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Facts
The assessee filed its return of income, disallowing expenses of Rs. 8,54,970/-. The Assessing Officer also disallowed this amount in the intimation passed u/s 143(1). Subsequently, a rectification order u/s 154 resulted in a fresh demand due to a double addition of the same expenses. The assessee appealed to the CIT(A), who dismissed the appeal.
Held
The Tribunal observed that the assessee had suo motu disallowed expenses, which were also disallowed by the CPC in the intimation u/s 143(1). The Tribunal disagreed with the CIT(A)'s finding that the doctrine of merger was not applicable. For the sake of complete justice, the Tribunal decided to remit the issue back to the Assessing Officer.
Key Issues
Whether the addition/disallowance of Rs. 8,54,970/- constituted a double addition, and whether the doctrine of merger was applicable in this case.
Sections Cited
143(1), 44AB, 154, 37(1), 40, 244A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES ‘E’: NEW DELHI.
Before: SHRI S. RIFAUR RAHMAN & SHRI RAJ KUMAR CHAUHAN
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeal), ADDL/JCIT (A), Panchkula (hereinafter referred to ‘ld. CIT (A)’) dated 24.06.2025 for AY 2020-21.
Brief facts of the case are, assessee filed its return of income declaring total income of Rs.3,93,87,570/- on 27.01.2021. While filing the return of income the assessee had disallowed expenses of Rs.8,54,970/- in part A- other information. The return of income was processed u/s 143(1) of the Act and intimation was passed on 15.02.2021. In the above said intimation, assessee observed that the Assessing Officer has disallowed the Rs.8,54,970/- which was shown in different clause of the return of income and audit report u/s 44AB of the Act. Assessee with the bona fide belief deposited the demand of Rs.2,90,398/- on 30.03.2022 against the demand raised along with interest. Further assessee observed that against the same demand of AY 2020-21, Income Tax refund for AY 2021-22 was also adjusted for an amount of Rs.2,98,854/-. Accordingly, assessee filed rectification application u/s 154 of the Act. A rectification order u/s 154 was passed dated 23.12.2022 in which again a fresh demand of Rs.2,81,940/- on account of double addition of the same expenses of Rs.8,54,970/- was raised.
Aggrieved with the above order assessee preferred an appeal before Ld. CIT(A) Panchkula, and raised the grounds and also made a detailed submissions with regard to tax deposited of Rs.2,90,398/- on 30.03.2022 plus Rs.2,98,854/- on 08.07.2022 totalling to Rs.5,89,282/- was not considered by the Assessing Officer. In the rectification order passed u/s 154 of the Act, the relevant details submitted by the assessee are reproduced at Page 3 to 11 of the appellate order.
After considering the submissions of the assessee Ld. CIT(A) dismissed the appeal of the assessee by relying on the decision of ITAT Chennai in the case of Kumbokonam Central Cooperative Bank vide order dated 21.02.2025 and further observed that the additions was made by the Assessing Officer u/s 143(1) of the Act, therefore, assessee should have contested the above said order instead of rectification order u/s 154 of the Act. He observed that the doctrine of merger is not applicable and both order u/s 143(1) and u/s 154 operate on independent plains, are separately appealable.
Further, Ld. CIT(A) remitted the issue to the Assessing Officer with regard to adjustment of credit of tax already paid by the assessee and further demand raise by the AO u/s 154 may be allowed if found appropriate. Accordingly, he remitted the above said ground to the file of Assessing Officer for statistical purposes.
Aggrieved with the above order assessee is in appeal before us raising following grounds of appeal:
1. The Ld CIT(A) has erred in upholding double addition of Rs. 8,54,970/- u/s 37(1) of IT Act ignoring the fact that the above figure has been reported and added to total Income under section 40 of I.T. Act in ITR (Any Other disallowance) and u/s 37(1) in Tax Audit Report/ FORM 3CD. 2 The Ld CIT(A) has erred by relying on the case law of and which are based on totally different facts than the present appeal.
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in ignoring the Statutory Auditors Certificate, Affidavit by management, Rectification Order and relevant case law referred by the appellant while upholding the action of the CPC in making a double addition of Rs. 8,54,970/-, 4. That the Ld. CIT(A) erred in not issuing a categorical direction for grant of credit for taxes paid of Rs. 2,90,398/-and refund adjustment of Rs. 2,98,854/-, and in not directing refund thereof along with interest u/s 244A.
5. That the appellant craves leave to add, amend, modify, rescind supplement or alter any of the grounds of appeal before the appeal is finally adjudicated upon.
7. At the time of hearing Ld. AR of the assessee brought to our notice page 6 of the First Appellate Order and submitted that assessee itself has disallowed the capital expenditure incurred by it on the loss on sale of fixed assets Rs.1,98,108/- and personal expenditure relating to interest on taxes to the extent of Rs.6,56,862/- and the above said amount was disallowed by it in its computation of income, at Schedule Part A and he also brought to our notice relevant tax audit report which is placed in the paper book. He further submitted that in the intimation pass u/s 143(1) of the Act the Assessing Officer disallowed the same expenditure u/s 37(1) of the Act. He submitted that assessee also made the disallowance suo moto and Assessing Officer also made similar disallowance which amounts to double disallowance. Further he brought to our notice page 12 of the appellate order wherein Ld. CIT(A) has dismissed the grounds raised by the assessee on the reason that the additions were made in intimation u/s 143(1) of the Act and assessee should have contested the same against the above said order instead of filing appeal against Section order. He submitted that the rectification order u/s 154 was also passed by the CPC against the same addition made by the Assessing Officer u/s 143(1) of the Act. Therefore, there is direct connection with the rectification order passed by the Assessing Officer. Therefore, it is an appealable order, dismissing the appeal of the assessee is unjustified and he prayed that the double addition made by the Assessing Officer may be considered and deleted.
On the other hand Ld. DR relied on the findings of the lower authorities.
Considering the rival submissions and material placed on record, we observed that assessee while filing the return of income suo moto disallowed the loss of sale of fixed assets and personal expenditure to the extent of Rs.8,54,970/- while processing the return of income CPC also disallowed the similar amount and raise the demand.
Aggrieved with the above, assessee filed application u/s 154 of the Act for rectification of the above mistake apparent on record. However, the Assessing Officer rejected the same by passing the order u/s 154 of the Act. After considering the findings of the Ld. CIT(A) we are not inclined to agree with the findings of the Ld. CIT(A) that doctrine of merger is not applicable in the present case. We noticed that the payment of tax and fresh demand raise by the Assessing Officer in rectification order u/s 154 of the Act was remanded back to the Assessing Officer to verify. Since the issue raised by the assessee in the given appeal also having direct relevance to the mistake apparent on record that assessee itself disallowed certain expenditure which was further disallowed by the Assessing Officer while passing the intimation u/s 143(1) of the Act. For the sake of complete justice we are inclined to remit this issue also to the file of Jurisdictional Assessing Officer to consider the submissions of the assessee as per law.
In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on this day of 12th February, 2026. 12.