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Facts
The assessee, a company deriving business income, filed its return claiming a deduction under Section 80IA, which was processed under Section 143(1) with adjustments for belated Provident Fund/ESI deposits and disallowance of Section 80IA deduction due to late Form 10CCB filing. A subsequent regular assessment under Section 143(3) incorporated these same additions. The Ld. CIT(A) dismissed the assessee's appeal, applying the doctrine of merger, holding that the Section 143(3) order superseded the Section 143(1) intimation.
Held
The Tribunal ruled that the CIT(A) erred in dismissing the appeal without adjudicating on the merits, emphasizing that Section 250(6) mandates a decision on all appeal grounds. It clarified that the doctrine of merger does not apply when a Section 143(3) order merely adopts Section 143(1) adjustments without independent discussion. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter for fresh adjudication on all grounds, ensuring the assessee a reasonable opportunity of hearing.
Key Issues
Dismissal of appeal by CIT(A) based on the doctrine of merger without adjudicating merits of additions for belated provident fund payment (Under Section 43B) and disallowance of Section 80IA deduction (due to late Form 10CCB filing) originally made under Section 143(1) and subsequently incorporated in Section 143(3) assessment.
Sections Cited
250, 143(1), 143(3), 43B, 36(1)(va), 80IA, 116, 139(1), 246, 250(6), 246A, 143(4), 144, 154, 80IB
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2018-19 Shreenath Mhaskoba Sakhar Vs. DCIT, Circle-5, Pune. Karkhana Ltd., Survey No.12/2, 2nd Floor, Meghdoot Building, Behind Bharat Petroleum Pump, Hadpasar, Pune- 411028. PAN : AAHCS3018G Appellant Respondent Assessee by : Shri B.D. Bhide Revenue by : Shri A. D. Kulkarni Date of hearing : 02.04.2025 Date of pronouncement : 30.05.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 17.12.2024 passed by Ld. Addl/JCIT(A)-7, Kolkata [‘Ld. CIT(A)’] for the assessment year 2018-19.
The appellant has raised the following grounds of appeal :- “Being aggrieved by an order passed U/Sec.250 by the ld. CIT(A)- NFAC, Delhi (hereinafter referred for short as the ld. CIT(A)) your appellant submits following grounds of appeal among others without prejudice to each other for sympathetic consideration:
1. On the facts & circumstances of the case and in law, the ld. CTT(A) erred in not deciding ‘Grounds’ raised before him/her by invoking the ‘doctrine of merger' which fails to decide whether, CPC was justified in imposing additions to the returned income which are untenable as per provisions of Sec. 143(1) of the Income Tax Act. Appellant prays to decide whether, the 'doctrine of merger’ is applicable for not deciding Grounds raised before the ld. CIT(A) when there is no difference in the hierarchy of Income Tax authorities passing an order U/Sec.143(1) and U/Sec.143(3) as per provisions of Sec.116 r.w. Sec. 143 of the Income Tax Act! 2. i. On the facts & circumstances of the case and in law, the ld. CIT(A) erred in not deciding whether the CPC was justified while imposing addition to the returned income U/Sec. 43B representing employees' provident fund recovery amounting to Rs.2,99,286/-payable on 15.05.2017 which was paid on 22.05.2017 in the context of law prevailing as of the date of passing an order U/Sec.143(1) when, said addition was objected before passing an order U/Sec.143(1) when questioned to the appellant by CPC ii. On the facts & circumstances of the case and in law, the ld. CIT(A) erred in not deciding whether the CPC was justified while imposing addition to the returned income U/Sec. 438 representing employees' provident fund recovery amounting to Rs.3,41,163/- payable on 15.08.2017 which was paid on 16.08.2017 in the context of law prevailing as of the date of passing an order U/Sec.143(1) when, said addition was objected before passing an order U/Sec.143(1) when questioned to the appellant by CPC. Appellant prays for directing the ld. A.O./CPC to delete an addition imposed U/Sec.43B totalling to Rs. 6,40,449/- (je. Rs.2,99,286/- + Rs.3,41,163/-).
