By K. B. Bhujle | Advocate
New Page 1
Reported:
45 Rectification: Limitation: S. 154 of I. T. Act, 1961:
Assessment order appealed against: Limitation to begin from the date of the
order giving effect to the appellate order:
CIT Vs. Tony Electronics Ltd.; 185 Taxman 121 (Del):
In the case of the assessee, the assessment order was passed
u/s. 143(3) of the Income-tax Act, 1961, on 24/11/1998, making various
additions. The Commissioner (Appeals) gave partial relief to the assessee. The
matter had gone to the Commissioner (Appeals) again. Therefore, orders recording
appeal’s effects had to be passed three times. On 30/01/2006, the Assessing
Officer issued a show cause notice u/s. 154, and passed a rectification order
u/s. 154 on 26/04/2006, withdrawing certain deductions which were allowed in the
assessment order dated 24/11/1998. The Tribunal quashed the rectification order
on the ground that the same was barred by limitation.
On appeal by the Revenue, the Delhi High Court reversed the
decision of the Tribunal and held as under:
“i) The legal position with which there cannot be any
quarrel, is that once an appeal against an order passed by an authority is
preferred and is decided by the appellate authority, the order of the said
authority merges with the order of the appellate authority. With this merger,
the order of the original authority ceases to exist and the order of the
appellate authority prevails with which the order of the original authority is
merged. To all intents and purposes, it is the order of the appellate
authority that would be seen.
ii) Once the doctrine of merger is understood in its true
sense as explained in a number of judgments, and relying on the interpretation
given to the word “any” or “order” given to sub-section (7) of section 154 by
the Apex Court, the inescapable conclusion would be that the original order of
assessment had ceased to operate on the decision given by the Commissioner
(Appeals), and had merged with the orders of the appellate authority. The
final order, passed by the appellate authority was dated 28/06/2004, and
acting thereupon, the Assessing Officer passed an assessment order, giving the
appeal effect thereto, on 23/07/2004. Thus, it was the order dated 28/06/2004,
passed by the Commissioner (Appeals) which remained on record to all intents
and purposes, as the original order of assessment had been merged.
iii) Once the matter was viewed from that angle, it was no
explanation that the error sought to be rectified occurred in the original
assessment order and was not the subject-matter of the appeal. Obviously, it
was an error of calculation which could not have been the subject-matter of
the appeal.
iv) The Tribunal misdirected itself in law by calculating
limitation u/s. 154(7) with reference to the date of the original order of
assessment. As a consequence, the order of the Tribunal was to be set aside
and the rectification order passed by the Assessing Officer was to be upheld
and restored.”
