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TMI Blog2023 (8) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Faceless Appeal Centre, Delhi [in short the Ld. CIT(A)] for assessment year 2009-10, in relation to rectification order passed by the Assessing Officer. The relevant grounds raised by the assessee are reproduced as under: 1 The Ld. CIT(A) erred in not considering that the proceedings u/s. 154 were time-barred. 2. The Ld. CIT(A) fell in error of law in not appreciating that, the facts circumstances of the case, the limitation period for passing an order u/s. 154, commenced from the date of the original assessment order dated 21 November 2011. 3. The Ld. CIT(A) failed to appreciate that, in the facts circumstances of the case, the original assessment order, did not merge with the original order of the Ld. CIT(A), to the extent of the issue raised in the proceedings u/s. 154 4. The Ld. CIT(A) misdirected himself in not appreciating that there was no mistake apparent in the original assessment order and hence recourse to the proceedings u/s. 154 was improper, bad and illegal 5. The Ld. CIT(A) erred in ignoring that the very fact that an additional document was required to be taken into consideration record for the purpose of adjudicating the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d perused the relevant material on record. In the assessment order passed u/s 143(3) of the Act on 21.11.2011, the claim of the assessee of remuneration to partners amounting to Rs. 47,71,285/- was accepted by the Assessing Officer but subsequent to the order of the Ld. CIT(A) dated 16.01.2014. The Assessing Officer gave effect to the order of the Ld. CIT(A) on 02.04.2014 and thereafter sought to rectify the claim of the assessee of remuneration to partners. It is contention of the Assessing Officer that under the original partnership agreement monthly salary/remuneration of Rs. 5,000/- only was provided to the working partners and there being two working partners, remuneration could have been allowed to the assessee to the extent of Rs. 1,20,000/- and therefore, the excess remuneration paid was disallowable. According to Assessing Officer, this being a mistake apparent from record, he rectified the claim of the assessee of remuneration to partners vide order u/s 154 of the Act dated 29.06.2017. Before us, the contention of the assessee that the order sought to be rectified u/s 154(7) of the Act is the original assessment order and therefore order dated 29.06.2017 passed by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly opined that the word Order had not been qualified in any way and it does not necessarily mean the original order. It can be any order, including the amended or rectified order. The Court was further of the view that once a reassessment order or rectification order was passed giving effect to the order of the appellate forum, the original order ceases to operate. Following discussion on this aspect is relevant for our purpose:- A similar expression in rule 38 of the Mysore sales Tax Rules fell for consideration in International Cotton Corporation (P) Ltd. v. Commercial Tax Officer, (1975) 35 STC 1; (1975) 2 SCR 345. Dealing with the point raised, this court held as under: The other attack that the rectification order is beyond the point of time provided in rule 38 of the Mysore Sales Tax Rules is also without substance. What was sought to be rectified was the assessment order rectified as a consequence of this court s decision in Yaddalam s case (1965) 16 STC 231. After such rectification the original assessment order was no longer in force and that was not the order sought to be rectified. It is admitted that all the rectification orders would be within time calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en. Doctrine of Merger has been explained by the courts in number of judgments. Our purpose will suffice by referring to one judgment where this doctrine is explained along with the rationale behind it. It is in the case of Gojer Bros. (Pvt.) Ltd. Vs. Shri Ratan Lal Singh (1974) 2 SCC 453, which reads as under: 11. The juristic justification of the doctrine of merger may be sought in the principle that there cannot be, at one and the same time, more than one operative order governing the same subject-matter. Therefore the judgment of an inferior court, if subjected to an examination by the superior court, ceases to have existence in the eye of law and is treated as being superseded by the judgment of the superior court. In other words, the judgment of the inferior court loses its identity by its merger with the judgment of the superior court. In another case of Commissioner of Income-tax Bombay v. Amritlal Bhogilal Co. [1958] 34 ITR 130 (SC), the position in regard to the doctrine of merger was stated thus by Gajendragadkar J. who spoke for the Court: 16. There can be no doubt that, if an appeal is provided against an order passed by a tribunal, the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle would be applicable also when the assessment order is challenged in the appeal and appellate authority passes order at variance with the orders passed by the AO, on the basis of which fresh order under Section 143(3) read with Section 250 of the Act is required to be passed by the AO giving effect to the order of the appellate authority. 