3. On the facts & circumstances of the case and in law, the ld. CTT(A) erred in not deciding whether the CPC was justified in denying deduction claimed by the appellant U/Sec. 80-I amounting to Rs 3,40,96,491 when, said addition was objected before passing an order U/Sec 143(1) when questioned to the appellant by CPC.
Appellant prays for directing the ld. A.O./ CPC to allow deduction claimed by the appellant U/Sec.80-1 amounting to Rs.3,40,96,491/-. 4. Appellant prays for restoration of income returned as per 'Return of Income' filed on 31/10/2018 U/Sec. 139(1) of the Income Tax Act. 5. Appellant craves leave and reserves right to add/ alter/ withdraw any of the above grounds of appeal during appeal proceedings or, before an appeal order is passed.”
3. The facts of the case in brief are that the assessee is a company deriving income from business and has furnished its return of income on 31.10.2018 declaring taxable income of Rs.11,01,60,830/- after claiming deduction of Rs.3,96,40,491/- u/s 80IA of the IT Act. The return was processed u/s 143(1) of the IT Act on 25.06.2020 on a total income of Rs.15,04,41,770/-. The above assessed income includes prima-facie adjustments/disallowance of deduction of Rs.3,96,40,491/- claimed u/s 80IA of the IT Act since Form 10CCB audit report was not furnished along with return of income but was furnished subsequently that is on 30.03.2019. Apart from above, an amount of Rs.6,40,449/- (2,99,286 + 3,41,163) was also added to the income of the assessee since the above amount pertains to belated payment of employees provident fund as reported in Form 3CD.
4. After considering the reply of the assessee, Ld. CIT(A) dismissed the appeal filed by the assessee by observing as under :- “5.1 I have carefully gone through the Intimation u/s 143(1), the grounds of appeal and submission made by the appellant in this regard. Briefly stating facts of the case is that the appellant filed return of income which was processed u/s 143(1) by CPC making certain adjustments over and above the returned income. The issues on which adjustments were made in Intimation u/s 143(1) were (i) on account of delayed deposit of employee's contribution to PF and ESI u/s 36(1)(va) --- Rs.6,40,449/- and (ii) disallowed claim of deduction u/s 801A due to non e-filing of Form 10CCB along with return of income Rs.3,96,40,491/-. 5.2 The ground number 1 is prayer to condone delay in filing of appeal. Intimation u/s 143(1) was passed on 25.06.2020 and received by appellant on 29.06.2020. It was therefore required to file appeal on or before 29.07.2020. However, it did so on 05.03.2021 i.e. delay of 219 days. The entire period of delay being covered by covid 19 pandemic for which Hon'ble Supreme Court has held that all delays are to be ignored. Hence, in this case also the delay in filing of appeal is condoned and the appeal decided on merit. 5.3 The appellant during these appellate proceedings has stated that subsequent to passing of Intimation u/s 143(1) on 31.10.2018, its case was subjected to regular assessment u/s 143(3) of the Act which order was passed on 19.02.2021. In the said assessment order also, the same additions and disallowances were made as made in Intimation u/s 143(1). The appellant has filed separate appeal against the said assessment order u/s 143(3) and as stated by it, is yet to be decided. As per various Tribunal and Court judgements, such as (i) National Stock Exchange of India Ltd. v DCIT, Circle-7(1) (1), Mumbai [ITA No.732/Mum/2023, Mumbai Tribunal, date of judgement-22.09.2023] and (ii) The South India Club, New Delhi v ITO, Ward Exemption 2(3), New Delhi [ITA No. 354/Del/2024, Delhi Tribunal, Date of judgement-22.05.2024], it has been held that doctrine of merger applies when regular assessment order u/s 143(3) is passed subsequent to summary assessment u/s 143(1) and in that situation, it is only the assessment order u/s 143(3) that survives and the earlier summary assessment or intimation u/s 143(1) becomes infructuous. In view of the same the grounds of appeal raised in this appeal needs no further adjudication and appellant’s appeal is dismissed.”
It is the above order against which the assessee is in appeal before the Tribunal.
