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Income Tax Appellate Tribunal, JAIPUR BENCHE ‘B’ JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 920/JP/2017
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE ‘B’ JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 920/JP/2017 fu/kZkj.k o"kZ@Assessment Year :2008-09 cuke Smt. Nirmala Goyal The ACIT, Vs. L/H Late Shri Om Prakash Goyal, Circle-2, Prop. M/s Omni Palace, Ajmer Omni House, Jaipur Road, Ajmer LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAQPG8361C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Nikhalesh Kataria (CA) jktLo dh vksj ls@ Revenue by : Shri A. K. Mahala (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 20/03/2019 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 04/04/2019 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of ld. CIT(A), Ajmer dated 13.09.2017 for AY 2008-09. “1. The order passed u/s 154 is bad in law as well as on the facts of the present case and hence the same may please be quashed. 2. Rs. 85,88,944/- The ld. AO erred in law as well as on the facts of the present case in disallowing the deduction u/s 54F while passing order u/s 154. The ld. CIT(A) erred in confirming the same. Without prejudice to above 3. Rs. 16,29,600/- The ld. AO erred in law as well as on the facts of the present case is not considering the investment made in house of Rs. 16,29,600/-. The CIT(A) erred in confirming the same.”
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer 2. Briefly stated, the facts of case are that the Assessing officer issued a show cause dated 12.03.2015 u/s 154 read with section 155 stating that while giving effect to the order of the ld. CIT(A), the deduction u/s 54F was wrongly allowed at Rs. 1,20,50,000/- instead of Rs. 34,61,056/- and given that the mistake in calculation of deduction u/s 54F is apparent on the face of the record, the same is hereby proposed to be rectified u/s 154 of the Act. Thereafter, considering the reply of the assessee, though not finding the same acceptable, the AO disallowed deduction u/s 54F amounting to Rs. 85,88,944/- vide its order dated 23.03.2015 passed u/s 154 of the Act.
Against the said order of the AO u/s 154 dated 23.03.2015, the assessee filed an appeal before the ld. CIT(A) who has confirmed the said action of the AO holding that the same is within the purview of section 154 and the same has been passed within the period allowed u/s 154(7) of the Act. Against the said order of the ld CIT(A), the assesse is now in appeal before us.
During the course of hearing, the AR submitted that the claim u/s 54F was made before the Assessing Officer as would be clear from the perusal of the assessment order and against the said denial of claim u/s 54F, the assessee has taken a specific ground of appeal before the ld. CIT(A) to allow the deduction to the extent of Rs. 1,20,50,000/- u/s 54F of the Act. Thereafter, the ld. CIT(A) has given a specific direction to allow deduction to the tune of Rs. 1,20,50,000/- to the AO and the AO could not go beyond the said specific directions so given by the ld. CIT(A). It was further submitted that there was no direction by the ld. CIT(A) to compute the quantum of deduction u/s 54F of the Act. It was further submitted that while issuing of notice u/s 154, the AO has stated that there was direction by ld. CIT(A) to allow deduction u/s 54F. However, this observation of the 2
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer ld. AO is clearly incorrect in as much as the ld. CIT(A) has directed to allow deduction to the tune of Rs. 1,20,50,000/- which is absolutely clear from the order of ld. CIT(A) and it was not a mere direction to allow deduction u/s 54F. It was accordingly submitted that the very initiation of rectification proceedings was based on incorrect premises and hence consequent rectification deserves to be deleted. It was further submitted that the Revenue took a specific ground before the Tribunal and the issue of exemption u/s 54F to the tune of Rs. 1,20,50,000/- was settled by the Tribunal vide its order dated 02.02.2012.
It was further submitted that the ld. AO is not competent to rectify the order passed by the ld. CIT(A) on the pretext of rectifying the appeal effect order. It was submitted that the there was clear direction of ld. CIT(A) to allow the deduction to the tune of Rs. 1,20,50,000/- and it was not a mere direction to allow deduction u/s 54F. It was further submitted that even if it is assumed that where there is a mistake in the order of the ld. CIT(A), there is mechanism provided in section 154 which addresses such a situation and our reference was drawn to the section 154(2) of the Act which reads as under:- “154(2) subject to the other provisions of this section, the authority concerned- (a) May make an amendment under sub section (1) of it own motion, and (b) Shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee or by the deductor or by the collector and where the authority concerned is the Commissioner (Appeals) by the Assessing Officer also”
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer It was submitted that the legislature duly provided the mechanism where there remained any mistake in the order passed by the ld. CIT(A) and thus as per specific provisions of the Act the ld. AO could very well have moved the application for rectification before the ld. CIT(A). The ld. AO couldn’t take the place and jurisdiction of the ld. CIT(A) by passing the rectification in the order of ld. CIT(A) on the pretext of error in giving appeal effect.
