Bhagwati, C.J.
1. This references raises a rather important question affecting the jurisdiction of the Tribunal under the provisions of the Income-tax Act, 1961. The reference arises out of an assessment made on the assessee for the assessment year 1964-65. The assessees is a private limited company and in the course of its assessment for the assessment year 1964-65, the assessee made, inter alia, three claims for deduction : one was from depreciation in respect of the land on which stood the building of the assessee; the other was for develop rebate in respect of certain machinery installed during the relevant account year and the third was for a sum of Rs. 25,920 begins the aggregate amount of stamp duty, registration charges, lawyer's fees and the miscellaneous expenses incurred by the assessee in connection with the issue of debentures secured on the fixed assets of the assessee and issue to the Bank of India Ltd. to secure a loan borrowed for the purpose of the business of the assessee. Out of these three claims, the first was rejected by the Income-tax Officer and the second was partially disallowed and so far as the third was concerned, it was wholly disallowed on the ground that it represented capital expenditure. The assessee being aggrieved by the order of assessment preferred an to the Appellate Assistant Commissioner and in the memorandum of appeal, amongst other, two ground were taken, on relating to the disallowance of the whole of the first claim and the other relating to the partial disallowance of the second claim and relief was sought that these two claims should be fully allowed as permissible deductions. The disallowance of the third claim which is the one with which we are concerned in the present reference was not challenged by the assessee in the memorandum of appeal, nor did it from the subject-matter of any ground of appeal. No leave of the Appellant Assistant Commissioner was also sought to urge it as an additional ground of appeal. The result was that the Appellate Assistant Commission was not called upon to consider and decide whether the disallowance of the third claim was properly made by the Income-tax Officer and there was no decision of the Appellant Assistant Commissioner considered the other two grounds urged on behalf of the assessee and decided that the first claim was rightly rejected by the Income-tax Officer but the disallowance of the second was improper and it should be allowed as a permissible deduction. The assessee thereupon carried the matter further in appeal to the Tribunal. Only one ground of appeal was originally taken in the memorandum of appeal and that related to the disallowance of the first claim. But before the appeal came on from hearing, a decision was given by the Supreme Court in India Cements Ltd. v. Commissioner of Income-tax, to the effect that expenditure such as the one claimed by the assessee as forming the subject-matter of the third claim must be held to the expenditure incurred wholly and exclusively for the purpose of the assessee's business and as such allowable as a deduction under section 10(2) (xv) of the Income-tax Act, 1922, corresponding to section 37 of the present Act. The assessee thereupon made an application to the Tribunal for raising an additional ground of appeal challenging the disallowance of the third claim and this application was filed before the actual date of hearing of the appeal. When the appeal reached hearing, the first claim was not pressed by the assessee since it was already covered by a decision given in the meantime by the Supreme Court in Commissioner of Income-tax v. Alps Theatre, a short note of which was reported in 64 I. T. R. 1 (Short Notes). The main and the only controversy between the parties, therefore, centered rough the third claim sought to be agitated by means of the additional ground. The assessee pointed out that this ground could not be taken up by it earlier as the decisions of the Madras, Kerala, Andhra Pradesh and Calcutta High Courts which had the field prior to the decision of the Supreme Court in India Cements case has unanimously taken the view that expenditure such as the one claimed by the assessee was capital expenditure and hence not allowable as a deduction and it was only after the decision of the Supreme Court in Indian Cements' case that the assessee could legitimately take it as a ground of appeal and therefore the assessee should be permitted to raise it though it was originally not taken in the memorandum of appeal. The revenue on the other hand urged that it was not competent to the Tribunal to entertain this ground of appeal since it had not been raised before the Appellant Assistant Commissioner and there was no decision of the Appellate Assistant Commissioner upon it. The Tribunal however took the view that there was no question of lack of competence and it was entirely within the discretion of the Tribunal whether or not to allowed the additional ground to be raised and held that, on the facts and in the circumstances of those, there was no reasons which the additional ground of appeal should not be allowed to be raised by the assessee even though it was not originally taken in the memorandum of appeal. The Tribunal then proceeded to consider the additional ground of appeal and held that, in view of the decision of the Supreme Court in India Cements' case, the expenditure which formed the subject-matter of the third claim was an allowable deduction. The Commissioner thereupon applied for a reference and on to application of the Commissioner, the following question of law was referred by the Tribunal to this court :
'Whether, on the facts and the circumstances of the case, the Tribunal had jurisdiction to allow the assessee to raise the additional ground and to decide whether the assessee was entitled to a deduction of Rs. 25,910 ?'
