2017 (9) TMI 1402 - AT - Income Tax

Levy of interest u/s 234B, 234D and 222 while passing order u/s 154/260A/143(3) - CIT invoking the doctrine of merger - Held that - It is settled principle of law that once the appeal filed against the completed assessment is decided by the appellate authority, the assessment order merges into the order passed by appellate authority. Since there is no dispute that when the AO has passed original assessment order in all the aforesaid cases, he has categorically ordered to charge the interest as per law and in accordance with ITNS 150 and he has specifically enclosed computation of tax and interest as per ITNS 150 along with assessment order. So when there was specific order passed by the AO for charging the interest under the Act and the said order merges into the appeal order, there is no illegality or perversity in the findings returned by ld. CIT (A). The ld. AR for the assessee though raised ground in the alternative that without prejudice the calculation under various sections is neither correct nor as per spirit of law, but has failed to point out as to how and under what circumstances, the calculation of the interest made by the AO is not in accordance with law. As the assessee contended that since the Special Leave Petition filed by the assessee has been admitted by Hon ble Supreme Court, this issue cannot be decided. However, when the ld. AR for the assessee is confronted with the fact that only interest has been calculated on the quantum of income on the basis of facts which have not been disputed in quantum proceedings rather question of law has been challenged the ld. AR has failed to reply otherwise. So far as second contention raised by the assessee in AY 2003-04 that the withdrawal of interest u/s 244 is not only illegal but also not authorized under the order passed u/s 144/260A/143(3), against the refund already issued, is concerned, when certain amount is found to be due against the assessee the same can be adjusted against the refund due to the assessee by issuing a demand notice as provided u/s 244A(1). In the instant case, the refund has been adjusted against the interest levied on the assessee as per assessment order and again, we are of the considered view that there is no illegality or perversity in the impugned order passed by the ld. CIT (A). - Decided against assessee.

Summary

Issues Involved:
1. Charging of interest under various sections of the Income Tax Act 1961.
2. Calculation of income and interest payable as per the AO's computation.
3. Applicability of the "doctrine of merger" in determining the authority to charge interest.
4. Adjustment of refund against the interest levied on the assessee.

Issue 1: Charging of Interest under Various Sections:
The assessee challenged the charging of interest under sections 234B, 234D, and 220(2) of the Income Tax Act 1961. The contention was that the interest charged was excessive, illegal, and not in accordance with the law. The AO had specifically ordered to charge interest as per law and ITNS 150. The CIT (A) invoked the "doctrine of merger," stating that once the appeal is decided, the assessment order merges into the appellate order. The Tribunal found no illegality in the CIT (A)'s decision, as the AO's specific order to charge interest merged into the appeal order. The AR failed to demonstrate how the interest calculation was incorrect or against the spirit of the law.

Issue 2: Calculation of Income and Interest Payable:
The AO computed the assessed income of the assessee for various assessment years. The CIT (A) upheld the assessment order. The Tribunal reviewed the calculations and determined the assessed income based on relief granted on advances received and other expenses. The AR raised concerns about the interest calculation, but the Tribunal found no fault in the CIT (A)'s comprehensive order appreciating the law and facts.

Issue 3: Applicability of the "Doctrine of Merger":
The Tribunal discussed the principle of the "doctrine of merger," emphasizing that the assessment order merges into the appellate order once an appeal is decided. The AO's specific order to charge interest under the Act was considered valid and merged into the appeal order. The AR's alternative argument about the interest calculation not aligning with the law was dismissed due to lack of evidence or demonstration of incorrectness in the AO's calculations.

Issue 4: Adjustment of Refund Against Interest Levied:
The assessee contested the withdrawal of interest u/s 244 against the refund already issued, claiming it was illegal and not authorized. The Tribunal explained that when an amount is due from the assessee, it can be adjusted against the refund by issuing a demand notice as per the Act. The Tribunal found no illegality in the adjustment of the refund against the interest levied, supporting the CIT (A)'s decision.

In conclusion, the Tribunal dismissed all appeals filed by the assessee, upholding the CIT (A)'s order. The Tribunal found no illegality or perversity in the impugned order, stating that the CIT (A) had passed a comprehensive order considering the law and facts.