It was further submitted that the order of AO merged with that of ld. CIT(A) on the issue of deduction u/s 54F of the Act and the law is very well settled that the ld. AO cannot make any rectification with respect to the matters which has been considered and decided by the ld. CIT(A) and it is only ld. CIT(A) who can make rectification and even the provision of section 154(1A) are very much clear on this aspect, which read as under:- “154(1A) Where any matter has been considered and decided in any proceedings by way of appeal or revision relating to an order referred to in sub section (1) the authority passing such order may notwithstanding anything contained in any law for the time being in force amend the order under that sub section in relation to any matter other than the matter which has been so considered and decided.”
It was accordingly submitted that where on any matter, the appeal has been decided, then no rectification could be made by the Assessing Officer with respect to such matter. In the present case also, the issue of deduction u/s 54F has been decided by the ld. CIT(A) and therefore, there remains no ground for the ld. AO to initiate any sort of rectification proceedings. Further, reliance was placed on the following decision:- • CIT vs. Ramchandra Hatcheries 305 ITR 117 (Chennai) • Rajputana Mining Agencies vs. ITO 118 ITR 1 (Raj HC) • Utkal Galvanizers vs. ACIT 298 ITR 53 (Orissa HC) 4
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer • Bhagwandas Associates vs. ITO 119 ITD 1 (Pune ITAT)
It was further submitted that the even in the reassessment proceedings initiated u/s 147, the AO has allowed the deduction to the tune of Rs. 1,20,50,000/- vide its order dated 25.03.2013 and same has since been confirmed by the ld. CIT(A) vide its order dated 04.12.2013.
It was further submitted that the proceedings on the issue of allow ability of deduction to the tune of Rs. 1,20,50,000/- reached its finality with the order of Hon’ble ITAT and carrying out rectification would effectively undo all the appellate proceedings and even leaving the order of Hon’ble ITAT meaningless. It was accordingly submitted that the AO exceeded his jurisdiction in disallowing partial deduction u/s 54F while making rectification order.
It was further submitted that the only the mistakes which are apparent on record and which are not debatable in nature could be rectified under the provisions of section 154 of the Act. In the present case, the assessee has made investment in the construction to the tune of Rs. 1,62,96,00/- and the same has not been considered by the AO in the original proceedings. Further, the AO has considered the capital gain amount as declared by the assessee. However, the AO has not considered Rs. 1,000,00/- worth of disallowance of transfer expenses; and Rs. 7,06,080/- in terms of section 50C valuation and Rs. 60,00,000/- transfer expenses disallowed as per the reassessment proceedings. Further, the AO has taken the net sale consideration as declared by the assessee, however, the amount of addition as per section 50C as well as disallowance of Rs. 60,00,000/- has not been taken into consideration. It was further submitted that if the above correct amounts are taken into consideration, the eligible deduction would come to Rs. 52,12,288/- instead of Rs. 34,61,056/- allowed by the ld. AO. It was accordingly submitted that the 5
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer very calculation made by the AO is not apparent from the face of the record and in fact it himself has made mistakes while making calculations and such calculation which are debatable in nature cannot be subject matter of rectification and consequently, there is no jurisdiction with the AO to pass the impugned rectification order.
Per contra, the ld. DR relied on the finding of the lower authorities and it was submitted that the direction of the ld. CIT(A) was to allow the deduction u/s 54F of the Act and as far as quantum of the deduction is concerned, the same has to be computed as per the provisions of section 54F which has been rightly computed by the Assessing Officer. It was accordingly submitted that the AO has not exceeded his jurisdiction or has not stepped into the jurisdiction of the ld CIT(A). There is thus no infirmity in the order of the ld CIT(A) who has confirmed the findings of the AO and the same should be upheld.