2. The question is one relating to the scope and ambit of the jurisdiction of the Tribunal and its determination must obviously depend on a true interpretation of the relevant provisions of the statute dealing with appeals to the Tribunal.
3. But before we examine these provisions it is necessary to understand the true nature of the order of the Appellate Assistant Commissioner against which appeal may be preferred to the Tribunal. What is the order which the Appellate Assistant Commissioner makes when he disposes of an appeal against an order of assessment Section 246 which provides for an appeal to the Appellate Assistant Commissioner against an order of assessment confers the right of appeal if he is aggrieved by the order of assessment and the object to the amount of income assessed or to the amount of tax determined under the order of assessment. Now the process of assessment of the amount of income and determination of the amount of tax would ordinarily involve consideration of diverse items or sources of income and reaching of several decision by the Income-tax Officer, and the assessee who is aggrieved by an order of assessment may object to the amount of tax determined on one or more grounds directed against the decision reached by the Income-tax Officer in the course of the assessment. The assessee may be satisfied with some decision given by the Income-tax Officer and may be dissatisfied with others and to the extent to which he is dissatisfied, he may challenge such decisions by raising specific grounds of appeal and urge that the amount of income assessed or the amount of tax determined as a result of such decision be either set aside or reduced. Where such an appeal is preferred, section 250, sub-section (2), says that both the assessee and the Income-tax Officer shall have a right to be heard at the hearing of the appeal. Section 251 lays down the powers of the Appellate Assistant Commissioner in disposing of the appeal and sub-section (1), clause (a), says that on an appeal against an order of assessment, the Appellant Assistant Commissioner may confirm, reduce, enhanced or annual the assessment or he may set aside the assessment and refer the case back to the Income-tax Officer. The Explanation at the end of section 251 makes it clear that, in disposing of the appeal, the Appellate Assistant Commissioner may consider and decide any matter arising out of proceedings in which the order appealed against was passed, notwithstanding that such matter was into raised before the Appellate Assistant Commissioner by the assessee. This Explanation, was not there in the old Act but even without the Explanation, the interpretation consistently placed by the High Courts on the corresponding provisions of the old Act was - vide Narrondas Manordass v. Commissioner of Income-tax, and this interpretation was confirmed by the Supreme Court in commissioner of Income-tax v. McMillan and Co., and Commissioner of Income-tax v. Shapoorji Pallonji Mistry 3 - that once an appeal is preferred by an assessee, the powers of the Appellate Assistant commissioner are it confined to a consideration of only those matters which are raised by the assessee in appeal but he may also consider and decide matters not raised in appeal but 'considered by the Income-tax Officer and determined in the course of the assessment. ' The Explanation gives statutory recognition to this interpretation and accords legislative approval to it. The result is that if an assessee does not choose to appeal, the order of assessment becomes final subject to any power of revision which the Commissioner may have under section 263, but if, as observed by Chagle C.J., in Narrondas' case :
'..... the assessment if opened up by the action of the assessee himself, then the powers conferred upon the Appellate Assistant Commissioner, are much wider than the powers of an ordinary court of appeal. The statute provides the once an assessment comes before the Appellate Assistant Commissioner, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee; his competence arranges over the whole assessment and it is open to him to correct the Income-tax Officer and determined in the course of the assessment.'