18. No doubt, the rectification order passed under Section 154 would mean the assessment order as rectified and the assessment order is not obliterated thereby. However, what would be the position when assessment order is not challenged and amended by the appellate authority. Once rectification order under Section 154 of the Act is passed it would mean that the appeal effect order is rectified. From this it follows the rectification can be done up to 31.03.2019. In view of this it would rather be incorrect on the part of the assessee to assert that the action u/s 154 was barred by limitation. Thus I do not find any merit in assessee's this contention. The explanation of the assessee is not tenable. The mistake is being apparent from record is therefore here by rectified. The total income of the assessee is compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the order of assessment made by the ITO and if the AAC is satisfied that there was a case for enhancing the assessment he can make an order enhancing the assessment, Thus, if the AAC's satisfied that the ITO has granted either excessive relief or the assessment of income and tax is in any way erroneous, he has the power to make on order enhancing the assessment while deciding the appeal filed by the assessee. In that sense, it is possible to say that the entire assessment proceedings are open before the AAC. It is common knowledge that while making as assessment and bringing the income of the assessee to tax, the ITO has to deal with several contentions made by the assessee for determining the taxable income and the tax payable having regard to the several provisions of the I.T. Act. It is only in respect of claims with regard it which the ITO passes an order adverse to the assessee that the assessee goes in appeal to the AAC. If the assessee is satisfied with a part of the assessment order, he does not make that part a subject of appeal. It is thus open to the AAC deals with the appeal, it is mainly that part of the order of the ITO which has been challenged by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T. Act. It is important to noticed another aspect of the provisions relating to rectification of mistakes, the provisions of s. 35 of the Indian I.T. Act, 1922, and the corresponding provisions of s. 154 of the I.T. Act, 1961, give a power of rectification to the Commissioner, the AAC and the ITO only in respect of the orders passed by them. The ITO can exercise his power of rectification in respect of the order made by him. The AAC can exercise the powers of rectification only in respect of the orders made by him, when the statute has given powers of rectification to the ITO in respect of his own order, the position is that he is able to rectify his own order within the prescribed period if the whole of the order or a part of the order has not been subjected to appeal. If the theory of merger is accepted as being attracted wholly, the provision relating to rectification of mistake by the ITO in a case where even a part of the assessment order is made the subject of appeal is likely to become nugatory. It, therefore, clearly appears to us that the provisions of the I.T. Act contemplates that in a case where an assessment is made the subject of an appeal, the assessment orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. But AO issued notice u/s. 154 of the Act dated 21 January 2014 seeks to rectify the order dated 13 th April 2009 passed consequent to the Hon'ble Tribunal's order in ITA No. 8983/M/2004 dated 30 th August 2007 i.e. the order giving appeal effect to the order of ITAT. We find from the facts of the case that the CIT(A)' order, against which the present appeal is filed, has discussed this issue at page 6 para 3.2 and has followed an order passed in the case of the group concern of the assessee company on a similar issue. The said order in the case of group concern was also challenged by the Revenue by filing an appeal to the Tribunal and the Tribunal in the case of ACIT vs. M/s Godrej Sara Lee Ltd. (Now amalgamated into Godrej Consumer Products Ltd.) in ITA No.118/Mum/2015 vide order dated 22- 08-2016 has dismissed the Revenue's appeal and decided this very issue of limitation in favor of the assessee by observing as under: - We have heard the rival submissions and perused the material before us. We find that, while completing the original assessment, the AO had determined book profit of the assessee at Rs. 40.89 crores, that the assessee had pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The Revenue in its submissions filed before the Tribunal also accepts that they cannot rectify the order u/s. 143(3) of the Act. It is the case of the Revenue that what is sought to be rectified is the order giving effect to the Tribunal's order dated 13th April 2009 and therefore the order under 154 of the Act dated 29 th March 2014 is within limitation. If this proposition is accepted then the effect would be that the AO is sitting in appeal over the Tribunal's order and more so when the issue of diminution in the value of an asset for calculating book profit was not the subject matter of the Tribunal's order. It is a settled position that the AO while giving effect to the Tribunal's order cannot go beyond the directions of the Tribunal and since in the instant case the issue of calculation of book profit qua diminution in the value of an asset was not the subject matter of the appeal, the Revenue is not justified in contending that the order is within the time limit. 11. We also find that this issue of doctrine of merger came for consideration of the Hon ble Bombay High Court in the case of Seksaria Cotton Mills (Supra). The Hon'ble High Court has o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dated July 4, 1986, in view of the fact that there was a mistake in the order dated July 12, 1982 and consequent thereto, the application for rectification dated July 4, 1986 was not time barred. But in the instant case, since the original order was subjected to appeal and hence provisions of section 154(IA) of the Act would be applicable and the decision of Hon ble Supreme Court will not apply on facts of the case. Hon ble Supreme Court in the case of Alagendran Finance Ltd (Supra) was dealing with section 263(2) of the Act read with clause(c) to Explanation 263(1) which is identical to section 154(1A) of the Act. The Hon'ble Supreme Court held that since issue of lease equalization fund was not the subject matter of reassessment proceedings, the limitation for revising the assessment order qua lease equalization fund will start from the original assessment order passed u/s. 143(3) of the Act and not from the date of reassessment order passed u/s. 147 of the Act. Therefore, according to us the facts of the instant appeal are identical to the case of Alagendran Finance Ltd. and therefore the issue is squarely covered against the Revenue and in favor of the assessee. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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