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Facts
The assessee, a PSU, appealed against the CIT(A)'s dismissal of its challenge to a quantum addition of Rs.1,69,71,833/- made in a reassessment order dated 02.09.2011. This appeal was filed in consequence to a subsequent rectification order dated 24.10.2018, even though the assessee had not challenged the original reassessment order before any appellate authority.
Held
The Tribunal held that the assessee had accepted the reassessment order by not appealing against it. The rectification order, which stemmed from an application to delete a penalty, could not be used as an 'escape route' to challenge the quantum addition or interest from the original reassessment order. Therefore, the quantum addition and charging of interest in the reassessment order could not be raised in appellate proceedings against the rectification order.
Key Issues
Can the validity and quantum addition of an un-appealed reassessment order be challenged through an appeal against a subsequent rectification order?
Sections Cited
154, 147, 143(3), 115JB, 234A, 234B, 234C, 244A
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Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI AVDHESH KUMAR MISHRA
Appellant by Shri Y.K.Maghan, CA Respondent by Sh. Anuj Garg, Sr. DR Date of Hearing 24/04/2024 Date of Pronouncement /06/2024 ORDER PER AVDHESH KUMAR MISHRA, AM
The appeal filed by the assessee is directed against the order, dated 17.04.2023, of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi [In Short, the ‘CIT(A)’].
The core issue before us is that whether the CIT(A) dismissing the assessee’s appeal filed in consequence to the order dated 24.10.2018 of the Assessing Officer [In Short ‘the AO’] passed under section 154/147/143(3) of the Act for the Assessment Year [In Short,the ‘AY’] 2006- 07 is justified.
The relevant facts, in brief, are that the appellant/assessee is a Central Government Public Sector Unit, which came into existence on 13.01.2006. It commenced its business from February, 2006. This is the first AY of the appellant/assessee consisting of previous year of two months only. It filed its Income Tax Return [In short, the ‘ITR’) declaring income of Rs.9,11,18,593/-on 30.11.2006. The case was scrutinized and the original assessment was completed under section 143(3) of Income Tax Act, 1961 [In short, the ‘Act’) on 28.11.2008 accepting the returned income under normal provision and Rs.51,77,31,728/- in accordance with the provisions of section 115JB of the Act. The assessed income was revised at loss of Rs.63,43,249/- under section 154 of the Act vide order dated 30.08.2010. Later on, the case was reopened and the consequential reassessment was done at income of Rs.1,06,28,584/- under section 147/143 of the Act on 02.09.2011. After reassessment, an application under section 154 of the Act filed by the appellant/assessee was disposed of, vide order dated 24.10.2018, by the AO. Aggrieved with the order dated 24.10.2018 passed under section 154/147/143(3) of the Act, the appellant/assessee filed appeal before the CIT(A) challenging the quantum addition of Rs.1,69,71,833/- made in the reassessment order passed under section 147/143(3) of the Acton 02.09.2011 and consequential interest charged therein under section 234A, 234B and 234C of the Act and interest not paying interest on refunds due under section 244A of the Act. The CIT(A) dismissed the appeal with the direction to the AO to verify the claim of the appellant/assessee and to decide the issues accordingly. Aggrieved, the assessee brought this matter before the ITAT.
The Ld. AR did not press ground no.1. The ground no. 2 & 3 are in respect of disallowance of prior period expenses of Rs.1,69,71,833/-. It was contended that the relevant previous year consisting of 2 months was the first year of the appellant/ assessee’s business; therefore, there was no prior period expenses. The regular expenses were wrongly classified as prior period expenses in the Profit & Loss Account though the audit report filed in Form 3CD along with the ITR did not show any prior period expenses. The Ld. AR thus contended that the expenses of Rs.1,69,71,833/- was allowable in the relevant year. However, the wrong classification of expenses as prior period expenses in the Profit & Loss Account resulted the disallowance expenses of Rs.1,69,71,833/-. Placing reliance on the decisions of the Hon’ble Supreme Court in the cases of Tuticorin Alkali Chemicals &Fertilizers Ltd. 227 ITR 172 and Taparia Tools Ltd. 372 ITR 605 and the decisions of the Hon’ble Delhi High Court in the cases of Modipan Ltd. 334 ITR 102 and Sriram Piston 174 Taxman 147, the Ld. AR submitted that such disallowance was devoid of any merit; therefore, the same was requested for deletion. To buttress the arguments, the Ld. AR placed emphasis on the CBDT Circular no.14 dated 11.04.1955.
