2023 (8) TMI 1249 - AT - Income Tax

Rectification of mistake u/s 154 - period of limitation - HELD THAT - As following the decision of Sakseria Cotton Mills Ltd 1979 (2) TMI 17 - BOMBAY HIGH COURT we hold that in the case limitation for expiry of 4 years for the purpose of section 154(7) of the Act has to be reckoned from the original assessment u/s 143(3) of the Act which is dated 21.11.2011 whereas the order u/s 154 has been passed on 29.06.2017, which is clearly beyond the period of four years specified and therefore, the 154 order passed by the AO is beyond the period of the limitation provided. Accordingly, same is invalid in law and thus it is quashed. The grounds of appeal of the assessee are accordingly allowed.

Summary

Issues Involved:
1. Whether the proceedings u/s 154 were time-barred.
2. Whether the original assessment order merged with the order of the Ld. CIT(A).
3. Whether there was a mistake apparent in the original assessment order warranting rectification u/s 154.

Summary:

1. Whether the proceedings u/s 154 were time-barred:
The assessee contended that the rectification order dated 29.06.2017 was barred by limitation as it should have been passed within four years from the original assessment order dated 21.11.2011. The Assessing Officer argued that the limitation period should be reckoned from the date of the order giving effect to the Ld. CIT(A)'s order, i.e., 02.04.2014, making the rectification order within the permissible period.

2. Whether the original assessment order merged with the order of the Ld. CIT(A):
The Assessing Officer asserted that the original assessment order merged with the Ld. CIT(A)'s order, implying the limitation period should start from the date of the Ld. CIT(A)'s order. The doctrine of merger was supported by the decision of the Hon'ble Delhi High Court in CIT v. Tony Electronics Ltd., which stated that once an order is appealed and decided by an appellate authority, the original order ceases to exist and merges with the appellate order.

3. Whether there was a mistake apparent in the original assessment order warranting rectification u/s 154:
The Assessing Officer identified an apparent mistake in the original assessment order regarding the remuneration/salary to partners, which was not limited to Rs. 1,20,000/- as per the partnership agreement. The Ld. CIT(A) allowed partial relief based on additional evidence submitted under Rule 46A of the Income-tax Rules, 1961, but did not fully address the limitation issue.

Judgment:
The Tribunal, following the decision of the Hon'ble Bombay High Court in CIT v. Sakseria Cotton Mills Ltd., held that the limitation period for rectification u/s 154 should be reckoned from the date of the original assessment order. Since the rectification order dated 29.06.2017 was beyond the four-year limitation period from the original assessment order dated 21.11.2011, it was deemed invalid. The Tribunal quashed the rectification order and allowed the appeal of the assessee.