We have heard the rival contentions and perused the material available on record. The assessee while declaring the long term capital gains of Rs. 9,66,385/- had claimed deduction u/s 54F of an amount of Rs. 1,20,50,000/- incurred towards purchase of agricultural land. However, the Assessing officer has disallowed the deduction u/s 54F of Rs 1,20,50,000 in the original assessment order passed u/s 143(3) dated 06.12.2010. Subsequently, the assessee carried the matter in appeal before the ld. CIT(A) who vide his order dated 25.04.2011 directed the AO to allow deduction of Rs. 1,20,50,000/- u/s 54F as claimed by the assessee and the relevant findings of the ld CIT(A) are contained at para 3.7 of his order which is reproduced as under:-
“3.7 When the present case is examined in view of this legal position, it is found that AO disallowed exemption u/s 54F on the ground that land purchased by appellant was Agricultural land and moreover the property 6
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer was not registered in his name. However in view of above mentioned decisions, I hold that deduction u/s 54F cannot be disallowed on the ground that Land purchased is Agricultural and not Registered in the name of buyer. The only conditions for claiming exemptions u/s 54F are as follows:- a. The asset transferred is long term capital asset, not being a residential house. b. Residential house is purchased within one year before or two years after the date of transfer of the original asset. c. Construction is completed within three years from the date of transfer. Thus there is no prohibition regarding construction of a residential house on agricultural land. CBDT Cir. No. 667 dt. 18.10.1993 (2014 ITR (St) 103) has clarified that for the purpose of computing exemption u/s 54 or 54F, the cost of the plot together with cost of the building will be considered as cost of new asset, provided the acquisition of the plot and also the construction thereon are completed within the period specified in these sections. Therefore, AO is not justified to disallow deduction u/s 54F. AO is directed to allow exemption of Rs. 1,20,50,000/- u/s 54F as claimed by appellant. Ground No. 1 is thus allowed.”
Subsequently, the Revenue filed an appeal before the Tribunal challenging the order of ld. CIT(A) wherein he has allowed the deduction of section 54F amounting to Rs. 1,20,50,000/- to the assessee and has raised the following grounds of appeal: “In view of the facts and circumstances of the case the ld. CIT(A), Ajmer has erred in :- 1. allowing the benefit of section 54F of the IT Act, 1961, amounting to Rs. 1,20,50,000/- incurred for the purchase of agriculture land though 7
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer the evidence of the construction of residential house were not on record during the year under consideration; 2. allowing the benefit of section 54F of the I.T. Act, 1961 though the assessee has not constructed any house property within 3 years from the date of agreement i.e. 19.11.2007; 3. allowing the benefit of section 54F of the I.T. Act, 1961 though the assessee has not furnished any evidence of construction of houe property till the date of assessment i.e. 06.12.2010. 4. allowing the benefit of section 54F in view CBDT Circular No. 667 dated 18.10.1993 which is not applicable in this case; 5. The appellant craves to add, amend, alter, delete or modify the above grounds of appeal before or at the time of hearing.”
The Co-ordinate Bench of the Tribunal vide its order dated 02.01.2012 has confirmed the order of the ld CIT(A) and the relevant findings are contained at para 8 of its order which is reproduced as under:-
“8. We have heard rival submissions and considered them carefully. After considering the material on record, we find that there is no infirmity in the order of ld. CIT(A). The AO has examined agreement of purchase of plot. The assessee has sold a property for a consideration of Rs. 5,60,00,000/- and assessee has purchased a property from Shri Ram Richpal Agarwal and Shri Beni Gopal Agarwal at Deepak Nagar Yogna property. This land was purchased consisting of 3300 sq. yards which is a part of agricultural land. The rate of land was Rs. 4550/- per sq. yard. Rs. 10,00,000/- was given in advance on 19.11.2007. An agreement was entered, copy of the same was filed before the AO. The remaining amount was paid on a later stage. The assessee claimed exemption under section 54F stating that the 8
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer amount in question has been invested for purchase of land for constructing the house. However, AO did not accept the contention of the assessee on two grounds i.e. firstly, the land in question purchased through an agreement and the agreement has not been registered; secondly, it was opined by AO that the plot in question is an agricultural land and on purchase of agricultural land, deduction under section 54F cannot be allowed. However, the Id. CIT (A) considered the fact that there is no bar to purchase agricultural land on which house was to be constructed. The fact is that subject to provisions of sub-section (4) of section 54F, where, in the case of an assessee being an individual or a Hindu Undivided Family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or (two years) after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, found that assessee has purchased a plot of land and has constructed a house on the same, then taking into consideration the case of Narendra. Mohan Uniyal, 34 SOT 152 (Del.) and taking into consideration the decision of Hon'ble Rajasthan High Court in case of Vishnu Trading & Investment Co. (supra) and also the decision in case of Shyam Sunder Makhija (supra) found that assessee is eligible for exemption under section 54F. The AO's contention was that land purchased by assessee was agricultural land and, moreover, the property was not registered in his name. However, after taking into consideration the provisions of section 54F, the Id. CIT (A) found that the only condition for claiming exemption under section 54F is that the asset transferred is long term capital asset, not being a residential house. The assessee has 9
