TMI Blog2021 (1) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... rendra Sharma, Advocate For the Respondent : Sri.Kannan Narayanan, JCIT-DR ORDER PER GEORGE GEORGE K, JM This appeal at the instance of the assessee is directed against CIT(A) s order dated 22.11.2016. The relevant assessment year is 2002-2003. 2. The grounds raised read as follow:- 1. The Order of the learned Commissioner of Income-tax [Appeals] in so far as it is against the Appellant is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant's case. 2. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the assumption of jurisdiction by the learned assessing officer under section 154 of the Act is barred by limitation and hence the entire order passed by the learned assessing officer under the provisions of section 154 of the Act is bad in law and the same requires to be cancelled on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the order sought to be rectified under section 154 of the Act is an order passed by the learned assessing officer pursuant to the directions of the Hon'ble Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.03.2007 passed u/s 263 of the I.T.Act, set aside the assessment order dated 10.02.2005, and directed the A.O. to compute the income after disallowing two expenditure claimed under the head `donation of asset and `loss of asset amounting to ₹ 2,18,08,792 and ₹ 2,19,73,292, respectively, since according to the CIT, these were capital expenditure. Aggrieved by the revisionary order of the CIT passed u/s 263 of the I.T.Act, the assessee preferred an appeal to the Tribunal. The Tribunal vide order dated 28.03.2007 in ITA No.584/Bang/ 2009 vacated the findings of the CIT and directed the Assessing Officer to look into the issue afresh whether the expenditure claimed by the assessee are allowable or not. The A.O., pursuant to the order of the Tribunal, called for details as regards the item claimed as revenue expenditure. After examining the details submitted by the assessee, the AO passed order dated 20.10.2011 u/s 143(3) r.w.s. 254 of the I.T.Act. The expenditures were disallowed by the A.O. by treating it as capital expenditure. As against the order of the A.O. passed u/s 143(3) r.w.s. 254 of the I.T.Act, it is stated that the assessee has filed further appeal before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon ble Supreme Court in the case of Synco Industries Ltd. v. AO Other (reported in 299 ITR 444), it is seen that the deduction under Chapter VIA has to be given out of the gross total income calculated as per the provisions of Income Tax Act, 1961 after application of provisions relating to set off of losses . The A.O. held that 154 order is not barred by limitation, since order sought to be rectified is order of A.O. dated 20.10.2011 passed u/s 143(3) r.w.s. 254 of the I.T.Act. On merits, the A.O. held that the issue is not debatable, since there is clear declaration of law by Hon ble Apex Court in case of Synco Industries Limited (supra). 6. Aggrieved by the order of the Assessing Officer in passing a rectification order u/s 154 of the I.T.Act, the assessee has preferred an appeal to the first appellate authority. Before the CIT(A), the assessee contended that the rectification order is barred by limitation. Further, it was contended that on merits, the issue is highly debatable and hence proceedings u/s 154 of the I.T.Act cannot be taken. Both the issues raised by the assessee were rejected by the CIT(A). The relevant findings of the CIT(A) reads as follow:- 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned AR reiterated the submissions made before the Income Tax Authorities. 8. The learned Departmental Representative, on the other hand, relied on the orders passed by the A.O. and CIT(A). Further, the learned DR relied on the judgment of the Hon ble Apex Court in the case of Hind Wire Industries Limited v. CIT [(1995) 212 ITR 639 (SC). 9. We have heard rival submissions and perused the material on record. The issues raised for our adjudication are as follows:- (i) Whether the order of rectification passed by the A.O. under section 154 of the I.T.Act is beyond the period of limitation as per the provisions of section 154(7) of the I.T. Act or not? (ii) Whether the rectification proceedings initiated under section 154 of the I.T.Act is a debatable issue and is amenable for rectification under section 154 of the I.T.Act or not? 9.1 We shall first adjudicate the whether the order of rectification passed by the A.O. under section 154 of the Act is beyond the period of limitation as per the provisions of section 154(7) of the Act or not? The issue which was rectified u/s. 154 of the I.T.Act is with regard to the deduction under section 80-IA of the I.T.Act. Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue of deduction u/s 80IA of the I.T.Act was not subject matter of any proceedings either in revision or appeal. In other words, admittedly, the issue as regards the computation of deduction u/s 80IA of the I.T.Act is arising only from the original assessment order dated 10.02.2005 passed u/s 143(3) of the I.T.Act. The further question is which is the order sought to be rectified u/s 154(7) of the I.T.Act, whether it is the order of A.O. dated 10.02.2005 passed u/s 143(3) or A.O s order dated 20.10.2011 passed u/s 143(3) r.w.s. 254 of the I.T.Act. If the period of limitation is reckoned from original assessment order, then rectification order dated 28.03.2012 is barred by limitation u/s 154(7) of the I.T.Act. 9.4 In this context, let us refer to section 154 of the I.T.Act, which reads as follows:- Rectification of mistake. 154. [(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,- (a) amend any order passed by it under the provisions of this Act [(b) amend any intimation or deemed intimation under subsection (1) of section 143;]] [(c) amend any intimation under sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7), where an application for amendment under this section is made by the assessee [or by the deductor] on or after the 1st day of June, 2001 to an income-tax authority referred to in sub-section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,- (a) making the amendment; or (b) refusing to allow the claim.] 