2025 (4) TMI 36 - AT - Income Tax

Rectification order passed u/s. 154 - as in the scrutiny assessment done on the assessee in order passed u/s. 143(3) returned income of the assessee had been incorrectly accepted since the income declared in the return of income which was accepted in the assessment order did not match with the declared income - Assessee is aggrieved by direction of the CIT(A) restoring the issue back to the AO for passing a speaking order more particularly when the CIT(A) himself had noted several infirmities and illegalities in the order passed by the AO. HELD THAT - Undisputedly the impugned rectification order seeks to modify the intimation made u/s. 143(1) of the Act. It is also an undisputed fact that in the case of the assessee a scrutiny assessment order u/s. 143(3) of the Act had been passed subsequently accepting the returned income of the assessee. CIT(A) we hold has rightly appreciated these facts and held that consequent to assessment order passed u/s. 143(3) in the case of the assessee the intimation u/s. 143(1) no longer survived having merged in the order passed u/s. 143(3) of the Act and that therefore there was no occasion to rectify the intimation u/s. 143(1) at all. The findings of CIT(A) in this regard we hold are correct. Having held so we are completely in agreement with the assessee that there was no occasion to restore the issue back to the AO for reconsideration. We may add that the ld. CIT(A) has also recorded correctly the fact that the rectification order passed by the AO u/s. 154 does not clearly bring out the mistakes in the processed income and that it is a non-speaking order and in the light of the same there is no occasion for giving the AO a second chance to pass a speaking order as done by the ld. CIT(A). In view of the same we hold that the ld. CIT(A) has wrongly directed the AO to reconsider the issue and pass speaking order in the present case. This direction of the ld. CIT(A) is set aside. The order passed in the present case u/s. 154 is held to be not sustainable in law on account of the fact that it had sought rectification of an intimation which already stood merged in the assessment order subsequently made in the case of the assessee u/s. 143(3) of the Act. Appeal of the assessee stands allowed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the delay of 22 days in filing the appeal by the assessee should be condoned.
Whether the direction by the CIT(A) to the Assessing Officer (AO) to pass a speaking order was justified, given that the original order was found to be non-speaking and erroneous.
Whether the rectification order passed under Section 154 read with Section 143(1) was valid, considering that a scrutiny assessment under Section 143(3) had already been completed.
Whether the CIT(A) was correct in restoring the issue to the AO for passing a speaking order despite identifying errors in the original order.

ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay

Relevant Legal Framework and Precedents: The legal framework allows for the condonation of delay if a reasonable cause is shown for the delay in filing an appeal.
Court's Interpretation and Reasoning: The Tribunal considered the reasons provided by the assessee, including relocation and misunderstanding of the order, as reasonable causes for the delay.
Key Evidence and Findings: The assessee's application detailed the circumstances leading to the delay, including relocation and the initial impression that the order was favorable.
Application of Law to Facts: The Tribunal applied the principle of reasonable cause to the facts, finding the delay of 22 days to be excusable.
Conclusions: The Tribunal condoned the delay and admitted the appeal for adjudication.

Direction to Pass a Speaking Order

Relevant Legal Framework and Precedents: A speaking order is one that clearly states the reasons for the decision, allowing for transparency and understanding.
Court's Interpretation and Reasoning: The Tribunal found the CIT(A)'s direction to pass a speaking order unnecessary since the original order was already deemed erroneous and non-speaking.
Key Evidence and Findings: The CIT(A) had noted that the AO's order lacked clarity on the mistakes or omissions identified.
Application of Law to Facts: The Tribunal applied the requirement for a speaking order to the facts, finding that the CIT(A) should not have restored the issue for reconsideration.
Conclusions: The Tribunal set aside the CIT(A)'s direction, holding that the AO's order was unsustainable.

Validity of Rectification Order under Section 154

Relevant Legal Framework and Precedents: Section 154 allows for rectification of mistakes apparent from the record, but not when a scrutiny assessment under Section 143(3) has been completed.
Court's Interpretation and Reasoning: The Tribunal agreed with the CIT(A) that the rectification order was invalid because it attempted to modify an intimation under Section 143(1) after a scrutiny assessment under Section 143(3) had been completed.
Key Evidence and Findings: The CIT(A) noted that the AO failed to specify the mistakes in the processed income and did not determine a revised total income.
Application of Law to Facts: The Tribunal applied the legal principle that once a scrutiny assessment is completed, the intimation under Section 143(1) cannot be rectified.
Conclusions: The Tribunal held the rectification order to be unsustainable in law.

Restoration of Issue to AO

Relevant Legal Framework and Precedents: The restoration of an issue for reconsideration is typically warranted when further examination is needed.
Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) erred in restoring the issue to the AO, as the original order was already found to be erroneous.
Key Evidence and Findings: The CIT(A) had noted several infirmities in the AO's order, questioning its validity.
Application of Law to Facts: The Tribunal applied the principle that an erroneous order should not be given a second chance for correction.
Conclusions: The Tribunal set aside the CIT(A)'s direction to restore the issue to the AO.

SIGNIFICANT HOLDINGS

The Tribunal condoned the delay of 22 days in filing the appeal, finding reasonable cause for the delay.
The direction by the CIT(A) to the AO to pass a speaking order was set aside, as the original order was already found to be non-speaking and erroneous.
The rectification order under Section 154 was held to be invalid, as it attempted to rectify an intimation under Section 143(1) after a scrutiny assessment under Section 143(3) had been completed.
The Tribunal set aside the CIT(A)'s direction to restore the issue to the AO, holding that an erroneous order should not be reconsidered.
The appeal of the assessee was allowed.

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