Loading judgment…
Facts
The assessee, S.K. Sharma Contractor, filed an application under section 154 for proper working of refunds and interest for AY 1991-92, as the previous assessment orders and appeals did not adequately address these. This application, filed on 10.11.2014, was not disposed of within the statutory six months. The AO issued a communication on 04.07.2020, referring to an earlier order, which the assessee challenged. The CIT(A) dismissed the appeal, reasoning that the AO's communication was merely an internal correspondence and not an appealable order under section 246A of the Act.
Held
The Tribunal found that the AO failed to dispose of the assessee's rectification application under section 154 within the statutory time limit, thereby breaching a statutory obligation. It clarified that the communication from the AO on 04.07.2020 was not a proper order under section 154. Citing CBDT Circulars, the Tribunal held that rectification applications can be disposed of by the AO even after the expiry of the statutory time limit. Therefore, the Tribunal directed the AO to entertain and dispose of the assessee's application filed on 10.11.2014 as per law after verifying the records.
Key Issues
Whether a communication from the AO in response to an undisposed rectification application under section 154 constitutes an appealable order, and whether the CIT(A) was justified in dismissing the appeal on this ground.
Sections Cited
Section 154, Section 143(3), Section 244A, Section 220(2), Section 246A, Section 154(8), Section 119, Section 154(7)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI AVDHESH KUMAR MISHRA
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.798/Del/2023, A.Y. 1991-1992 S.K.Sharma Contractor, ITO R-11/2 Raj Nagar, Ward-2(2)(3) Ghaziabad, UP Vs. Ghaziabad PAN: AADFS8630H (Appellant) (Respondent)
Appellantby Shri Deepanshu Agarwal, CA Respondent by Sh. Anuj Garg, Sr. DR Date of Hearing 23/04/2024 Date of Pronouncement 30/05/2024 ORDER PER AVDHESH KUMAR MISHRA, AM
This appeal of the Assessment Year [In short, the ‘AY’] 1991-92, at the instance of the appellant/assessee, challenges an order dated 13.03.2023, of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi [In short, the ‘CIT(A)’].
By the order under challenge, the CIT(A) dismissed the appeal of the appellant/assessee on the reasoning that the claimed order under section 154 of the Income Tax Act, 1961 [In short, the ‘Act’] against
Page 1 of 12
ITA No.798/Del/2023
which the appeal filed was an internal correspondence between the Assessing Officer [In short, as the ‘AO’] & the Range Head and therefore, the same could not be appealed before the CIT(A).The limited issue that we are tasked here to decide is that whether the CIT(A) was justified in dismissing the appeal of the appellant/assessee on the above reasoning.
The relevant facts, in brief, emerged from the documents submitted by the appellant/assessee, a contractor, are that its case pertaining to the AY 1991-92 was scrutinized and the assessment was completed under section 143(3) of the Act, on 30.12.1993, determining income at Rs.10,72,760/-. Aggrieved, the appellant/assessee appealed before the CIT(A), who allowed part relief of Rs.1,69,340/- vide order dated 28.02.2002. The CIT(A)’s order was further challenged before the Tribunal, which allowed reliefs of Rs.16,555/- and Rs.5,285/- to the appellant/ assessee vide orders dated 24.10.2003 and 14.11.2003 respectively. Thus, the assessment of this case attained finality at income ofRs.8,81,580/-.
3.1 The appellant/assessee was not only dissatisfied with the quantum of refunds issued so far after scrutiny assessment and consequential appeal effects but also with the adjustments of its refunds against the net demands of partners. As per the Page 2 of 12
ITA No.798/Del/2023
appellant/assessee, the AO did not take pains to work outcorrect quantum of refund after proper working of (i) payable interest to it under section 244A of the Act and (ii) chargeable interest from itand from its partners on their net outstanding demand under section 220(2) of the Act.
3.2 Aggrieved with the quantum of refunds, the appellant/assessee filed an application under section 154 of the Act before the AO for refunds after proper working of interest under section 220(2) and 244A of the Act from & on it and its partners and allowing credit of taxes paid by them as per the law, which was disposed of by the AO vide order dated 07.01.2011. The order dated 07.01.2011 passed under section 154 of the Act was challenged before the CIT(A), who disposed it vide order dated 04.01.2013 as under: -
“The entire issue is not a matter of appeal but the matter of verification and rectification by the Assessing Officer. The appellant is directed to submit the entire set of its contentions, in form of application u/s 154 before the Assessing Officer and put its request for redressal of its grievance, before the Assessing Officer and, if needed, at higher forums. The Assessing Officer is directed to look into the matter carefully and sympathetically and do the needful....” 3.3 In pursuance of the CIT(A)’s order dated 04.01.2013, the appellant/assessee filed an application under section 154 of the Act
Page 3 of 12
ITA No.798/Del/2023
before the AO on 10.11.2014 for proper working of quantum of refund due to it along with the interest thereon under section 244A of the Act, which was not disposed of within the statutory time period of 6 months as per section 154(8) of the Act. In such circumstances, the appellant/assessee had not any option except to file grievance petitions and CPGRAM before the Income Tax Authorities for disposal of its application filed under section 154 of the Act before the AO on 10.11.2014. The application filed under section 154 of the Act before the AO on 10.11.2014 and grievance petitions were disposed of together by a communication/order dated 04.07.2020 by the AO. Aggrieved with the communication/order dated 04.07.2020 of the AO, the appellant/assessee filed appeal before the CIT(A) who dismissed it observing as under: -
“5.1 It can be seen that it is the correspondence from AO to Addl. Commissioner of income Tax dated 04.07.2020. The said correspondence was communicated to the appellant on 06.08.2020. After receiving the same, the appellant preferred the appeal before CIT(A). In form no. 35, appellant has mentioned this correspondence letter No. ITBA/COM/F/17/2020-21/1027439191 dated 04.07.2020 and also mention the section as u/s 154 of the Act but it is not the rectification order u/s 154 of the Act. Further, this kind of letter as mentioned above, did not find its place in ‘appealable orders’ enlisted in section 246A of the Act. Further, it is also imperative to mention that order u/s 154 of the Act dated 10.01.2014 of jurisdictional AO is appealable order, but the appellant failed to file appeal against such order u/s 154 of the Act that too within the stipulated time of 30 days. Page 4 of 12
ITA No.798/Del/2023
Accordingly, the appeal of the appellant is not maintainable. Since the grounds rendered infructuous. Accordingly, appeal is dismissed.” 4. The matter brought up before us revolves around one issue that whether the communication/order dated 04.7.2020 of the AO to the Range Head (A copy of the same was endorsed to the appellant/assessee.) is an appealable order u/s 246A of the Act.
