authorised the Commissioner to revise only those orders that were passed by the Income-tax Officer. Orders issued by the appellate authority were expressly excluded from the purview of section 33B. This distinction formed a key difference between the two revisional powers. The Court also noted another salient contrast: whereas the revisional jurisdiction under section 33A was barred from being exercised to the prejudice of the assessee, the jurisdiction under section 33B permitted the Commissioner, in the exercise of his revisional power, to make orders that could be prejudicial to the assessee. This comparative analysis set the stage for the Court’s subsequent determination that the registration order of the Income-tax Officer could be revised under section 33B, even though it was not appealable before the Appellate Assistant Commissioner.

In this case, the Court explained that unlike the power under section 33A, which cannot be used to the prejudice of the assessee, the power conferred by section 33B permits the Commissioner, when exercising his revisional authority, to issue orders that may be adverse to the assessee. It was not contested that, under section 33B, the Commissioner may revise orders of the Income-tax Officer that are erroneous and that cause prejudice to the revenue. The order of the Income-tax Officer that had registered the firm was not open to appeal; consequently, that order could not be the subject of a proceeding before the Appellate Assistant Commissioner. Because the registration order was not appealable, the Commissioner was free to revisit it under section 33B whenever he was of the opinion that the order had been wrongly made. In the facts before the Court, there was no doubt that the respondent firm could not lawfully be registered because one of its partners was a minor; therefore, on the merits, the Commissioner’s decision to set aside the registration was correct. Accordingly, the Court held that the High Court was mistaken in concluding that the Commissioner lacked authority to set aside the Income-tax Officer’s registration order for the years 1947-48 and 1948-49. The matter concerning the subsequent year 1949-50 did not raise any new difficulty. At the relevant time, the respondent had filed an appeal against the Income-tax Officer’s assessment order for that year, and the appeal was pending before the Appellate Assistant Commissioner. Because the appeal was still pending, no issue of merger arose with respect to the order that renewed the firm’s registration for 1949-50. Even assuming a theory of merger, the existence of a pending appeal may place the appealed order in a vulnerable position, but the order remains in force and legally effective until the appeal is finally disposed of. It is therefore incorrect to argue that the mere pendency of an appeal automatically suspends the operation of the order that is under appeal. The High Court, however, appeared to regard the revisional power under section 33B as an extraordinary power that could be exercised only for unusual and extraordinary reasons. The High Court further assumed that, because an appeal was pending, the tax department possessed an alternative remedy; it suggested that the department could have contested the validity or propriety of the respondent’s registration and could have urged the Appellate Assistant Commissioner to cancel it. As the Court observed, the department could not challenge the validity of the registration order within the assessee’s appeal before the appellate authority, and therefore the contention that an alternative remedy existed was inaccurate. The High Court’s conclusion was evidently influenced by the mistaken belief that such an alternative remedy was available. The argument that the extraordinary revisional power must be employed only for extraordinary reasons consequently became immaterial. The Court emphasized that the determination of whether the revisional power may be exercised in any particular case must be based solely on the provisions of section 33B itself. the

In interpreting the provisions of section 33B, the Court held that it could not impose any further restrictions on the exercise of that power based on speculative policy considerations or on the notion that the power was extraordinary. Accordingly, the Court concluded that the High Court had erred when it found that the Commissioner lacked authority to cancel the respondent’s registration for the fiscal year 1949-50. As a result, the opinion of the High Court was reversed, and both the principal question formulated by the tribunal and the additional question raised by the High Court were to be decided in favour of the appellant. The tribunal had also framed two further questions that the High Court had not addressed. Counsel for both parties agreed that it was unnecessary to remit those two questions to the High Court with an instruction to deal with them according to law. Both sides conceded that, if the principal issue concerning the Commissioner’s power under section 33B(1) to cancel the registration was answered in favour of the appellant, the two remaining questions would become merely academic and would likewise have to be answered in favour of the appellant. The Commissioner’s order, it was noted, sought to set aside the assessment orders made under sections 23(3) and 55 and directed the Income-Tax Officer to make fresh assessments in accordance with law for each of the years involved. When that portion of the order is read literally, it opens the door to the respondent’s objection. The assessment orders for the years 1947-48 and 1948-49, however, had been altered by the Appellate Assistant Commissioner, and therefore they were no longer the direct orders of the Income-Tax Officer; consequently, the Commissioner could not have exercised his revisional authority under section 33B(1) against those appellate orders. Nonetheless, the Court was inclined to believe that the Commissioner did not intend to overturn the assessments in that narrow sense. A reading of the entire order shows that, after cancelling the respondent’s registration, the Commissioner intended to direct the Income-Tax Officer to make the appropriate consequential amendment to the machinery or procedure that would be used to recover the tax owed by the respondent. It is further conceded that, in a subsequent order, the Income-Tax Officer accepted the figure for the respondent’s taxable income as determined by the appellate authority for the relevant years and proceeded under section 23(5)(b) on the basis that the respondent was an unregistered firm. Accordingly, the Court could not hold that the Commissioner’s order was unlawful simply because he instructed the Income-Tax Officer to issue the order in a particular manner. The answer to question No. 2 would therefore follow the same reasoning.

In this case the Court observed that the answer to the second question would be negative, and then turned to the third question. The Court found it difficult to see how the third question could arise from the proceedings that had been before the tribunal. That question sought to challenge the validity of the procedure that the Income-tax Officer had used when he made fresh orders against the respondent. The Court pointed out that the fresh orders were clearly taken after the Commissioner’s order made under section 33B(1), and therefore the tribunal could not have permitted the respondent to raise that contention in the appeals that had been filed against the Commissioner’s order under the same provision. The Court also noted that the counsel for the respondent had fairly conceded that when the Income-tax Officer merely adopted a different method of recovering the tax payable after the respondent’s registration had been cancelled, there was no occasion or need to issue another notice to the respondent. Consequently the Court held that the answer to the third question must also be negative. As a result, the Court concluded that all the questions framed in the appeal were answered in favour of the appellant. Accordingly, the order of the High Court was set aside, the appeal was allowed, and costs were awarded throughout.