4. The powers of the Appellate Assistant Commissioner are not confined to the subject-matter of the appeal but extend to the subject-matter of the assessment. The entire assessment is thrown open before the Appellate Assistant Commissioner and so long as he does not travel outside the matters considered and determined by the Income-tax Officer, he can correct any decision of the Income-tax Officer in the course of the assessment even of the assessee is satisfied with it and had not challenged it in the appeal. But whatever be the points considered and determined by him - whether raised originally in the memorandum of appeal or with leave granted under section 250, sub-section (5) or considered suo motu - the Appellate Assistant Commissioner must set out in the order 'the points for determination, the decision thereon and the reasons for the decision' - vide section 250, sub-section (5). The order of the Appellate Assistant Commissioner would thus consist of various decision on matters which may be raised in appeal by the assessee or considered suo motu by the Appellate Assistant Commissioner and the effect of these decisions would be to confirm or reduce or enhanced or annual or set aside the assessment as stated in sub-section (1), clause (a) of section 251.
5. Turning now to section 253, which provides for an appeal to the Tribunal against an order passed by the Appellate Assistant Commissioner under section 250, we find that, unlike section 246, this section confers a right of appeal both on the assessee and the revenue - vide sub-section (1) and (2) and as appears clearly from the language of sub-section (4) and particularly the words 'the Income-tax Officer or the assessee may, notwithstanding that he may not have appealed against such order or any part thereof........ file a memorandum of cross-objections..... against any part of the order...... ' It postulates that in respect of the same order of the Appellate Assistant Commissioner, there may be an appeal by the assesses to one part and an appeal by the assessee as to one part and an appeal by the revenue as to the other. The reason for this departure in the scheme is obvious. The order of the Appellate Assistant Commissioner, as pointed out above, would consist of various decision on matter considered by him and out of these decisions, some may be against the assessee and some may be against the revenue. The assessee, if he does not accept the decisions which are against him, may prefer an appeal to the Tribunal against that part of the order of the Appellate Assistant Commissioner which comprises such decisions (vide sub-section (1)) and the revenue also, similarly, may, if it does not accept the decisions recorded against it, prefer an appeal to the Tribunal against that part of the order of the Appellate Assistant Commissioner which consists of such decisions (vide sub-section (2)). Where the assessee or the revenue has preferred an appeal to the Tribunal against that part of the order of the Appellate Assistant Commissioner which consists of decisions recorded against him, the other party, if he has not already appealed, may file cross-objections against that part of the order of the Appellate Assistant Commissioner who consists of decisions with which he is dissatisfied (vide sub-section (4)). The appeal by the assessee or by the revenue against any part of the order of the Appellate Assistant Commissioner is therefore really an appeal against the decisions of the Appellate Assistant Commissioner which are against him and by which he is aggrieved. It is therefore, imperative that here must be a decision of the Appellate Assistant Commissioner by which the assessee or the revenue is aggrieved before he can prefer an appeal against that part of the order of the Appellant Assistant Commissioner consisting of such decision. A fortiori, if a particular matter is not considered and decided by the Appellate Assistant Commissioner and the decision on it does not form part of the order of the Appellate Assistant Commissioner, there can be no appeal against it. This much was not disputed, and indeed could not be disputed, by the learned advocate appearing on behalf of the assessee.
