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TMI Blog2025 (3) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... AO in starting the computation of income from assessed income as per intimation u/s 143(1) when there was no adverse remark in the scrutiny assessment for the issues disallowed in the intimation order. 3. For that even otherwise, the disallowance of Rs 1.20 crores being contingent liabilities on account of income tax dispute was not called for when the same liability was shown in the subsequent year and Ld. CIT(A) deleted the same holding that it was only a contingent liability which was never claimed as deduction. 4. For that the addition of Rs 1,64,597/- was also not called for." 3. Brief facts of the case as culled out from assessment order are that the assessee filed return of income for the AY 2020-21 on 29/12/2020, declaring total income of Rs. 34,83,49,050/-. Subsequently, the return was processed u/s 143(1) of the Act and income was assessed at Rs. 36,05,13,647/-. Thereafter, the case was selected for complete scrutiny under CASS and the assessment was completed on 22/09/2022, wherein the AO disallowed an amount of Rs. 2,07,954/- as 'Equalization levy written off' & an amount of Rs. 14,37,500/- as 'Brokerage Expenses'. Accordingly, the income was assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tingent nature and the details are at annexure no. 7 on page 42 and are the same as is mentioned earlier. The Ld. AR also drew our attention to page 62 of the paper book which is the computation of total income in support of the claim that no deduction against such contingent liabilities were claimed either in this or in the succeeding assessment year. It was also submitted that in respect of similar adjustment in the succeeding assessment year the appeal was allowed by the Ld. CIT(A). However, it may be mentioned that the order referred to in the paper book at page 77 to 82 is an appeal order dated 20.12.2022 for A.Y. 2021-22 which is against the intimation u/s 143(1) of the Act dated 26.10.2022 while the appeal in the impugned assessment year relates to the assessment u/s 143(3) of the Act and not against the intimation u/s 143(1) of the Act. The Ld. AR also relied upon the judicial pronouncements in the cases of M.P. Madhyam vs. DCIT in ITA No. 424 & 426/IND/2022 order dated 30.08.2023, National Stock Exchange of India Limited vs. DCIT in ITA No. 732/MUM/2023 order dated 22.09.2023 and CESC Ltd. and Another vs. DCIT reported in 134 Taxmann 647. The case laws relied upon by the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Ld. CIT(A) was in respect of the subsequent scrutiny assessment order u/s 143(3) of Act and neither against the intimation nor against the rectification order. 9. The right of appeal is a statutory right and the appeal before the Tribunal relates to the order of the Ld. CIT(A) passed u/s 250 of the Act against the scrutiny assessment of the Ld. AO. The assessee has relied upon the following two decisions in support of the claim that once the scrutiny assessment was made, the intimation was subsumed in the order under section 143(3) of the Act and the Ld. CIT(A) ought to have decided the issue and granted relief to the assessee. In the case of The South India Club Mandir Marg, Vs. Income Tax Officer Ward Exemption 2(3), New Delhi I.T.A. No. 354/Del/2024 ITAT Delhi Bench 'G' order dated 22.05.2024 relied upon by the assessee, though it is mentioned that the intimation order u/s 143(1) merged with the regular assessment passed u/s 143(3) of the Act but the issue was denial of registration under section 12A of the Act and the order is distinguishable on facts as is extracted below: 10. Considered the rival submissions and material placed on record. We observe that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to his knowledge that the assessee has filed appeal against the regular assessment order. Therefore, he has travelled beyond the mandate. The issue of allowability of section 11 is already considered in the regular assessment and that issue is already in appeal before FAA. Therefore, reviewing the same is uncalled for. 12. Coming to the submissions of the Ld AR, the assessee also not disputing the fact that the intimation merges with the regular assessment when the proceedings are initiated u/s 143(3) of the Act. Therefore, the admitted fact that the appeal against the intimation is infructuous. The grievance of the assessee is that Ld CIT(A) has not stopped with the findings but gave findings on the merits. After considering the submissions, we are also of the view that the findings on allowability u/s 11 is uncalled. Particularly when the issue under consideration is under challenge before another Appellate Authority. 13. The next issue raised by the Ld AR is, the assessee was granted the 12A registration on 5.1.2021 and the notice u/s 143(2) was issued on 22.09.2019. At the time of grant of registration, the assessment was pending and the same was passed only on 8.2.2021. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y reserve as a business expenditure and appeals therefrom were pending. What was accepted in the intimation had been reversed in the regular assessment and the assessee had preferred an appeal which was pending. The instant case was a case where the theory of merger was bound to apply because the intimation issued under section 143(1)(a) was no longer operative in respect of the assessment years 1990-91 and 1992-93. The only order which was effective and operative was the one passed under section 143(3). The order passed under section 143(1)(a) ceased to be operative and merged in the final order. [Para 12] {emphasis supplied} In the case of Hindustan Aeronautics Ltd. v. CIT [2000] 243 ITR 808 / 110 Taxman 311, the Apex Court opined that where the Legislature intended to make a distinction as to where there will be no merger, the Legislature has made express provision therefor. There is no provision in section 143 that notwithstanding an order having been passed under section 143(3), an order passed under section 143(1) shall continue to subsist. [Para 15] Section 154(1A) provides that the rectification has to remain restricted to the matter which has not been considered and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 136, the Supreme Court may reverse, modify or affirm the Judgment, decree or order appealed against while exercising its appellate Jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can, therefore, be applied to the former and not to the latter. (iv) An order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case, it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed. (v) If the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of article 141. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the Court, Tribunal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made in the intimation u/s 143(1)(a) of the Act, 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. 14. In the result, the appeal of the assessee is dismissed." 6. In view of the finding made in the case of MSTC Ltd. (supra), since the adjustment made in the intimation u/s 143(1) of the Act have neither been reversed by the Ld. AO nor any adjudication has been made in the assessment order therefore, the Ld. CIT(A) was justified in dismissing the appeal of the assessee on the ground that the impugned intimation was not contested in appeal. Hence, we find no error in the order of the Ld. CIT(A) which is hereby upheld in view of the order of the Hon'ble Jurisdictional High Court and the doctrine of merger discussed in the case of MSTC Ltd. (supra). Hence, ground nos. 1, 2 & 3 are dismissed. 7. As regards ground no. 4 relating to addition of Rs. 1,64,597/-, neither the Ld. AR pressed this issue nor the same emanates from the order of the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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