TMI Blog2009 (10) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... rectified – answered in favor of revenue. - 196 of 2009 - - - Dated:- 9-10-2009 - A.K. SIKRI and VALMIKI J. MEHTA JJ. Ms. Prem Lata Bansal, Advocate for the appellant. Mr. Satyen Sethi with Mr. Manu K. Giri, Advocates, for the respondent. JUDGMENT The judgment of the court was delivered by A.K. SIKRI, J. - An interesting question of law relating to the limitation of correcting error under Section 154 of the Income Tax Act, 1961 (hereinafter referred to the 'Act') arises in this appeal. The issue is: from which date the period of limitation provided under Section 154 of the Act is to be reckoned. 2. The assessment order was framed by the Assessing Officer (AO) under Section 143(3) of the Act on 24.11.1998 framing the income at Rs.8.77 crores. While doing so, the AO had made various additions, which were not palatable to the respondent/assessee. The respondent/assessee filed appeal against that order. The Commissioner of Income Tax (Appeal), vide his order dated 20.5.1999, gave partial relief to the assessee. The matter had gone to the CIT (A) again and, therefore, order recording appeal effects had to be passed three times. The relevant dates in this behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the order sought to be amended was passed". According to the assessee, since the assessment was framed on 24.11.1998, the period of four years had lapsed long ago and, therefore, the proposed action on the part of the AO was time barred. The AO did not accept this plea while passing the orders dated 26.4.2006. According to him, the period of four years was to be calculated from 23.7.2004 when the AO had given appeal effect and passed revised assessment order on that date, on the basis of decision of the Tribunal. 5. The assessee questioned this wisdom of the AO by filing appeal before the CIT(A). The CIT(A) confirmed the action of the AO and dismissed the appeal on 4.12.2006. Still aggrieved, the assessee approached the Income Tax Appellate Tribunal (for short, the 'Tribunal') by filing further appeal. The assessee has succeeded in its effort before the Tribunal, as vide impugned orders dated 25.4.2008 the Tribunal has quashed the AO's order on the ground that the same was barred by limitation. Now, it is the turn of the Revenue to feel dissatisfied with the order of the Tribunal. Hence, the present appeal. 6. It is in this backdrop the appeal was admitted on the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 27.5.1999, i.e. the first appeal effect. In the case of Hind Wire Industries Limited v. CIT, 212 ITR 639, the Supreme Court has held that the word 'order' in the expression "from the date of the orders sought to be amended" in Section 154(7) of the Act, is not qualified in any way, it does not necessarily mean the original order; it could be any order including the amended order or rectified order. The Court relied upon the judgment in the case of International Cotton Corporation (P) Ltd. v. CTO, (1975) 2 SCR 345, in which it is held that after rectification, the original assessment order no longer remains in force. What was sought to be rectified by the Officer was the assessment order as rectified by him. There is no doubt that the rectified order is also 'any order' which can be rectified under Rule 38. 8. The contention of the Revenue is that the original order of assessment, assessing the income at Rs.8.77 crores, had been merged into the order of CIT(A) and the order of CIT(A) stood merged with the order of Tribunal, which was passed on 28.6.2004. Giving appeal effect to this order of the Tribunal, when the revised assessment orders were passed on 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first appeal effect order dated 27.5.1999. He, thus, argued that mistake was not in the order dated 23.7.2004, rather the same was in original assessment order dated 24.11.1998. This fact is not in dispute. Both CIT(A) and the Tribunal has recorded a finding that mistake was in order dated 24.11.1998. Mistake was that depreciation instead of being added to the income was reduced from the assessee income resulting in double deduction. 12. Countering the submission of the Revenue predicated on the doctrine of Merger, the learned counsel submitted that the purpose for passing appeal effect order was altogether different. He argued that the effect of reassessment is to set aside original order and substitute in its place the order made in reassessment proceedings. The initial order of assessment does not survive in any manner or to any extent {See - CIT v. K. Kesava Reddiar, (1989) 178 ITR 457) and Sharda Trading Company v. CIT, (1984) 149 ITR 19 (Del)}. However, rectification order under Section 154 of the Act does not obliterate the original order. After the order rectifying the mistake is passed, what remains is not the rectification order but the assessment order as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision was endorsed in Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu, (1977) 39 STC 177 when this court observed there as follows : "The reason for that is that once an assessment is reopened, the initial order for assessment ceases to be operative. The effect of reopening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on reassessment. The initial order for reassessment cannot be said to survive, even partially, although the justification for reassessment arises because of turnover escaping assessment in a limited field or only with respect to a part of the matter covered by the initial assessment order. The result of reopening the assessment is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment. As it is, we find that in the present case, the assessment orders made under section 12A were comprehensive orders and were not confined merely to matters which had escaped assessment earlier. In the circumstances, the only orders which could be the subject matter of revision by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be enforced. In law the position would be just the same even if the appellate decision merely confirms the decision of the tribunal. As a result of the confirmation or affirmance of the decision of the tribunal by the appellate authority the original decision merges in the appellate decision and it is the appellate decision alone which subsists and is operative and capable of enforcement." 16. Once we understand the Doctrine of Merger in its true sense, as explained above, and relying upon the interpretation given to the word 'any' or 'order' given to sub-section (7) of Section 154 of the Act by the Apex Court in Hind Ware Industries (supra), the inescapable conclusion would be that the original order of assessment had ceased to operate on the decision given by the CIT(A) and had merged with the orders of the appellate authority. The final orders passed by the appellate authority were dated 28.6.2004 and acting thereupon the AO passed assessment order, giving appeal effect thereto, on 23.7.2004. Thus, it is the order of 28.6.2004 passed by the CIT(A) which remains on record for all intent and purposes as the original order of assessment has been merged. Once the matter is v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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