Ld. AR appearing from the side of the assessee submitted before us that he do not want to press ground No.1 raised in the memo of appeal and only wants to argue ground No.2, 3 and 4 raised in the memo of appeal.
Ld. AR submitted before us that the order passed by Ld. CIT(A) is unjustified. With regard to ground No.2 Ld. AR submitted before us that CPC has disallowed belated payment of employees provident fund in respect of payment of Rs.2,99,286/- and of Rs.3,41,163/-. However, out of these two payments an amount of Rs.3,41,163/- was due on 15th August 2018 and being Independence Day it was holiday therefore the payment of Rs.3,41,163/- was made on 16th August 2018 i.e. on the very next day. Accordingly, Ld. AR requested to delete the addition of Rs.3,41,163/- made by CPC. Apart from above, it was also argued that on the date of processing of return the issue was debatable since there were contradictory views of different High Courts, therefore CPC ought not to have made prima-facie adjustment because in response to prior notice of adjustment the assessee has also brought this fact into the knowledge of CPC that according to divergent views of various High Courts this issue was debatable.
8. With regard to ground No. 3 & 4 Ld. AR submitted before us that Ld. CIT(A) was not justified in not deciding whether the CPC was justified in denying deduction under section 80IA claimed by the assessee when it was objected by the assessee. Ld. AR further submitted before us that form 10CCB was filed prior to processing of returns of income by CPC. Therefore it was very well available before CPC while processing the return of income. It was also contended by learned AR that filing of form 10 CCB is only directory and not mandatory. Ld. AR further relied on judgement passed by Hon’ble Supreme Court in the case of Commissioner of Income-tax, Maharashtra vs. G. M. Knitting Industries (P.) Ltd., 71 taxmann.com 35 (SC) wherein it was decided that :- “Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings (Condition as to number of workers) - Assessment year 2005-06 - Even though necessary certificate in Form 10CCB along with return of income had not been filed but same was filed before final order of assessment was made, assessee was entitled to claim deduction under section 80-IB [In favour of assessee]”
9. Accordingly, Ld. AR prayed before us that in the instant case in hand the audit report in Form 10CCB was also filed prior to processing of the return and therefore the above case law squarely applicable to the facts of the case. Therefore, Ld. AR prayed to delete the addition made by CPC on account of belated filing of Form 10CCB.
Ld. DR appearing from the side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book. In this regard, we find that Ld. CIT(A) has not adjudicated the grounds of appeal raised by the assessee and dismissed the appeal filed by the assessee since he was of the view that the assessment order u/s 143(3) of the IT Act was passed subsequent to intimation u/s 143(1) of the IT Act and therefore doctrine of merger applies and in that situation it is only the assessment order passed u/s 143(3) of the IT Act that survives and the earlier summary assessment/ intimation u/s 143(1) of the IT Act becomes infructuous and therefore the appeal filed by the assessee against assessment order passed u/s 143(3) of the IT Act is only to be adjudicated. In this regard reliance was placed by him on the decisions passed by coordinate bench of Mumbai and Delhi Tribunal respectively in the case of National Stock Exchange of India and the South India Club, New Delhi.
12. In this regard, we find that the appeal against the assessment order u/s 143(3) of the IT Act for the same assessment year is also filed by the assessee before Ld. CIT(A) & which is yet to be decided as informed by the Ld. AR.
13. With regard to reliance placed by Ld. CIT(A) in the case of National Stock Exchange of India Ltd vs. DCIT, Mumbai in order dated 22.09.2023, we find that the facts are different. In the above referred decision the first appeal against intimation order u/s 143(1) of the IT Act was not dismissed summarily and the additions were not made in the regular assessment passed u/s 143(3) of the IT Act and therefore while allowing the appeal of the assessee it was observed by the Tribunal that the addition made in the order passed u/s 143(1) of the IT Act shall not survive since it has been merged in the order passed u/s 143(3) of the IT Act.
14. Regarding reliance placed by Ld. CIT(A) on the decision in the case of South India Club, New Delhi in order dated 22.05.2024, we find that the facts are different since in this case also the first appellate authority has not dismissed the appeal summarily but has decided the merits of the case accordingly, we find that this case is also not applicable to the facts of the instant case in hand.
