TaxTMI 
TaxTMI 
2021 (1) TMI 469
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....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 Tribunal which was passed under section 143[3] r.w.s. 254 of the Act and the issue which was proposed to be rectified was never a subject matter of appeal before the learned authorities and consequently the learned assessing officer exceeded his jurisdiction which is not permissible in law on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax [Appeals] is not justified in law in confirming the order of rectification passed by the learned assessing officer under section 154 of the Act, without appreciating that in the guise of rectifying the order dated 20/10/2011, has attempted to rectify already concluded issues in the original order of assessment passed under section 143[3] of the Act dated 10/02/2005, under the facts and circumstances of the case. 5. The learned Commissioner of Income-tax [Appeals] failed to a....
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....see, 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 the CIT(A) and same is pending adjudication. 4. In the meanwhile, the Assessing Officer issued notice of rectification u/s 154 of the I.T.Act proposing to rectify the A.O.'s order dated 20.10.2011 passed u/s 143(3) r.w.s. 254 of the I.T.Act. The reason for the A.O. to issue notice u/s 154 of the I.T.Act was that deduction u/s 80IA of the I.T.Act amounting to Rs. 80.55 crore has been allowed before computing gross total income. The assessee filed objection to the notice issued u/s 154 of the I.T.Act, stating that rectification proceedings initiated is time barred. On merits, it was submitted that the issue sought to be rectified is a debatable issue and not amenable to proceedings u/s 154 of the I.T.Act. However, the Assessing Officer rejected the contentions raised by the assessee and passed an order u/s 154 of the I.T.Act on 28.03.2012. The A.O. computed the income in the followin....
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.... under section 80LA. was not a subject matter either in revision or appeal before ITA T. Therefore, there was no bar in rectifying a mistake apparent from record in the order passed under section 143(3) read with section. 254 of the Act on 20.10.2011. There is no substance in the appellant's contention. The ground is not allowed. 8. In ground no. 3, it has been contended that the issue rectified by the officer was highly debatable and required a long drawn process of reasoning. 9. According to Article 141 of the' Constitution of India the law declared by the Supreme Court shall be binding on all courts within the territory of India. Therefore, it could not be said that the matter was debatable. As noted above, the matter rectified was the computation of deduction under section 80IA relating to the manner in which it was to be computed with reference to set off of losses. The relevant facts were on record and as such long drawn process of reasoning was not required in this case. The ground is not allowed. 10. In ground no. 4, it has been contended that the assessing officer had rectified concluded issues in the guise of rectification proceedings. 11. As noted above....
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....to ITAT or even in the consequential order passed by the A.O. to give effect to the order of the I.T.A.T under section 143(3) r.w.s. 254 of the Act dated 20.10.2011. The chronological order by the A.O., revisional authorities, Appellate authority, etc. are follow:- Sl. No. Proceedings Date (a) Order passed under section 143(3) of the Act. 10/02/2005 (b) Revision order passed under section 263 of the Act. 28/03/2007 (c) Order of the Tribunal against the appeal preferred by the appellant against 263 order. 16/05/2008 (d) Consequential order passed by the learned AO subsequent to the directions of the Hon'ble Tribunal under section 143(3) r.w.s. 254 of the Act 20/10/2011 (e) Impugned rectification order passed by the A.O. under section 154 of the Act. 28/03/2012 9.2 The CIT[A] in para 7 of the impugned order had relied on the provisions of section 154(1A) of the I.T.Act to hold that the A.O. is justified in making rectification of the issue which was not subject matter of appeal / revision. The relevant findings of the CIT(A) reads as follow:- "7. From a bare reading of sub-section (1A) of section 154; it is clear that any matter not considered in proceedings by ....
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....ought to its notice by the assessee [or by the deductor], and where the authority concerned is the [***] [Commissioner (Appeals)], by the [Assessing] Officer also. [***] (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee [or the deductor], shall not be made under this section unless the authority concerned has given notice to the assessee [or the deductor] of its intention so to do and has allowed the assessee [or the deductor] a reasonable opportunity of being heard. (4) Where an amendment is made under this section, an order shall be passed in writing by the income-tax authority concerned. [(5) Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assessee or the deductor, the Assessing Officer shall make any refund which may be due to such assessee or the deductor.] (6) Where any such amendment has the effect of enhancing the assessment or reducing a refund [already made or otherwise increasing the liability of the assessee or the deductor, the Assessing Officer shall serve on the assessee or the deductor, as the case may b....