6. But the contention of the assessee was that as soon as the order disposing of the appeal was passed by the Appellate Assistant Commissioner, the order of assessment made by the Income-tax Officer was merged in the order of the Appellate Assistant Commissioner which become the final order of assessment and the decision of the Income-tax Officer disallowing the third claim, therefore, by implied acceptance, become the decision of the Appellate Assistant Commissioner. The assessee urged that in any event when he preferred the appeal to the Appellate Assistant Commissioner, the entire assessment was thrown open before the Appellate Assistant Commissioner and it was thrown open before the Appellate Assistant Commissioner to correct the Income-tax Officer even on a matter which was not raised by him in appeal and it must therefor be presumed that when the Appellate Assistant Commissioner did not interfere with the disallowance of the third claim by the Income-tax Officer. The assessee submitted that, in the circumstances, since there was an implied decision of the Appellate Assistant Commissioner disallowing the third claim, the assessee was entitled to challenge it in appeal and even if he failed to do so in the memorandum of appeal as originally filed, the Tribunal was within its rights in granting him leave to do so by raising an additional ground of appeal. This contention of the assessee is, in our pinion, not well founded and must be rejected. Our reasons for saying so are as follows.
7. To appreciate the contention of the assessee, it is necessary first to consider whether on the making of the order by the Appellate Assistant Commissioner disposing of the appeal, the order of assessment passed by the Income-tax Officer was merged in the order of the Appellate Assistant Commissioner. It is now well-settled that where an order passed by the Appellate Assistant commissioner in appeal confirms or reduced or enhanced or annuls the assessment, the order of assessment passed by the Income-tax Officer ceases to exist and is merged in the order of the Appellate Assistant Commissioner, and the order that stands and is operative thereafter is not the order of the Income-tax Officer but the order of the Appellate Assistant Commissioner not only in respect of matters consider and decide by the Appellate Assistant Commissioner but also in respect of matters not dealt with by him. This principle which follows a necessary corollary from the wide amplitude of the powers of the Appellate Assistant Commissioner in disposing of an appeal against an order of assessment was laid down by the Bombay High Court in Commissioner of Income-tax v. Tejaji Farasram Kharawala, and was affirmed by the Supreme Court in commissioner of Income-tax v. Amritlal Bhogilal & Co. It is also implicit recognised in sub-section (1A) of section 154, recently introduce by way of amendment with effect from 6th October, 1964, which provides, inter alia, that where any matter has been considered and decided in any proceedings by way of appeal against an order of assessment, the Income-tax Officer passing the order of assessment may, notwithstanding anything contained in any law for the time being in force, amend the order of assessment in relation to any matter other than the matter which has been so considered and decided. The revenue however contented that whatever might have been the position prior to the introduction of sub-section (1A) in section 154, the enactment of this sub-section had the effect of abrogating the principle of merger and in view of the clear and explicit provision enacteds this sub-section, the principle of merger did not apply in the present case and the order of assessment passed by the Income-tax Officer could not be regarded as having merged in the order of the Appellate Assistant Commissioner. Now, plainly, this sub-section was not in force on 1st April, 1964, begins the date of commencement of the assessment year, and it could not therefore be held to apply in the present case unless it had retrospective operation. The revenue therefore urged that this sub-section was retrospective in operation on the ground that it enacted a procedure provision but this contention was disputed by the assessee who submitted that the provision enacted in the sub-section was a substantive provision conferring for the first time a right on the Income-tax Officer to rectify his order of assessment even after it was merged in the order of the Appellate Assistant Commissioner and could not therefore be construed to have the effect of abrogating the principle of merger but it merely sought to nullify the effect of the Bombay decision in Tejaj Farasram Kharawala's case by authorising the Income-tax officer to rectify the original order of assessment made by him despite its merger in the order of the Appellate Assistant Commissioner. It is not necessary for us to resolve this controversy since we are of the view that even if sub-section (1A) of section 154 was not attracted and the principle of merger applied in its fullness, the revenue must still succeed. We will therefore proceed on the hypothesis that the principle of merger applied and the order of the Appellate Assistant Commissioner.