We further find that another coordinate bench of this Tribunal in the case of M/s Areca Trust in Assessment Year : 2018-19 order dated 26.07.2023 hold that if the additions made in the intimation u/s 143(1) of the IT Act have been incorporated as it is in the order u/s 143(3) of the IT Act i.e. without any discussion than the intimation order u/s 143(1) of the IT Act does not get merged in the order passed u/s 143(3) of the IT Act and then the appeal against summary assessment order passed u/s 143(1) of the IT Act is required to be adjudicated. The Tribunal in its order observed as under :- 7. We have heard the rival submissions and perused the material on record. On perusal of the impugned Assessment Order passed under section 143(3) (order dated 12.02.2021), it is clear that AO has assessed the total income at Rs.23,29,62,420/- solely relying on the adjustment made by the AO/CPC in the intimation made under section 143(1) of the Act. In the impugned Assessment Order passed under section 143(3) of the Act, there is no independent discussion as regards the income assessed at Rs.23,29,62,420/-. The relevant portion of the assessment completed under section 143(3) of the Act dated 12.02.2021 reads as follows: “4. In response to the notice, the assessee responded via e-proceedings and submitted the details called for. Details filed are examined and the income is assessed at Rs. 23,29,62,420/ as per 143(1)(a) of the Act.”
Section 246A specifically provides for an appeal as against intimation issued under section 143(1) of the Act. In the instant case, total income has been assessed at Rs.23,29,62,420/- as per the intimation passed under section 143(1) of the Act. Therefore, the cause of action for the assessee arises from the intimation issued under section 143(1) of the Act and appeal ought to have been filed as against the same. The assessment completed under section 143(3) of the Act merely adopts the assessed figures in the intimation order passed under section 143(3) of the Act. Therefore, no cause of action arises from the order passed under section 143(3) of the Act.
Section 143(4) of the Act only mentions that on completion of regular assessment under section 143(3) or 144 of the Act, the tax paid by assessee under section 143(1) of the Act shall be deemed to have been paid toward such regular assessment. That by itself does not mean there is merger of intimation under section 143(1) with that of regular assessment under section 143(3) / 144 (unless issue has been discussed and adjudicated in regular assessment under section 143(3) / 144 of the Act). Assessee, against the intimation under section 143(1) of the Act, has filed a rectification application under section 154 of the Act (vide application dated 16.06.2020) and the same is pending disposal. The CIT(A) in the impugned order has directed the AO to dispose off the said rectification application dated 16.06.2020. Moreover, if assessee is advised to file an appeal as against the intimation under section 143(1) of the Act, a liberal approach may be taken for condonation of delay since assessee’s application for rectification of the intimation under section 143(1) of the Act has been filed within time and same is pending disposal. With the above said observation, the grounds of the assessee are rejected.
Accordingly, in the light of above decision passed by a coordinate bench of this Tribunal in the case of M/s Areca Trust (supra), wherein the appeal of the assessee was dismissed, however in the benefit of the assesse, since he was given liberty to file first appeal against the 143(1) order belatedly, we are of the considered opinion that the legislature has provided separate appeals against each order passed under the Act and therefore the assessee has all the rights to file appeal against 143(1) order as well as against 143(3) regular assessment order. And there is no bar in section 246 of the IT act which stops the assessee to file appeal against 143(1) order, even if 143(3) order is passed subsequent to it. We further find that as per section 250(6) of the IT Act, Ld. CIT(A) is required to decide each and every ground of appeal raised by the assessee and cannot dismiss the appeal without adjudicating the same. Considering the totality of the facts of the case, we find force in arguments of Ld. counsel of the assessee that Ld. CIT(A) has erred in dismissing the appeal without adjudicating the same. Accordingly, we deem it appropriate to set-aside the order passed by Ld. CIT(A) and remand the matter back to his file with a direction to decide the appeal afresh by adjudicating each and every ground raised by the assessee as per fact and law and also after providing reasonable opportunity of hearing to the assessee. The