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer not transferred a residential house but a long term capital asset. This is an undisputed fact and the AO has not doubted this fact. Second condition is that residential house is purchased within one year before or two years after the date of transfer of original asset. This condition is not applicable on the assessee as assessee has not purchased any new house either one year before or two years after the transaction. Third condition is construction of the house should be completed within 3 years from the date of transfer and this condition was satisfied as explained by Id. CIT (A). The Board Circular no. 667 dated 18.10.93 was also taken into consideration by Id. CIT (A) whereby it was clarified that for the purpose of computing exemption under section 54 or 54F, the cost of the plot together with cost of the building will be considered as cost of new asset, provided the acquisition of the plot and also the construction thereon are completed within the period specified in these sections. These conditions were found satisfied by the Id. CIT (A) and, therefore, he has allowed the exemption to the assessee. We have seen a copy of valuation report which was obtained on 17.3.2011 and it is found that as per this report the house was constructed by assessee and the valuation of the construction is Rs. 16,29,600/-. It means, the exemption claimed by assessee which was at Rs. 1,20,50,000/- only. This consideration was paid for the purchase of plot and Rs. 16,29,600/- was also invested in construction of house of which the assessee has not claimed any deduction for the reason known to him. However, it is seen that house was constructed and, therefore, ld. CIT (A) has allowed the exemption to the assessee to the tune of Rs. 1,20,50,000/-. Since all the conditions for claiming exemption under section 54F have been found satisfied, therefore, in our view, it will be futile exercise if the matter is sent back to the file of AO. All the 10
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer details are placed on record from which it is established that assessee purchased a plot of land and then constructed the house on it. The house constructed on agricultural land or on other land does not matter, but the fact that house should be constructed and from the report it is very much clear that a residential house was constructed as this fact has been mentioned by valuer in para 14 of his valuation report. In view of these facts and circumstances, we hold that ld. CIT(A) was justified in allowing the claim of the house. Accordingly, we confirm the order of ld. CIT(A).”
In light of above, it is clear that the matter relating to eligibility and quantum of deduction u/s 54F has been examined by the Assessing officer in the original assessment proceedings and has travelled right up to the Tribunal. When the matter reached the ld CIT(A), the latter has given a direction that “AO is not justified to disallow deduction u/s 54F. AO is directed to allow exemption of Rs. 1,20,50,000/- u/s 54F as claimed by appellant.” The directions of the ld CIT(A) are therefore crystal clear and there is no ambiguity that the assessee is eligible for deduction u/s 54F amounting to Rs 120,50,000. In pursuance to the said directions of the ld CIT(A), the the AO passed the appeal effect order giving effect to the order of the ld. CIT(A) dated 25.04.2011 wherein the AO has allowed the deduction of an amount of Rs. 1,20,50,000/- u/s 54F of the Act. The matter thereafter travelled to the Tribunal and before the Tribunal also, the Revenue has taken a specific ground challenging the order of the ld CIT(A) is allowing deduction u/s 54F amounting to Rs. 1,20,50,000/- and the Tribunal has since confirmed the order of the ld CIT(A). The order of the AO has thus merged with the order of the Tribunal so far as the issue relating to deduction u/s 54F of the Act is concerned. In light of the same, the action of the Assessing officer in passing the impugned order u/s 154 dated 11
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer 23.03.2015 wherein he has reduced the quantum of deduction u/s 54F is clearly beyond his jurisdiction and cannot be sustained. The said position has been made clear in terms of section 154(IA) of the Act wherein it has been laid that where any matter has been considered and decided in any proceedings by way of appeal or revision relating to an order referred to in sub section (1), the authority passing such order, may notwithstanding anything contained in any law for the time being in force, amend the order under that sub section in relation to any matter other than the matter which has been so considered and decided. The matter relating to deduction of Rs 1,20,50,000 u/s 54F has been specifically raised by the assessee before the ld CIT(A) and thereafter, by the Revenue before the Tribunal and both the appellate authorities have since considered and examined the said matter and has decided in favour of the assessee. Our view is fortified by the decision of the Hon’ble Jurisdictional High Court in case of Rajputana Mining Agencies & others vs ITO (1979) 118 ITR 585 wherein it was held as under:
“14. It was also argued by the learned counsel for the petitioners on behalf of the petitioners in writ petition Nos. 132 of 1963 and 133 of 1963 that against the original assessment orders passed by the Income-tax Officer, the petitioners in both these writ petitions filed appeals before the Appellate Assistant Commissioner of Income-tax and it was argued on their behalf in those appeals that the Income- tax Officer should have grossed up the dividends received by the petitioners in these two writ petitions from the company on the ground that the company had not paid tax. The Appellate Assistant Commissioner of Income-tax directed the Income-tax Officer to gross up the dividends and thus the order passed by the Income-tax Officer merged in the appellate order passed by the Appellate Assistant 12
