2022 (10) TMI 941 - AT - Income Tax

Rectification of mistake - rectification or the typographical error in the assessment order - Unexplained cash deposits - estimation of GP - doctrine of merger - AR also submitted that the order passed by the Assessing Officer u/s 143(3) of the Act got merged with the order passed after giving effect to the rectification order passed - case was selected for Scrutiny through CASS for examining the issue i.e. High risk transactions (PAN reported in STR) - whether appeal filed by the appellant as not maintainable despite the fact that the appeal was filed as a common appeal against both the orders u/s 154 as well as u/s 143(3) ? - HELD THAT - Once the assessee has challenged the order of the Assessing Officer in the appellate proceedings, the pedantic hyper-technical approach of the Revenue Officer is required to be rejected as it is an admitted position that the assessment proceedings are not adversarial litigation. Further, the doctrine of merger will go into play for the rescue of the assessee. Once law has given a right to the assessee to challenge the order of the Assessing Officer by following consolidated appeal whereby the assessee can challenge the assessment order and the rectification order then the assessee cannot be non-suited merely because he had only challenged the orders u/s 154. Though the AO had only made an addition to the returned income of the assessee as against the cash deposit during the demonetization period, however, still the assessee chooses to challenge the meagre addition on the above said technical ground, we are of the opinion that the order of the learned CIT(A) is required to be quashed, and the case is remanded back to the file of the AO with a direction to pass the order on merit after treating the appeal of the assessee as an appeal challenging the order u/s 143(3) r.w.s. 154. Needless to say, while exercising power, the learned CIT(A) may use all his powers vested under the Act, including the power to enhance / reduce / confirm the order passed by the Assessing Officer.

Summary

Issues involved:
- Challenge to the order of the Commissioner of Income Tax (Appeals) 11 Hyderabad dated 31-03-2022
- Maintainability of a single appeal against composite orders
- Dismissal of the appeal by the CIT (A) despite being filed as a common appeal against different orders
- Estimation of Gross Profit (GP) at 0.53% for A.Y. 2018-19
- Comparison with previous years' GP rates
- Impact of demonetization on GP rates
- Rectification application and subsequent appeal

1. Challenge to CIT (A) Order:
The appeal was directed against the CIT (A) order dated 31-03-2022, challenging the lawfulness, weight of evidence, and probabilities of the case. The appellant contended that a single appeal is maintainable against composite orders, citing precedents from the Calcutta and Patna High Courts. However, the CIT (A) dismissed the appeal, stating that it was not maintainable despite being filed as a common appeal against orders under different sections of the IT Act 1961.

2. Estimation of Gross Profit (GP):
The appellant objected to the estimation of GP at 0.53% for A.Y. 2018-19 without finding any defects in the audited books of account. The CIT (A) upheld the estimation, citing discrepancies in cash sales compared to previous years. The appellant argued that GP rates for previous years were lower and accepted, questioning the basis for the higher estimation. The impact of demonetization on GP rates in the preceding year was also highlighted.

3. Rectification Application and Appeal:
After receiving the assessment order, the appellant filed a rectification application to correct an error in the assessed income. The Assessing Officer rectified the error, but the appellant remained aggrieved by the assessment order itself. The CIT (A) dismissed the appeal, emphasizing that the rectification pertained to a typographical error and not the estimation of profit. The appellant challenged this decision, leading to a detailed argument regarding the grounds raised before the CIT (A) and the technicalities of the appeal process.

Conclusion:
The Tribunal considered the grounds raised by the appellant challenging the estimation of income and the addition to the returned income. It was noted that the appeal primarily contested the Assessing Officer's order under section 143(3), which was subsequently rectified. The Tribunal rejected the Revenue Officer's technical approach, emphasizing the right of the appellant to challenge the assessment order. Consequently, the CIT (A) order was quashed, and the case was remanded back to the Assessing Officer for a fresh decision, allowing the appeal for statistical purposes.