TMI Blog2014 (1) TMI 1757X X X X Extracts X X X X X X X X Extracts X X X X ..... tification but according to us, he cannot approach the Assessing Officer for rectification in the order passed on 25/01/2011 as it was passed consequent to the directions of the CIT(A) and the Tribunal. Therefore, the limitation can only start from the original assessment order for rectification as the original assessment cannot be called to have been merged with the order dated 25/01/2011 for the purpose of section 154 of the Act. We, therefore, are of the considered view that the CIT(A) has properly adjudicated the issue in the light of various judicial pronouncements and since we do not find any infirmity therein, we confirm his order. - Decide against assessee. - IT Appeal No. 702 (Luck.) of 2013 - - - Dated:- 7-1-2014 - SUNIL KUMAR YADAV, JUDICIAL MEMBER AND A.K. GARODIA, ACCOUNTANT MEMBER Rakesh Garg for the Appellant. Alok Mitra for the Respondent. ORDER Sunil Kumar Yadav, Judicial Member - This appeal is preferred by the assessee against the order of CIT(A), inter alia, on various grounds, which are as under: 1. Because the CIT(A) has erred on facts and in law in rejecting the claim of the assessee for rectification of the orders, claiming the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessment was completed u/s 143(3) of the Act vide order dated 31/03/2006 denying the set off of brought forward capital loss of ₹ 12,49,310/-. An appeal was preferred against the said assessment order before the CIT(A) and the CIT(A), vide order dated 27/12/2006, partly allowed the appeal on the issue of disallowance made out of the appellant claim for interest but the computation of long term capital gain was confirmed by the CIT(A) against which an appeal was filed before the Tribunal and the Tribunal, vide its order dated 13/06/2008 in I.T.A. No.239/Lkw/2007 decided the issue of disallowance out of various claims in the profit loss account and remitted the issue of computation of long term capital gain to the file of the Assessing Officer for a limited purpose to arrive at the fair market value on the date of transfer by referring to the Valuation Officer. The Assessing Officer passed a consequential order on 31/12/2009 and re-computed the long term capital gain at ₹ 33,40,926/-. Against this order, the assessee again preferred an appeal before the CIT(A) with the submission that the Assessing Officer had not followed the direction of the Tribunal in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 66,56,400/- which included certain disallowances and long term capital gains was computed at ₹ 62,99,941/- taking into account deemed sale consideration in terms of provisions of section 50C. No set off of brought forward long term capital loss pertaining to AY 2002-03 was allowed against the above gains. Second, order was passed by the AO u/s 143(3)/254 on 31.12.2009 in accordance with the directions of the Hon'ble ITAT to refer the determination of fair market value of the property to the DVO and the long term capital gains was computed at ₹ 33,40,926/-. In this order the Assessing Officer stated that the order is being passed without the fair market value determined by the Valuation Officer and subject to suitable modification on the basis of DVO's report as and when the same is received. Third order u/s 154/254/143(3) was passed by the Assessing Officer on 25.01.2011 after receiving the valuation report of the DVO and long term capital gain was determined at ₹ 13,19,962/-. An application u/s 154 dated 09.05.2011 was filed before the AO on 18.05.2011 seeking to rectify the order dated 25.01.2011. 5.1 Section 154 provides that no amendment u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of limitation. Reliance is placed on the following judgments: The Hon'ble ITAT, Bangalore Bench in the case of Syndicate Bank v. Dy. CIT [1998] 65 ITD 141 has held that Section 154 of the Income-tax Act, 1961 - Rectification of mistake -Apparent from records - Assessment year 1975-76 -Original assessment order was passed on 7-2-1978 and it was rectified on 19-12-1989 - Whether there being no orders of rectification in between above two dates, and two subsequent orders passed on 17-9-1980 and 16-5-1986 being consequential orders and not rectificatory orders, impugned rectification order was barred by limitation and had to be cancelled - Held, yes The Hon'ble ITAT, Chennai Bench in the case of Asstt. CIT v. Precott Mills Ltd. [2009] 178 Taxman 15 (Chennai) (Mag.) has held that a reading of the provisions of section 154 clearly indicates that as per section 154(7), there is a limitation to rectify any mistake arising in any order within four years from the end of the financial year, in which the order was passed. In the notice under section 154(3) dated 17-3-2005, the Assessing Officer had sought to rectify the rectification order dated 30-1-2004 for rectifying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of reassessment and subject matter of assessment were the same. They were not. [Para 12] Therefore, in the instant case, the doctrine of merger would have no application. [Para 13] Therefore, keeping in view the facts and circumstances of the instant case and, in particular, having regard to the fact that the Commissioner exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which, was not the subject of reassessment proceedings, the period of limitation provided for under sub-section (2) of section 263 would begin to run from the date of the order of original assessment and not from the order of reassessment. The revisional jurisdiction, having, thus, been invoked by the Commissioner beyond the period of limitation, it was wholly without jurisdiction, rendering the entire proceeding a nullity. [Para 15] Tribunal and the High Court, therefore, were correct in passing the impugned judgment. The appeal therefore, was to be dismissed. The Hon'ble High Court of Madras in the case of CIT v. Shriram Engg. Construction Co. Ltd. [2011] 11 taxmann.com 151 (Mad.) has held that as per the provisions section 263( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is prejudicial to the interests of the revenue, the section definitely gives power to the Commissioner. The deciding factor in the instant case was that the complaint of the Commissioner refers to the order passed under section 143(3) and not the amended order under section 154. [Para 11] For the foregoing reasons the Tribunal was right in holding that the order of the Commissioner passed under section 263 was barred by limitation. In view of the above the action of the AO in rejecting the application of the appellant filed u/s 154 is upheld. 