R. S. PATHAK C.J. - The petitioners pray for a writ in the nature of certiorari quashing an order dated August 26, 1970, of the Income-tax Officer, 'A' Ward, Mandi, setting aside an assessment order and re-opening the assessment proceedings.
The first petitioner, M/s. Ram Lal Ishwar Dass, is a partnership firm carrying on business at Kulu. The second petitioner, Shri Balwant Rai, is one of the partners. The petitioner-firm has been regularly assessed under the Income-tax Act, 1961. In proceedings for the assessment year 1969-70 the petitioners failed to comply with a notice under section 143(2) and appear on January 5, 1969, and accordingly an ex parte assessment order was made under section 144 of the Act. The petitioners applied under section 146 of the Act for setting aside the ex parte assessment order and re-opening the assessment proceeding. They also preferred an appeal under section 246 of the Act before the Appellate Assistant Commissioner of Income-tax. The appeal was disposed of first. On June 11, 1970, the Appellate Assistant Commissioner allowed the appeal in part and reduced the assessed income of Rs. 75,470 by Rs. 27,055. Thereafter, when the application under section 146 of the Act came on before the Income-tax Officer, 'A' Ward, Mandi, the petitioners filed an application pointing out that their appeal had been disposed of on the merits by the Appellate Assistant Commissioner and that, therefore, the application under section 146 of the Act had become infructuous. The Income-tax Officer, however, took the view that sections 146 and 250 of the Act were independent of each other, and, therefore, the mere disposal of the appeal under section 250 did not make the application under section 146 infructuous. He observed that the could not permit the assessee to withdraw the application. Holding that the assessee had been prevented by sufficient cause from complying with the notice issued under section 143(2), he made an order dated August 26, 1970, cancelling the assessment order and re-opened the assessment proceeding. By this writ petition, the petitioner prays for relief against that order.
The petitioners contend that as the appeal had been disposed of on the merits by the Appellate Assistant Commissioner the assessment order must be considered as having merged in the appellate order and as, therefore, the application under section 146 of the Act for cancelling the assessment order had become infructuous the Income-tax Officer had no jurisdiction to make the impugned order. A perusal of the appellate order shows that the assessment was assailed by the petitioners on its merits, and the Appellate Assistant Commissioner found substance in three of the four grounds urged before him. He held that, (1) the Income-tax Officer was not justified in rejecting the accounts and adding Rs. 14,740 in the rice, maize, wheat and atta accounts, (2) the addition by the Income-tax Officer of Rs. 2,515 in karyana account should be reduced to Rs. 1,500, (3) the Income-tax Officer was justified in disallowing Rs. 1,000 in the shop expenses account, and (4) the Income-tax Officer was not right in treating an amount of Rs. 11,200 as the income of the assessee from an undisclosed source, and therefore, the addition was deleted. It is not shown that there was any part of the assessment order which was not considered by, and covered by a finding of, the Appellate Assistant Commissioner. That being so, the entire assessment order must be taken to have merged in the appellate order. Once that conclusion is reached, in my opinion, there can be no doubt that the application under section 146 of the Act had become infructuous. The Income-tax Officer could act under section 146 of the Act and cancel the assessment only if an assessment order still remained on the record. He could not cancel the assessment and re-open the assessment proceeding when the Appellate Assistant Commissioner had already superseded the assessment order by his appellate order, which appellate order having been passed on the merits must be considered as replacing the assessment order in regard to the several matters considered therein. The appellate order constitutes an assessment of the petitioners income made by the Appellate Assistant Commissioner. In the circumstances, there is no room left in law for the Income-tax Officer, who is an inferior authority, to make an assessment.
The respondents urge that having filed an application under section 146 of the Act the petitioners were not entitled to withdraws it. In the present care, the question whether the application should be allowed to be withdrawn does not arise. The application had become infructuous. It became infructuous because it could no longer seek any relief against an assessment order which had already been set aside in appeal. An application can be subject to withdrawal only if it is otherwise a live application, that is, an application which can be entertained and decided. Once the assessment order was set aside, the entire substratum of the proceeding under section 146 stood removed and the application automatically fell with it. The rulings cited before me on behalf of the respondents in support of the proposition that an application under section 146 of the Act cannot be withdrawn as of right are, to my mind, not pertinent to the case. The respondents also rely on Mrs. Freny Rashid Chenai v. Assistant Controller of Estate Duty : 90ITR31(AP) and Karsandas Bhagwandas Patel v. G. V. Shah, Income-tax Officer, Rajkot : 98ITR255(Guj) . Those cases cannot assist the respondents because in the present case there is nothing to show that the entire assessment made by the Income-tax Officer was not superseded by the order of the Appellate Assistant Commissioner.
Accordingly, the writ petition is allowed, and the order dated August 26, 1970, made by the Income-tax Officer, A Ward, Mandi, and the proceedings taken consequent thereto are quashed. The petitioners are entitled to their costs, which I assess at Rs. 100 as a single set of cost.