8. But even, so, we fail to see how it can be said that there was any decision of the Appellate Assistant Commissioner in regard to the disallowance of the third claim when that was admittedly not a matte considered and decided by grim. It is no doubt true that even if the assessee did not carry this matter in appeal by originally including it in the memorandum of appeal or with leave of the Appellate Assistant Commissioner under section 250, sub-section (5), the Appellate Assistant commissioner was entitled to consider and decide it since the entire assessment was open before him. But he was not bound to do so and if in fact he did not consider it, it is difficult to see how it can be said that he decided it against the assessee. It is only if the Appellate Assistant Commissioner was under an obligation to examine the correctness of the entire assessment irrespective of the grounds of appeal taken by the assessee, that it could conceivably be urged that the Appellate Assistant commissioner must be presumed to have examined the correctness of the decision of the Income-tax Officer as regard the disallowance of the third claim and since be did not reserves that decision, he must be held to have accepted it as correct. But it is apparent, and this indeed was not disputed on behalf of the assessee, that the Appellate Assistant Commissioner was under no obligation to examine the correctness of every decision recorded by the Income-tax Officer in the course of the assessment. The entire assessment was of course before him and he had the power, if he so loose, to examine any particular decision of the Income-tax Officer and to correct it if found it wrong but there being no obligation on him to do so, no inference can be drawn from his commission to reserve the decision of the Income-tax Officer on any particular matter. The fact remains that the Appellate Assistant Commissioner did not consider and decide whether the disallowance of the third claim was proper or not. The fact remain that the Appellate Assistant Commissioner did not consider and decide whether the disallowance of the third claim was proper or not. It is not doubt true that the order of assessment passed by the Income-tax Officer was merged in the order of the Appellant Assistant Commissioner was thereafter the only operative order of assessment but that has no bearing on the question as to whether there was any decision of the Appellate Assistant Commissioner on the question of disallowance of the third claim from which an appeal could be preferred by the assessee or the revenue. The assessment made by the Income-tax Officer was confirmed by the Appellate Assistant Commissioner save in respect of the second claim which was partially allowed but the confirming of the assessment in respect of the disallowance of the third claim was not because the disallowance was proper but because the disallowance was not challenged by the assessee before the Appellate Assistant Commissioner and no relief was claimed in respect of it and the Appellate Assistant Commissioner also did not suo motu examine the question of correctness. There was therefore no decision of the Appellate Assistant Commissioner on the question of disallowance of the third claim. Moreover, it is difficult to imagine how an assessee can be heard to say that, though he did not claim any particle relief in the appeal preferred before the Appellate Assistant Commissioner, and the Appellate Assistant Commissioner had therefore no occasion to decide whether such relief should be granted or not, he is still aggrieved by the decision of the Appellate Assistant Commissioner in not granting such relief to him. How, can an assessee complain that an order does not grant him a particular relief, when such relief is not claimed by him in the appeal How can it be said by an assessee that the Appellate Assistant Commissioner erred in deciding a particular matte against him when no opportunity was given by him to the Appellate Assistant Commissioner even to make such error When the assessee seek to contend in the appeal to the Tribunal that the Appellate Assistant Commissioner erred in deciding a particular matter against him, the question would be : where is the decision of the Appellate Assistant commissioner deciding the matter against him by which he is aggrieved And if there is no such decision, obviously the assessee cannot appeal against it.
9. The consequences of a suggested construction of course do not later the statute but they certainly help to fix its meaning. Let us consider the consequences of the construction suggested on behalf of the assessee. Suppose in the present case both the first and the second claims had been allowed by the Appellate Assistant Commissioner and the Appellate Assistant Commissioner had granted full relief claimed by the assessee in the appeal, could the assessee have been then said that he is aggrieved by the order of the Appellate Assistant Commissioner How can an assessee who gets full relief claimed by him from the Appellate Assistant Commissioner and succeeds wholly in the appeal by ever said to be aggrieved by the order of the Appellate Assistant Commissioner and how can be appeal against the order of the Appellate Assistant Commissioner has not refused to him anything claimed by him Then, again, take a case where a ground of appeal challenging a particular allowance is not originally taken in the memorandum of appeal to the Appellate Assistant Commissioner and is subsequently sought to be added with leave of the Appellate Assistant Commissioner under section 250, sub-section (5), but the Appellate Assistant Commissioner is satisfied that the omission of that ground from the memorandum of appeal was wilful or unreasonable and he therefore does not allow the assessee to raid that ground and decides the appeal on other grounds urged on behalf of the assessee. Can it be said in such a case that because the assessment is confirmed, there is an implied decision of the Appellate Assistant Commissioner that the disallowance is proper If such an implied decision could be spelt out, the assessee would be able to raise that point in appeal before the Tribunal though by reason of his default he could not urge it before the Appellate Assistant Commissioner. We do not think the legislature could have intended to bring about such a consequence.
