Doctrine of Merger not applied; matter remitted for AO verification of tax credits and refund adjustments.

Whether the doctrine of merger applies to a repeated disallowance and consequent rectification demand was addressed by treating the question as one of mistake apparent on the record; the Tribunal found the rectification reproduced the same addition already reflected in the return and intimation, and concluded that the matter requires factual verification of tax payments, credit adjustments and refund treatment. Outcome: appeal allowed for statistical purposes and the issue remitted to the file of the Assessing Officer to examine the assessee's submissions, verify tax credits and refund adjustments, and determine the correctness of the disallowance.

---

---

Issues: Whether the double disallowance/addition of Rs. 8,54,970/- (disallowed by the assessee in the return and again by the CPC in intimation u/s 143(1)) giving rise to a fresh demand in a rectification order u/s 154 can be treated as a matter where the doctrine of merger applies and whether the matter should be remitted to the Assessing Officer for verification of tax credits and refund adjustments.

Analysis: The assessee had itself disallowed the relevant expenditure in the return and later the CPC/Assessing Officer made a similar disallowance in intimation issued under Section 143(1). A rectification application under Section 154 was filed and a rectification order creating fresh demand was passed. The question of whether the 143(1) intimation and the subsequent 154 order operate independently or merge for purposes of challenge was examined in light of the facts that the rectification order repeats the same addition and that tax payments and refund adjustments were made by the assessee. The Tribunal found that the issue raised in the appeal is directly connected with the alleged mistake apparent on the record and that remittance to the Assessing Officer for verification of tax credits and refund adjustment is necessary for complete justice.

Conclusion: The appeal is allowed for statistical purposes and the issue is remitted to the file of the Jurisdictional Assessing Officer to consider the assessee's submissions and verify the tax payments, refund adjustments and the correctness of the disallowance under law; decision is in favour of the assessee to the extent of remand and consideration by the Assessing Officer.

---