2024 (10) TMI 1642 - AT - Income Tax

Adjustment made in the intimation u/s 143(1)(a) - doctrine of merger - contention of the assessee that the intimation u/s 143(1) was merged in the order u/s 143(3) and therefore the additions made in the intimation should have been deleted by the CIT(A) which has not been done - HELD THAT - The doctrine of merger is a common law doctrine that is rooted in the idea of maintenance of the decorum of hierarchy of courts and tribunals the doctrine is based on the simple reasoning that there cannot be at the same time more than one operative order governing the same subject matter as held in the case of Gojer Bros. (P) Ltd. v. Ratan Lal Singh 1974 (5) TMI 115 - SUPREME COURT Since in the instant case the addition made in the intimation u/s 143(1)(a) by the CPC have not been reversed by the Ld. AO in the order u/s 143(3) passed subsequently and the income as per the intimation has only been retained therefore the doctrine of merger does not apply. AO has accepted the returned income thereby implying that no addition was made on account of the reasons for which the case was selected under scrutiny but the adjustment made to the income vide intimation issued by the CPC had been retained. Hence all the grounds of appeal in this regard are dismissed and the appeal of the assessee is liable to be dismissed. The assessee may pursue the other modes of relief in respect of the addition made in the intimation under section 143(1)(a) of the Act. Retention of the addition made in the intimation u/s 143(1)(a) - Since both the rectification as well as the appeal proceedings are pending therefore there does not arise any occasion for adjudication on the issue in this appeal against the scrutiny assessment order and the appeal is hereby dismissed and all other grounds of appeal are dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment revolve around the following:

• Whether the addition made in the intimation under section 143(1)(a) of the Income Tax Act should have been deleted in the appeal decided under section 143(3) by the Commissioner of Income Tax (Appeals) [CIT(A)].
• Whether the doctrine of merger applies, which would imply that the intimation under section 143(1)(a) merges into the order under section 143(3).
• Whether the CIT(A) erred in not addressing or correcting the computation of total income and the alleged anomalies in the assessment order.
• Whether natural justice was denied to the assessee by not being confronted with the intention to add contingent liabilities to income.
• The treatment of various grounds of appeal related to procedural and substantive errors in the assessment and appeal process.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework involves sections 143(1)(a) and 143(3) of the Income Tax Act, which pertain to the processing of returns and scrutiny assessments, respectively. The doctrine of merger, a common law principle, is also crucial, suggesting that a lower court's decision merges into a higher court's decision upon appeal.

Court's Interpretation and Reasoning

The Tribunal examined whether the intimation under section 143(1)(a) should merge into the order passed under section 143(3). The Tribunal noted that the doctrine of merger applies when a higher authority modifies, reverses, or affirms a lower authority's decision. In this case, since the addition made in the intimation was not reversed in the subsequent order under section 143(3), the doctrine of merger did not apply.

Key Evidence and Findings

The Tribunal found that the income computed under section 143(1)(a) was retained in the order under section 143(3), and no adverse inference was drawn regarding the reasons for scrutiny. The Tribunal also noted that the CIT(A) did not address the merits of the addition due to pending rectification and appeal proceedings.

Application of Law to Facts

The Tribunal applied the doctrine of merger to determine that the intimation under section 143(1)(a) did not merge into the order under section 143(3) because the latter did not modify or reverse the former. The Tribunal emphasized that the appeal before it related to the scrutiny assessment order, not the intimation or rectification proceedings.

Treatment of Competing Arguments

The Tribunal considered the assessee's argument that the intimation should have been subsumed in the order under section 143(3) and that the CIT(A) should have granted relief. However, it found that since the income as per the intimation was retained, the doctrine of merger did not apply. The Tribunal also acknowledged the pending rectification and appeal proceedings, which were appropriate channels for addressing the addition.

Conclusions

The Tribunal concluded that the CIT(A) did not err in dismissing the appeal concerning the intimation under section 143(1)(a) because the doctrine of merger did not apply. The Tribunal dismissed the appeal, suggesting that the assessee pursue other remedies for the addition made in the intimation.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

The Tribunal stated, "Since, in the instant case, the addition made in the intimation u/s 143(1)(a) of the Act by the CPC have not been reversed by the Ld. AO in the order u/s 143(3) passed subsequently and the income as per the intimation has only been retained, therefore, the doctrine of merger does not apply."

Core Principles Established

• The doctrine of merger does not apply if the subsequent order under section 143(3) does not modify or reverse the intimation under section 143(1)(a).
• The appeal against the scrutiny assessment order does not encompass issues pending in rectification or separate appeal proceedings.

Final Determinations on Each Issue

• The Tribunal dismissed the appeal, affirming the CIT(A)'s decision to retain the income computed under section 143(1)(a) in the order under section 143(3).
• The Tribunal suggested that the assessee pursue other remedies for addressing the addition made in the intimation.