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer Commissioner and thereafter the Income-tax Officer had no jurisdiction to initiate rectification proceedings under sub-section (9) of section 35 of the Act, which would have the effect of negativing and setting aside the order passed by the Appellate Assistant Commissioner on appeal. We find from the orders of the Appellate Assistant Commissioner produced in the aforesaid two writ petitions that although the Income-tax Officer had refused to gross up the income received by the petitioners in these two writ petitions by way of dividends from the company on the ground that the company had not paid income-tax, yet on appeal the Appellate Assistant Commissioner directed the Income-tax Officer to gross-up the dividend and give credit to the petitioners of tax under section 18(5) of the Act. It appears that as a matter of fact the Income-tax Officer, while acting under subsection (9) of section 35 of the Act, was not purporting to rectify in the case of petitioners in these two writ petitions, any mistake which might have occurred in his own earlier order but he had proceeded to rectify the order passed by the Appellate Assistant Commissioner on appeal, because the Income-tax Officer in both these cases had earlier also taken the view that, the dividend income received by the petitioners in these two writ petitions could not be grossed up, on the ground that the company had not paid income-tax and the same order has been passed by the Income-tax Officer even after rectification under the provisions of section 35(9) of the Act. It has also been stated before us that after the direction was given by the Appellate Assistant Commissioner in the appeals preferred by these two petitioners that their dividend income should be grossed up and credit for tax be allowed to the petitioners under section 18(5) of the Act, no formal order was passed by the Income-tax Officer, but he merely gave effect to the 13
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer order passed by the Appellate Assistant Commissioner and issued correction slips as a consequence to the appellate order. The question which, therefore, arises in these two writ petitions, is as to whether the Income-tax Officer was authorised to make a rectification of an error which is said to have been committed by the Appellate Assistant Commissioner in directing the grossing up of the dividend income of these two petitioners. In Commissioner of Income-tax v. Rao Thakur Narayaq Singh [1965] 56 ITR 234, it was held by their Lordships of the Supreme Court that it was not the intention of the legislature to enable the Income-tax Officer to reopen final decisions made against the revenue in respect of questions that directly arose for decision in earlier proceedings and were finally decided by the Tribunal. Their Lordships of the Supreme Court observed that if that was not the legal position, it would result in placing an unrestricted power of review in the hands of the Income-tax Officer to go behind the findings given by a hierarchy of Tribunals and even those of the High Court and the Supreme Court, with his changing moods. In the case before their Lordships of the Supreme Court, the assessee went in appeal to the Income-tax Appellate Tribunal against the revised assessment order passed by the Income-tax Officer and the Tribunal accepted the contention of the assessee, but while passing the order, by inadvertence or by mistake, the Tribunal set aside the entire order of re-assessment. No steps were taken to rectify the mistake com-mitted by the Tribunal under section 35 of the Act nor any attempt was made to get the question of illegality referred to the High Court. Thus, the order of the Appellate Tribunal become final. Thereafter the Income- tax Officer started fresh proceedings for re-assessment. In these circumstances, it was held by their Lordships of the Supreme Court 14
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer that the order of the Appellate Tribunal having become final and the finding of the Tribunal, even though passed by mistake, yet the Income-tax Officer could not initiate fresh assessment proceedings, as the order of the Tribunal was binding on the Income-tax Officer; In Indra Co.'s case [1968] 70 ITR 534 , the Calcutta High Court held that when an appeal, preferred from an order of assessment is decided by the Appellate Assistant Commissioner, the Income-tax Officer's order under appeal merges in the appellate order and, thereafter the operative order is the order of the appellate authority and the Income-tax Officer has no jurisdiction to rectify such an order under section 35 of the Act, as it would have the effect of rectifying the order passed by the Appellate Assistant Commissioner. In S. Sewa Singh Gill v. Income-tax Officer [1968] 70 ITR 534 , the Delhi High Court also took the same view that where the assessment order was affirmed on appeal by the Appellate Tribunal the only order that could be rectified was the order of the Tribunal and the Income- tax Officer had no jurisdiction to rectify his own order, which had ultimately merged in the order of the Tribunal. In J.K. Synthetics Ltd. v. Additional Commissioner of Income-tax [1976] 105 ITR 344 , the Allahabad High Court also held that where the assessment order was appealed against then that order was merged in the appellate order passed by the Appellate Assistant Commissioner and the only operative decision in law, which is effective and can be enforced, is the decision of the appellate authority. In Jeewanlal (1929) Ltd. v. Additional Commissioner of Income-tax [1977] 108 ITR 407 , the Calcutta High Court held that the application of the doctrine of merger depends on the nature of the appellate or revisional order in each case.