9.5 In context of the case, it is also necessary to discuss the issue regarding the merger of the orders in appellate order and the Assessing Officer s jurisdiction to rectify the same. The doctrine of merger is based on the principle that there cannot be, at one time, more than one operative order governing the same subject matter. Whether there is merger of the order of assessment or other order of the Assessing Officer in the appellate order of the appellate authority or not and, if there is, to what extent, depends upon the subject matter of the appellate order. The order of assessment made by the Assessing Office merges in the order of the appellate authority only in so far as it relates to items considered and decided by the appellate authority. That part of the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng regard to the fact that the Commissioner of Income-tax exercising his revisional jurisdiction reopened the order of assessment only in relation to lease equalisation fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity. 9.6 Further, the Hon ble Apex Court referred to Explanation (c) appended to sub-section (1) of section 263 of the I.T.Act and held that power of the Commissioner in revision is clear and unambiguous, as in terms thereof the doctrine of merger applies only in respect of such items which were subject matter of appeal and not in respect of those which were not. Accordingly, the Hon ble Apex Court held that the order u/s 263 of the I.T.Act is barred by limitation. The Explanation (c) appended to section 263(1) of the I.T.Act and section 154(1A) of the I.T.Act are p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer being barred by time under section 154(7) and order was confirmed by the Commissioner in appeal. The Tribunal took the view that for the purpose of section 154(7), limitation would commence from rectified order dated July 12, 1982 but on a reference, the High Court reversed the view taken by the Tribunal and held that the period of four years could be calculated from initial order of the assessment made on September 21, 1979 and not rectified assessment order dated July 12, 1982. The Supreme Court while construing section 154 observed that the word order has not been qualified in any way and does not necessarily mean original order . It can be any order including the amended or rectified order . The assessee therein had sought rectification of order dated July 12, 1982 and the court held that the word order under section 154(7) would include even rectified order . 24. In CIT v. Tony Electronics Limited (supra), the court has held that judgment in Hind Wire Industries Ltd. (supra) lays down that once an order is rectified, initial order ceases to operate and it is no more in existence. Relevant observation reads as under (page 385 of 320 ITR) : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended meaning thereby for the purpose of attracting section 154(7), such order which is sought to be amended, would determine the period of limitation. 29. In the present case, subsequent orders dated December 31, 2009 and January 25, 2011 were not in respect to the assessment of other items but confined to limited issue of long-term capital gain since that was the only aspect whereupon, the Tribunal has remanded the matter to the assessing authority. Issue of set off etc. was not the subject matter of consideration before the assessing authority when he passed orders dated December 31, 2009 and January 25, 2011. The assessee, in fact, wanted amendment in the original order dated March 31, 2006 and hence limitation would count from that order. 30. We may also notice at this stage that the Supreme Court's judgment in Hind Wire Industries Ltd. (supra) has been considered in CIT v. Alagendran Finance Ltd. [2007] 293 ITR 1 (SC) and it has been said therein that there may not be any doubt or dispute that once an order of assessment is reopened, the previous assessment would be held to be set aside and the whole proceedings would start afresh but the same would not mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, however, in regard to the subject- matter of the first rectification, the period of limitation should be reckoned from the date of the first rectification order. 17. Let me examine the impugned order in the light of the aforesaid principles. As the subject-matter of these petitions are subsequent orders passed by the authority who passed the original orders and are not orders of any appellate or revisional authority, the doctrine of merger is inapplicable. The original orders were passed on 29th July, 1985. There were rectified on 9th Jan., 1986, in regard to non-allowance of depreciation at the instance of petitioner. The assessing authority passed a second set of rectification orders dt. 13th March, 1991, in pursuance of notices dt. 21st Aug., 1990, in regard to six matters, which had nothing to do with the subject-matter of the first order of rectification dt. 9th Jan., 1986, which related to depreciation. He again passed a third set of rectification orders dt. 3rd May, 1991, in pursuance of notices dt. 26th Nov., 1990 in regard to disallowance of interest, which is also a matter which had nothing to do with the subject-matter of the first rectification dt. 9th Jan., 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Any rectification made in respect of that part of the order was required to be made within four years from 23rd Nov., 1956. The limitation for exercising powers of rectification under s. 154 could not, therefore, commence from 10th March, 1961, when the ITO made 'an order which was restricted only to carrying out the directions given by the AAC. It is obvious, therefore, that the rectification order made on 8th March, 1965, was clearly beyond a period of four years provided by s.154(7) of the I.T.Act, 1961. 9.10 In the light of our aforesaid reasoning and judicial pronouncements cited supra, we hold that since computation of deduction u/s 80IA of the I.T.Act was never the subject matter of issue / dispute in any proceeding u/s 263 of the I.T.Act, u/s 254 of the I.T.Act or in A.O. s order u/s 143(3) r.w.s. 254 of the I.T.Act, limitation u/s 154(7) of the I.T.Act, would have to be reckoned from the date of original assessment order dated 10.02.2005 passed u/s 143(3) of the I.T.Act. Therefore, rectification order dated 28.03.2012 would be barred by limitation u/s 154(7) of the I.T.Act. It is ordered accordingly. 9.11 The other grounds raised are not adjudicated, since ..... X X X X Extracts X X X X X X X X Extracts X X X X
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