4.1 The Ld. AR further submitted that the AO had wrongly reopened the assessment for disallowance of prior period expenses of Rs.1,69,71,833/- and questioned the merit of the reassessment order passed under section 147/143 of the Act on 02.09.2011. Further, it was contented that the appellant/ assessee had also been served with the notice dated 11.02.2010 under section 154 of the Act for disallowance of prior period expenses of Rs.1,69,71,833/-. However, the appellant/assessee had not received any rectification order under section 154 of the Act passed in consequent to the above-mentioned notice dated 11.02.2010. The Ld. AR further argued that the AO could not reopen any case on the similar reasoning in respect of which the proceedings under section 154 of the Act was pending. Reliance was placed on the decisions of ITAT in cases of Mahinder Freight Carrier 129 ITD 278 (Mum); Ram Kishore Rathore in order dated 03.02.2020 and Rajasthan State Development & Investment Corp. Ltd. in ITA No.92/JP/2015 order dated 20.02.2018. Accordingly, it was submitted that the reassessment order determining income at Rs.1,69,71,833/- passed under section 147/143(3) of the Act on 02.09.2011 was ab initio void. Hence, this impugned order deserved to be annulled.
The Ld. Sr. DR submitted that the impugned rectification order dated 24.10.2018 passed under section 154/147/143(3) of the Act had nothing to do with the merit of the reassessment order passed under section 147/143 of the Act on 02.09.2011 because the reassessment order was different than that the impugned order dated 24.10.2018 passed under section 154/147/143(3) of the Act. The Ld. Sr. DR vehemently contended that the reassessment order passed under section 147/143 of the Act on 02.09.2011 attained finality as the appellant/assessee accepted the same and never challenged the said reassessment order before any appellate authority. Now by filing appeal against the rectification order dated 24.10.2018 passed under section 154/147/143(3) of the Act, the appellant/assessee was trying to question the merit of the reassessment order passed under section 147/143 of the Act on 02.09.2011. Accordingly, the Sr. DR prayed for dismissal of the appeal.
We have heard both the parties at length and considered the material available on the record.
The facts emerged from the material available on record are that the appellant/assessee has accepted the reassessment order dated 02.09.2011, determining income of Rs.1,69,71,833/-, passed under section 147/143 of the Act and never filed any appeal against the said reassessment order. Thus, the only inference emerged therefrom is that the appellant/assessee has accepted the quantum addition of Rs.1,69,71,833/- made in the reassessment order dated 02.09.2011. In case, the appellant/assessee was having any grievance to the quantum addition of Rs.1,69,71,833/-, then it would have challenged the reassessment order dated 02.09.2011before the appellate authority/Court. Now, the appellant/assessee wants to get decided the quantum appeal and to overcome the shortcoming by filing appeal against the impugned rectification order dated 24.10.2018 passed under section 154/147/143(3) of the Act.
We are of the considered view that the quantum addition and charging of interest in the reassessment order dated 02.09.2011passed under section 147/143 of the Act cannot be raised during the appellate proceedings initiated in consequence to the revision/rectification order dated 24.10.2018 passed under section 154/147/143(3) of the Act. Basically, the appellant/assessee, in consequence to the order of the Hon’ble High Court against penalty order, filed an application under section 154 of the Act requesting deletion of the penalty demand from the System, which was acceded to by the AO. We are of the considered opinion that the rectification order dated 24.10.2018 passed under section 154/147/143(3) of the Act cannot be taken as escape route to challenge the validity and quantum addition made in the reassessment order dated 02.09.2011 passed under section 147/143 of the Act. We, therefore, do not find any merit in the appeal challenging the quantum addition of Rs.1,69,71,833/-. Hence, we dismiss grounds no. 2 and 3 challenging the quantum addition. With respect to charging of the interest u/s 234A, 234B and 234C of the Act and paying interest under section 244A of the Act, we do not find any anomaly in the impugned order to interfere with the finding of the CIT(A).
In view of the above, the appeal of the assessee is dismissed. Order pronounced in open Court on 28th June, 2024