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....4. The CIT(A) in the impugned order had relied on the provisions of section 154(1A) of the I.T.Act to hold that the A.O. is justified in making rectification of the issue, which are not subject matter of appeal / revision. In this context, it is relevant to refer to the judgment of the Hon'ble Apex Court in the case of CIT v. Alagendran Finance Ltd. [(2007) 293 ITR 1 (SC)] . The Hon'ble Apex Court in the case of CIT v. Alagendran Finance Ltd. (supra) was considering the issue of doctrine of merger and whether Commissioner's order passed u/s 263 of the I.T.Act is barred by limitation. In the said case, there were assessments completed for assessment years 1994- 95 to 1996-1997 and subsequently there were reassessment u/s 143(3) r.w.s. 147 of the I.T.Act. Thereafter, the Commissioner set aside the assessment orders and directed the A.O. to consider afresh the "Lease Equivalization Fund". The issue of "Lease Equivalization Fund" was not the subject matter of reassessment order passed u/s 143(3) r.w.s. 147 of the I.T.Act. Therefore, the question was whether the CIT's order u/s 263 of the I.T.Act was barred by limitation. If period of limitation is reckoned from the original assessment....
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.... even `rectified order'. In coming to the above conclusion, the Hon'ble Apex Court in the case of Hind Wire Industries Limited (supra) inter alia has followed the earlier judgment of the Hon'ble Supreme Court in a Sales-tax case in the case of International Cotton Corporation Pvt. Ltd. v. CTO reported in 35 STC 1, on the reasoning that on rectification, the original order is no longer subsisting, with the result that the time limit cannot be counted from the date of original order. In other words, once an order of rectification is passed, the assessment itself is modified and what remain thereafter is, not the order of rectification, but assessment as rectified. 9.7 The Hon'ble Allahabad High Court in the case of Shree Naw Durga Bansal Cold Storage and Ice Factory v. CIT & Anr. [(2017) 397 ITR 626 (All.)] (facts of the case considered by the Hon'ble Allahabad High Court and facts of the instant case are similar) had also referred to the judgment of the Hon'ble Apex Court in the case of Hind Wire Industries Limited (supra) by observing as under:- "23. We also find that judgment relied on by learned counsel for the assessee in Hind Wire Industries Ltd. (supra) also supports the af....
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.... the original order. It can be any order, including the amended or rectified order." (emphasis1 added) 26. The aforesaid word "including" makes it very clear that an amended or rectified order would not result in nullifying the original order and to say that the original order would cease to exist, the observations made in the Delhi High Court judgment is more than what has been said. The judgment referred in Hind Wire Industries Ltd. (supra) related to the cases wherein the court found that effect of reopening and re-assessment of assessment is to vacate the initial order of assessment and to substitute in its place the order made on reassessment. With this proposition there cannot be any quarrel and this aspect is already covered in Deputy CCT v. H. R. Sri Ramulu [1977] 39 STC 177 (SC), V. Jaganmohan Rao v. CIT/EPT [1970] 75 ITR 373 (SC) and CST v. H. M. Esufali H. M. Abdulali [1973] 90 ITR 271 (SC). 27. In Hind Wire Industries Ltd. (supra) the Supreme Court has used word "including" in the amended or rectified order would mean that word "order" as the case may be can be either "original order" or "amended order" or "rectified order" depending upon the fact as to in which ord....
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....habad High Court followed the judgment of Hon'ble Apex Court in the case of CIT v. Alagendran Finance Ltd. (supra) and concluded as under:- "31. Learned counsel for the assessee also could not dispute that mistake regarding set off of loss had occurred in the assessment order dated March 31, 2006 but on this aspect the assessee did not either carry the dispute in appeal before the Commissioner of Income-tax (Appeals) or Tribunal or filed application for rectification within the period of limitation under section 154(7). Therefore, in the garb of remand order in relation to some other aspect, the assessee, could not have taken advantage of extension of limitation by seeking commencement thereof from the order passed by the assessing authority on the issue on which remand was made." 9.8 The Hon'ble jurisdictional High Court in the case of M/s.Kothari Industrial Corporation Limited v. The Agricultural Income Tax Officer reported in 230 ITR 306 had held that the period of limitation for a second rectification should be reckoned from the date of original order, if subject matter of second rectification is different from subject matter of the first rectification. The relevant finding ....
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....nt only if the second rectification related to subject-matter of the first rectification. If the subject-matter of the subsequent rectification is not the subject-matter of the first rectification, then necessarily the five years period will have to be calculated from the order of assessment dt. 29th July, 1985. The subject-matter of second and third rectifications which were initiated by the notice dt. 21st Aug., 1990 and 26th Nov., 1990, resulting in the orders dt. 13th March, 1991, and 3rd May, 1991, have no connection to the subject-matter of the rectification order dt. 9th Jan., 1986. The initiation of rectification proceedings by notices dt. 21st Aug., 1990, and 26th Nov., 1990 and orders dt. 13th March, 1991, and 3rd May, 1991, are, therefore, barred by time. Hence, these petitions are allowed. Annexures 'E', 'E1' and 'E2', dt. 13th March, 1991 in WP Nos. 11430-3211991 and Annexures 'M', 'M1', and 'M2', dt. 3rdMay, 1991, in WPNos. 13866-6811991, are hereby quashed." 9.9 The Hon'ble Bombay High Court in the case of CIT v. Sakseria Cotton Mills Ltd. reported in 124 ITR 570 (Bom.) has also taken a similar view. The relevant findi....