TaxTMI 
TaxTMI 
2009 (10) TMI 62
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....ated 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 behalf are tabulated as under :- 24.11.1998 Assessment under Section 143(3) was completed. 20.5.1999 Appeal against assessment order dated 24.11.1998 was disposed of by the CIT(A). 8.5.2003 First appeal effect order under Section 143(3)/250 was made and thereby income was assessment at Rs.1,26,57,100/-. 28.6.2004 Appeal against 2nd appeal effect order dated 8.5.2003 was disposed of by the CIT (A). 23.7.2004 Order under Section 143(3)/250 giving effect to order of CIT(A) dated 28.6.2001 was passed. For the purposes of giving effect, income determined vide order dated 27.5.1999, i.e. Rs.1,26,57,100/- was taken as the starting point and income was reduced to Rs.32,12,675/-. 30.1.2006 Notice under Section 154 of the Act, alleging that there was mistake in the order dated 23.7.2004 was issued. Mistake pointed out was that opening income for giving appeal effect taken at Rs.1,26,57,100/- should have been taken at Rs.1,39,14,788/-. 26.4.2006 Order under....
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....dissatisfied with the order of the Tribunal. Hence, the present appeal. 6. It is in this backdrop the appeal was admitted on the following substantial question of law :- "Whether the Tribunal misdirected itself in law by calculating limitation under Section 154(7) of the Income Tax Act, 1961 with reference only to the date of the original order of assessment?" 7. The submission of learned counsel for the revenue is twofold, namely: (i) The mistake occurred in the present case was not related to any legal dispute, but was a totaling mistake and the AO had inherent power to rectify such a mistake which crept in while computation. For this purpose, limitation prescribed under sub-section (7) of Section 154 of the Act was not even applicable. Dilating this submission, it was argued that determination of assessed income under Section 143(3) of the Act presupposes the computation to be made by the AO correctly. If any error has been committed then the AO has the inherent power to rectify the same. The rectification does not require any argument from the assessee nor require any permission from the assessee. As admitted by the assessee and recorded by the Tribunal, the a....
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....ch was passed on 28.6.2004. Giving appeal effect to this order of the Tribunal, when the revised assessment orders were passed on 23.7.2004, it would be this date which would be relevant for the purpose of ticking up the clock insofar as limitation is concerned. Submission of the respondent/assessee, on the other hand, is that the orders of CIT(A) as well as the Tribunal dealt with altogether different aspects, namely, issues regarding deductions under Sections 80-H, 80-I and 80-IA of the Act and it is those aspects which were determined by the CIT(A) as well as the Tribunal. The doctrine of Merger would, therefore, be applicable only in respect of those issues before the appellate authorities. However, the purported mistake, which is taken note of by the AO, had crept in the original order dated 24.11.1998 and was not the subject matter of appeals. The submission of the respondent/assessee, therefore, is that for correcting such an error, the starting point would be the original assessment order dated 24.11.1998 and umbrage under the orders passed by the Tribunal cannot be taken and doctrine of Merger, on this issue, shall not apply. 9. In this manner, thus, the learned counsel....
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....the order rectifying the mistake is passed, what remains is not the rectification order but the assessment order as rectified {See - S. Arthanari v. First ITO, (1972) 83 ITR 828 (Mad), Jeewanlal v. ACIT, (1977) 108 ITR 407, and J.N. Sahni v. ITAT, (2002) 257 ITR 16}. Since order under Section 154 is confined to amendment carried out and what survives is the assessment as rectified, therefore, though the mistake in the original order continues. But, for the purposes of amendment, rectification order cannot be the order sought to be amended because rectification order has no independent existence. 13. We find substance in the submissions of learned counsel for the Revenue. In fact, answer to the issue at hand is provided by the judgment of the Supreme Court in Hind Wire Industries (supra). Dealing with the same provision, namely, sub-section (7) of Section 154 of the Act, the Court was of the view that the answer rested on the word 'Order' used in the expression "from the date of the order sought to be amended" occurring in sub-section (7) of Section 154 of the Act. The Court categorically opined that the word 'Order' had not been qualified in any way and it does not necessarily m....
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....r. In the circumstances, the only orders which could be the subject matter of revision by the appellant were the orders made under section 12A of the Act and not the initial assessment orders. (Emphasis supplied)" 14. What follows from the aforesaid is that after the rectification order, initial order of assessment ceases to operate. It is no more in existence and is substituted by the fresh assessment order passed. The Court, thus, categorically held that the word 'any' in the expression "order sought to be amended" would mean even the rectified order. 15. Legal position with which there cannot be any quarrel is that once an appeal against the order passed by an authority is preferred and is decided by the appellate authority, the order of the said authority merges into the order of the appellate authority. With this merger, order of the original authority ceases to exist and the order of the appellate authority prevails, in which the order of the original authority is merged. For all intent and purposes, it is the order of the appellate authority that would be seen. Doctrine of Merger has been explained by the courts in number of judgments. Our purpose will suffice by refer....