T.U. Mehta, C.J.
1. In this reference, the Income-tax Appellate Tribunal, Chandigarh, has referred the following question to this High Court for its opinion :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in setting aside the orders of the Additional Commissioner of Income-tax cancelling the registration of the assessee-firm for the assessment year 1967-68 and continuation of registration for the assessment years 1968-69 and 1969-70 ?'
2. The question arises in the background of the following facts :
The respondent-firm was said to have been constituted on April 1,1966, for working as forest contractors and timber merchants pursuant toa partnership deed which was dated July 26, 1966. An application forregistration of this partnership was filed before the concerned ITO and itis said to have been presented on June 16, 1966. By his order dated June 9,1969, the ITO granted registration for the assessment year 1967-68 andthis registration was allowed to be continued even for the succeeding years1968-69 and 1969-70.
2. Thereafter the ITO discovered that the assessee's application for registration, which was stated to have been received on June 16, 1966, along with the partnership deed was actually not received on that date because the partnership deed was dated July 26, 1966, which could not have come into existence on June 16, 1966. The ITO, therefore, cancelled the registration under Section 186(1) for all the three assessment years in question. It is found that the assessee also gave it in writing that the firm should be treated as an unregistered firm for these three years. The order of the ITO cancelling this registration for all the three years was dated June 10, 1970.
3. On account of the cancellation of the registration and the treatment of the firm as an unregistered firm, the assessee preferred an appeal before the AAC. In this appeal, the AAC took the view that the order of the ITO cancelling the registration of the firm on June 10, 1970, was wrong in view of the fact that he had not recorded any finding to the effect that the firm was not a genuine one. He, therefore, set aside the ITO's order cancelling the registration and restored the registration of the firm by his order dated April 20, 1971.
4. It is found that while the appeal was pending before the AAC against the cancellation of the registration, the Addl. CIT called for the records and issued show-cause notice to the assessee on March 15, 1971, pursuant to his revisional powers under Section 263(1) of the I.T. Act, 1961. By this notice, he called upon the assessee to show cause why the registration orders passed under Sections 185(1) and 184(7) as well as the cancellation orders passed under Section 186(1) should not be cancelled. It should be noted here that it is not understood why the Commissioner wanted to cancel the order passed by the ITO under Section 186(1) cancelling the registration of the firm. Be that as it may, the fact remains that such a show-cause notice was issued by the Commissioner and as a result of this revision proceeding, he ultimately cancelled the registration which was granted by the ITO by his order dated June 9, 1969. This final order of the Commissioner is dated May 26, 1971, by which time the AAC had already restored the registration by his order dated April 20, 1971.
5. The above-referred order of the Commissioner was challenged by the assessee by preferring appeals to the Tribunal. The Tribunal took the view that revisional powers vested in the Commissioner under Section 263(1) could be exercised only with a view to revise a prejudicial order passed by the ITO and not an order passed by an AAC. The Tribunal further held that the order granting registration, which was passed by the ITO, was subsequently cancelled by the ITO himself and an appeal over that cancellation order was preferred by the assessee to the AAC, who had restored the registration by his order dated April 20, 1971, and, therefore, what the Commissioner did amounted to revision of the order passed by the AAC on April 20, 1971. According to the Tribunal, the Commissioner had no such revisional jurisdiction under Section 263(1) of the Act.
6. In view of this order of the Tribunal, the above-quoted question has been referred to us at the instance of the department.
7. We find that the question under consideration is very simple and is covered by the decision given by the Supreme Court in CIT v. Amritlal Bhogilal & Co. : 34ITR130(SC) , wherein the Supreme Court has observed that if the appellate authority modifies or reverses the decision of a Tribunal, it is obvious that it is the appellate decision that is effective and canbe enforced. In support of this proposition, the Supreme Court has invoked the doctrine of merger according to which the original decision merges in the appellate decision, and, hence, it would be the appellate decision alone which remains operative and capable of enforcement.
8. What has happened in this case is that by the appellate order of the AAC passed on April 20, 1971, the original order granting registration passed by the 1TO on June 9, 1969, was restored. The subsequent order of the ITO cancelling the registration as well as the previous order granting registration merged in the appellate order passed by the AAC on April 20, 1971. Therefore, when the Commissioner passed his order about a month after the AAC's order on May 26, 1971, what he was doing was to revise the order of the AAC and not the order of the ITO. Since the Commissioner had no jurisdiction to revise the order of the AAC acting under Section 263(1) of the Act, we are of the opinion that the view taken by the Tribunal is correct. The question which is, therefore, referred to us by the Tribunal is answered accordingly. The papers be sent back to the Tribunal for dealing with the case in accordance with the opinion expressed by us above. The reference is accordingly disposed of. It is further ordered that the applicant-department shall pay to the assessee the costs of this reference.