10. Before we close, we must refer to rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, on which considerable reliance was placed on behalf of the assessee. That rule provides that the appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule. There is a proviso which says that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground. This rule, in our opinion, does not help the assessee. It does no more than recognise the power of the Tribunal, which, even otherwise, it possesses, to allow the appellant to urge any ground not taken in the memorandum of appeal but that does not mean that with the leave of the Tribunal the appellant can take any ground of appeal even if he was not originally entitled to take it in the memorandum of appeal. Whatever grounds of appeal could be taken by the appellant in the memorandum of appeal, he can urge them with leave of the Tribunal if he has omitted to take them in the memorandum of appeal. But if he was not entitled to take ground of appeal even in the original memorandum of appeal, he cannot avail of this rule and improve his position by obtaining leave of the Tribunal. Since we are of the view that there being no decision of the Appellate Assistant Commissioner on the point whether the disallowance of third claim was proper, the assessee was not entitled to appeal against it to the Tribunal and the ground of appeal relating to such disallowance could not therefore have been taken even in the memorandum of appeal, we must hold that the Tribunal was not entitled to allow the assessee to agitate this question under the guise of granting leave under this rule.
11. Some reliance was also placed on behalf of the assessee on the decision of the Supreme Court in Commissioner of Income-tax v. Nelliappan but that decision in our view does not say anything which helps in the determination of the present question. Certain cash credits were added as undisclosed profits in the assessment of the assessee by the Income-tax Officer and the assessee challenged the addition before the Appellate Assistant Commissioner without success. The assessee thereafter carried the matter in appeal to the Tribunal but the Tribunal did not consider the contention of the assessee directed against the addition of the cash credits. The matter was thereupon taken by way of reference to the High Court of Madras. The High Court accepted the reference and sent the matter back to the Tribunal with a direction that the individual contentions of the assessee which included, inter alia, the contention in regard to addition of the cash credits should be considered by the Tribunal. When the case came back the Tribunal was not satisfied with the explanation of the assessee in regard to the cash credits and was of the view that the cash credits represented undisclosed profits but since the additions to the book profits had been made in excess of the amounts of cash credits, the Tribunal held that the 'addition of these credits had become redundant' and should therefore be deleted. The Commissioner again brought a reference to the High Court and from the High Court the matter went to the Supreme Court and the question raised was whether the Tribunal was right in law in making out a new case for the assessee inconsistent with the assessee's case that they did not represent undisclosed profits and it was not open to the Tribunal to give relief to the assessee on the basis of such inconsistent case. This argument was negatived by the Supreme Court on the ground that in hearing an appeal the Tribunal may give leave to the assessee to urge grounds not set froth in the memorandum of appeal and in deciding an appeal the Tribunal is not restricted to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal and the Tribunal was therefore competent to allow the assessee to raise the contention relating to the cash credits though it was not made the subject-matter of a ground in the memorandum of appeal. The Supreme Court did not say that even where a decision of the Income-tax Officer on a particular item is not challenged before the Appellate Assistant Commissioner and the Appellate Assistant Commissioner has not considered and decided that matter, it can still be agitated by the assessee in the appeal to the Tribunal.
12. Our answer to the question referred to us therefore is in the negative. The assessee will pay the costs of the reference to the Commissioner.