2014 (1) TMI 1757 - AT - Income Tax

Rejection of application for rectification - set off of long term brought forward capital loss against the capital gain - Held that - In the instant case, the order dated 25/01/2011 was passed during the remand proceedings pursuant to the remand order dated 06/01/2011 passed u/s 254(4) of the Act and in terms of directions issued by the Tribunal, therefore, this order can only be a part of the appellate proceedings/order of the CIT(A) and does not assume a character of the independent assessment order for the purpose of section 154 of the Act. Our attention was also invited to the provisions of section 154(1A) of the Act, according to which, a rectification can be sought with respect to any matter other than the matter, which has been so considered and decided by the Appellate Authority meaning thereby the Appellate Authority has jurisdiction to entertain the request of rectification with respect to those matters, which are not subject matter of the appeal before it. Therefore, at the most the assessee could have approached to CIT(A) for such rectification but according to us, he cannot approach the Assessing Officer for rectification in the order passed on 25/01/2011 as it was passed consequent to the directions of the CIT(A) and the Tribunal. Therefore, the limitation can only start from the original assessment order for rectification as the original assessment cannot be called to have been merged with the order dated 25/01/2011 for the purpose of section 154 of the Act. We, therefore, are of the considered view that the CIT(A) has properly adjudicated the issue in the light of various judicial pronouncements and since we do not find any infirmity therein, we confirm his order. - Decide against assessee.

Issues Involved:
1. Rejection of the claim for rectification of orders to set off long-term brought forward capital losses.
2. Observations regarding the disallowance of set-off of capital losses.
3. Validity of the order passed against the application under section 154.
4. Correct liability determination for capital gains considering brought forward losses.
5. Interpretation of provisions of law regarding the concept of merger of orders.
6. Direction for assessment orders to specify the year for setting off the determined loss.

Detailed Analysis:

1. Rejection of the Claim for Rectification of Orders to Set Off Long-Term Brought Forward Capital Losses:
The assessee's appeal was against the CIT(A)'s order rejecting the claim for rectification of orders to set off long-term brought forward capital losses amounting to Rs. 12,49,310/- against the capital gains for the year under consideration. The CIT(A) upheld the Assessing Officer's decision, stating that the limitation for rectification under section 154 starts from the date of the original assessment order (31/03/2006) and not from the date of the order passed in remand proceedings (25/01/2011).

2. Observations Regarding the Disallowance of Set-Off of Capital Losses:
The CIT(A) observed that the original assessment order denied the set-off of brought forward capital losses. The subsequent orders passed were consequential to the Tribunal's directions and did not address the set-off of losses. Therefore, the doctrine of merger did not apply, and the limitation period for rectification should be counted from the original order.

3. Validity of the Order Passed Against the Application Under Section 154:
The assessee's application for rectification under section 154 was filed on 18/05/2011, beyond the four-year limitation period from the original assessment order dated 31/03/2006. The CIT(A) and the Tribunal upheld the Assessing Officer's rejection of the rectification application as time-barred.

4. Correct Liability Determination for Capital Gains Considering Brought Forward Losses:
The assessee argued that the set-off of brought forward capital losses should be allowed to determine the correct liability of capital gains. However, the CIT(A) and the Tribunal found that the issue of set-off was not dealt with in the subsequent orders and thus, the limitation period for rectification could not be extended beyond the original order's date.

5. Interpretation of Provisions of Law Regarding the Concept of Merger of Orders:
The Tribunal referred to judicial pronouncements, including the Supreme Court's judgment in CIT v. Alagendran Finance Ltd., to conclude that the doctrine of merger applies only to issues considered and decided by the Appellate Authority. Since the set-off of losses was not addressed in the remand proceedings, the original assessment order did not merge with the subsequent orders for this issue.

6. Direction for Assessment Orders to Specify the Year for Setting Off the Determined Loss:
The assessee requested directions for the authorities to specify the year in which the loss determined for A.Y. 2002-03 should be set off. The Tribunal did not find merit in this request, as the original assessment order's limitation period had expired, and the subsequent orders did not address the set-off of losses.

Conclusion:
The appeal was dismissed, with the Tribunal confirming the CIT(A)'s order. The limitation period for rectification under section 154 starts from the date of the original assessment order. The doctrine of merger did not apply as the set-off of losses was not considered in the remand proceedings. The assessee's application for rectification was time-barred, and the original assessment order could not be rectified beyond the four-year limitation period.

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