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer 15. Mr. L.R. Mehta, appearing for the Revenue, argued that it was only the Income-tax Officer, who is authorised under sub-section (9) of section 35 of the Act to rectify the assessment order passed by him. Although the Income-tax Officer has the power to rectify his own order, but he has no power to rectify the order passed by the Appellate Assistant Commissioner on appeal, more particularly in respect of the very question on which the appellate authority had set aside the order passed by the Income-tax Officer. If the contention of Mr. L.R. Metha is accepted then the Income-tax Officer would have unlimited powers to restore his order even when the same is set aside by the Appellate Assistant Commissioner or the Appellate Tribunal on appeal. We do not think that any such power was sought to be invested in the Income-tax Officer' under the provisions of sub- section (9) of section 35 of the Act to rectify a mistake or error which is alleged to have been committed by the Appellate Assistant Commissioner, while reversing the order passed by the Income-tax Officer. In the instant case, the very question of grossing up of dividend income received by these two petitioners from the company was the subject matter of appeal before the Appellate Assistant Commissioner. The Income-tax Officer had refused to gross up the dividend income received from the company but the Appellate Assistant Commissioner directed him to gross up the dividend income, while allowing the appeal of the assessee. Now under the garb of rectification proceedings, the Income-tax Officer cannot, under the provisions of section 35(9) of the Act, restore his earlier order, which would have the effect of setting aside the order passed by the Appellate Assistant Commissioner on appeal. In our view, the whole purpose of creating a hierarchy of authorities having appellate or revisional jurisdiction would be frustrated if the Income-tax 16
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer Officer, who has passed the original assessment order, can set aside any order passed in appeal or revision, more particularly in respect of such questions which were expressly raised and decided by the appellate or revisional authority. Once the matter has been decided by the appellate or revisional authority, the order of the Income-tax Officer would merge with the order of the Appellate Assistant Commissioner or Commissioner, at least in respect of those questions which were expressly raised and decided by the appellate or revisional authority.
The Income-tax Act of 1961 has given statutory recognition to this doctrine of merger by providing in section 154(1 A) that where any matter has been considered and decided in any proceedings by way of appeal or revision relating to an order, the authority passing such order may amend the said order by way of rectification in relation to any matter other than the matter which has been so considered and decided. Thus, the questions which are expressly raised before or decided by the appellate or revisional authority cannot be reagitated and no rectification proceedings will be maintainable in respect thereof, under section 154 of the 1961 Act, before the Income-tax Officer in the garb of amending his own order. Therefore, in these two writ petition Nos. 132 of 1963 and 133 of 1963, the Income-tax Officer had no jurisdiction to rectify his orders which have already stood merged with the order passed by the Appellate Assistant Commissioner and the rectification orders passed by the Income-tax Officer in the case of these two petitioners are without jurisdiction.”
In light of above discussions and respectfully following the decision of the Hon’ble Jurisdictional High Court referred supra, the assumption of 17
ITA No. 920/JP/2017 Smt. Nirmala Goyal, Ajmer Vs. The ACIT, Ajmer jurisdiction by the AO u/s 154 cannot be sustained in law and the order so passed u/s 154 is thus set-aside.
In the result, appeal of the assessee is allowed.
Pronounced in the Open Court on 04/04/2019.
Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 04/04/2019 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Smt. Nirmala Goyal, Ajmer 2. izR;FkhZ@ The Respondent- The ACIT, Circle-2, Ajmer 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 920/JP/2017} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत