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2021 (8) TMI 566 - AT - Income TaxRectification of mistake u/s 154 - Merger of mistake in the order passed by the AO into the order passed by the CIT(A) and subsequent orders - Excess deduction u/s.36(1)(viia) - HELD THAT:- We find that this is a concept being expounded by the Ld.CIT(A) that if a mistake has occurred in an order, the same is said to have merged in all the subsequent orders for that assessment year. In this regard, assessee pleaded that the AO, when he passed the order u/s.143(3) r.w.s. 147 has never proposed to correct the earlier error. As reopened for a specific reason. Even in the body of the order AO did not consider this issue of earlier mistake and in the computation, he only started with the income as per the last assessment order dated 13/10/2010. Hence, Ld. Counsel pleaded that by no stretch of imagination, it can be said that the AO while making the reassessment was proposing a correction. Hence, the earlier mistake cannot get ‘merged’ with this reassessment order. We find that Ld.CIT(A) has passed a cryptic order on this issue. On what principle, he found that the mistake got merged in this order, needs due elaboration in light of the submissions of the Ld. Counsel of the assessee above. The aspects also need actual verification of assessment records. It is settled law that Ld. CIT(A) needs to pass a speaking order. Hence, we remit this issue to the file of Ld. CIT(A). The Ld.CIT(A) shall elaborate how the mistake can be said to have got merged in the reassessment order giving the jurisdiction u/s 154 with reference to a mistake, which actually occurred much earlier. At what stage, the proposal to correct the error was mooted. CIT(A) shall give the assessee proper opportunity of being heard and also examining the reassessment and other records. Thereafter, he shall pass an order as per law. As regards that assessee pleading on merits. We find that in a proceeding u/s. 154, the merits of the issue cannot be adjudicated. Moreover, in the order of Tribunal referred by assessee in grounds of appeal the matter was remitted to the file of AO. In the result, this appeal filed by the assessee stands allowed for statistical purpose. Disallowances u/s 14A - HELD THAT:- It is apparent that said decision of Hon’ble Supreme Court in Maxopp Investment Ltd [2018 (3) TMI 805 - SUPREME COURT] does not give a carte blanche to withdraw the relief granted u/s 14A. Or in other words that it mandates that without considering these aspects disallowances has to be done. There is no doubt that Hon’ble Supreme Court held that relief granted from disallowances u/s 14A on the plank that the investment being stock in trade cannot be upheld. Hence, no relief can be granted to assessee on this account. But, it is still deserved relief on the other issue for own interest free funds for the purpose of u/s 8D(ii) and restricting the disallowances with that extent exempt income. These cannot be said to be a subject matter of rectification u/s 154. Hence,upon careful consideration, we hold that the disallowance is not coming under the realm for rectification of mistake u/s 154 and the AO order u/s 154 cannot be presumed to have considered these aspects. We agree with the submissions of the assessee that order passed by the AO is not sustainable as the issue was debatable and it was not liable for rectification of mistake u/s .154. Hence, we hold that order passed to withdraw the relief granted u/s 14A earlier is bereft of jurisdiction. Hence, we set aside the order of Ld.CIT(A) and decide the issue in favour of the assessee.
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