4. Now the assessee has preferred an appeal before the Tribunal and reiterated its contentions that the original assessment order dated 31/03/2006 was merged with the order dated 25/01/2011, therefore, the limitation will start for the purpose of section 154 of the Act (hereinafter referred to as the Act ) from 25/01/2011. In support of his contention, he has also placed reliance upon the theory of doctrine of merger with the submission that whenever any rectification or appellate order is passed, the original order would merge with the rectified order or order of the Appellate Authorities and the limitation would reckon from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. At the most, in the instant case, the assessee could have moved to the CIT(A) for necessary rectification in this regard. But the Assessing Officer has no jurisdiction to entertain the application for rectification against an order dated 25/01/2011 passed consequent to the directions of the CIT(A) in remand proceedings. 6. Having heard the rival submissions and from a careful perusal of the orders of the authorities below and the judgments referred to by the parties, we find that the controversy revolves around an issue as to which would be the date from which limitation starts for the purpose of rectification u/s 154 of the Act, whether it would be date on which original assessment order was passed or would it be the date when the Assessing Officer has passed an order consequent to the direction of the CIT(A) in remand proceedings in terms of the order passed by the Tribunal vide order dated 13/06/2008 in I.T.A. No.239/Lkw/07. During the course of hearing, the learned counsel for the assessee has made a reference of the judgment of Hon'ble Apex Court in the case of Hind Wire Industries (supra) and Toni Electronics Ltd. (supra). In Hind Wire Industries, the original asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is very limited and they have to act and perform in terms of the directions issued by the Appellate Authority. They have no jurisdiction to enlarge or restrict the scope of enquiry/adjudication conferred by the Appellate Authority. 6.2 Our attention was invited to a judgment of Hon'ble Apex Court in the case of CIT v. Alagendran Finance Ltd. [2007] 293 ITR 1 (SC) in which while dealing with the issue of limitation u/s 263(2) of the Act, their Lordships have observed that a bare perusal of the order passed by CIT would clearly demonstrate that only part of the order of assessment which related to lease equalization fund was found to be prejudicial to the interest of the Revenue. The proceedings for reassessment have nothing to do with the said head of income. The doctrine of merger, therefore, would not apply in a case of this nature. Their Lordships further observed that there may not be any doubt or dispute that once an order of assessment is reopened, the previous assessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of reassessment is distinct and different, the entire pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under-assessed or has been assessed at too low a rate or has been made the subject of excessive relief under the Act or excessive loss or depreciation allowance has been computed. In either case whether the ITO invokes his jurisdiction under cl. (a) or cl. (b) or both, the proceedings for bringing to tax an escaped assessment can only commence by issuance of a notice under s. 148 of the Act within the time prescribed under the Act. Thus, under s. 147, the AO has been vested with the power to assess or reassess the escaped income of an assessee. The use of the expression assess or reassess such income or recompute the loss or depreciation allowance in s. 147 after the conditions for reassessment are satisfied, is only relatable to the preceding expression in cls. (a) and (b) viz., escaped assessment . The term escaped assessment includes both non-assessment as well as under-assessment . Income is said to have escaped assessment within the meaning of this section when it has not been charged in the hands of an assessee in the relevant year of assessment. The expression assess refers to a situation where the assessment of the assessee for a particular year is, for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the scope of reassessment proceedings as explained by the Supreme Court in the case of CIT v. Sun Engineering Works (P) Ltd. [1992] 198 ITR 297 (SC), is in relation to that which has escaped assessment, and does not extend to reopening the entire assessment for the purpose of redoing the same de novo. An assessee cannot agitate in any such reassessment proceedings matters forming part of the original assessment which are not required to be dealt with for the purpose of levying tax on that which had escaped tax earlier. Cases of underassessment are also treated as instances of escaped assessment. The order of reassessment is one which deals with the assessment already made in respect of items which are not required to be reopened, as also matters which are required to be dealt with in order to bring what had escaped in the earlier order of assessment, to assessment. An assessee who has failed to file an appeal against the original order of assessment cannot utilise the reassessment proceedings as an occasion for seeking revision or review of what had been assessed earlier. He may only question the extent of the reassessment insofar as the escaped assessment is concerned. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order originally passed by him. Therefore, the consequential order passed by the Assessing Officer cannot be called to be the rectified order of the original assessment order. Thus, the theory of doctrine of merger would not apply in such cases and the original assessment would not called to have been merged with the order of the Assessing Officer passed consequent to the directions in the orders of the Appellate Authority. Once the Assessing Officer cannot exceed the jurisdiction conferred by the Appellate Authority for passing an order in terms indicated in the appellate order, how the Assessing Officer can assume a jurisdiction to modify that rectified order passed u/s 154 of the Act. 6.4 In the instant case, the order dated 25/01/2011 was passed during the remand proceedings pursuant to the remand order dated 06/01/2011 passed u/s 254(4) of the Act and in terms of directions issued by the Tribunal, therefore, this order can only be a part of the appellate proceedings/order of the CIT(A) and does not assume a character of the independent assessment order for the purpose of section 154 of the Act. 6.5 Our attention was also invited to the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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