The Ld. AR argued that the appellant/assessee had not have any say on the way in which any order is written by the AO. The Ld. AR further contended that how the application filed under section 154 of the Act before the AO on 10.11.2014 by the appellant/assessee be disposed of by any order predated to 10.11.2014. Hence, the order dated 07.01.2011 passed by the AO under section 154 of the Act as mentioned in the said communication/order dated 04.07.2020 could not address the application filed under section154 of the Act on 10.11.2014. The Ld. AR also submitted that the reference of the order dated 10.01.2014 mentioned in para 5.1 of the impugned order of the CIT(A) was factually incorrect as no such order was ever passed by the AO. Further, it was contended that the said order dated 10.01.2014 could not address the issues raised by the appellant/assessee’s application filed under section 154 of the Act on 10.11.2014. It was further submitted by the Ld. AR that the application filed under section
Page 5 of 12
ITA No.798/Del/2023
154 of the Act on 10.11.2014 in pursuance of the Ld. CIT(A)’s order dated 04.01.2013 was nothing but a request for giving effect, as per the law, in true sense as per the direction of the Ld. CIT(A).
5.1 Alternatively, the Ld. AR further contended that if the said communication is not an order under section 154 of the Act as upheld by the Ld. CIT(A) then it can be said that the said application filed under section 154 of the Act got barred by the limitation. Therefore, the claim of the assessee as per the saidapplication filed under section 154 of the Act should be treated having allowed. The Ld. AR further placed emphasis on the fact that the AO in the said communication/order had mentioned that he had already passed an order u/s 154 of the Act on 07.01.2011, which addressed all grievances of the assessee whereas the appellant/ assessee had requested for revision and rectification of the order passed u/s 154 of the Act on 07.01.2011 vide its application filed under section 154 of the Act on 10.11.2014.
5.2 The Ld. AR further submitted that how an application filed under section 154 of the Act in 2014 as mentioned above could be disposed of in January, 2011. Hence, the inference drawn by the AO in this regard is unjustified. It was further contended that the Ld. CIT(A) had held that the assessee failed to file appeal against the order passed under section 154 of the Act by the AO in pursuance of the assessee’s Page 6 of 12
ITA No.798/Del/2023
application. However, the fact is that the assessee has not received any such order disposing its application filed under section 154 of the Act other than the communication/order dated 04.07.2020. The Ld. AR further submitted that its application filed under section 154 of the Act on 10.11.2014 was in pursuance of the direction of the Ld. CIT(A). Hence, in absence of the disposal of the said rectification application, it could be inferred that the AO had not given full effect of the appellate order dated 04.01.2013. Thus, the Ld. AR requested that the AO can be directed to give effect to the appellate order dated 04.01.2013 and in turn its application filed under section 154 of the Act on 10.11.2014.
The Ld. DR, placing emphasis on the finding of the CIT(A), requested for dismissal of this appeal on the reasoning that the communication/order dated 04.7.2020 of the AO to the Range Head is an appealable order u/s 246A of the Act.
We have heard both the sides at length and perused the material available on record.
The perusal of the record of this case reveals that the appellant/assessee had moved an application under section 154 of the Act on 10.11.2014 for the relevant AY. Undisputedly, the application
Page 7 of 12
ITA No.798/Del/2023
under section 154 of the Act on 10.11.2014 is in accordance with the law and in pursuance of the Ld. CIT(A)’s order dated 04.01.2013.
Section 154(8) of the Act provides that any application filed under section 154 of the Act shall be disposed of within the six months from the end of the month in which such application is received by the AO. Therefore, the issuance of an order disposing the application filed under section 154 of the Act is absolutely necessary. Since no order as per provisions of section 154(8) of the Act was ever passed by the AO, therefore, the appellant/assessee was not aware about the fate of its application filed under section 154 of the Act before the AO on 10.11.2014. When the fate of the same came to its notice vide the communication/order dated 04.7.2020 of the AO, then it filed the appeal before the CIT(A). The Act does not provide any recourse to the assessee when the AO failed to dispose of any application filed under section 154 of the Act within the statutory time limit. Since the AO had failed to discharge his statutory duty in passing the order disposing the application filed under section 154 of the Act on 10.11.2014, therefore we are of the view that the assessee is justified in raising this issue before the Appellate Authority as this is the only recourse available to it. The law is very well settled that if there is a breach of a statutory obligation, then a person committed such breach cannot be permitted
Page 8 of 12
ITA No.798/Del/2023
to take advantage of such situation, so as to prejudice the interest of the effected person. Needless to say, that the case record pertains for 1991-92 (more than 30 years old assessment proceedings).
In the light of the Circular No.73 dated 07.01.1972, a rectification application can be disposed of by the AO even after the expiry of the statutory time limit on merits and in accordance with law. It is worth mentioning here the content of the Circular No.73 dated 07.01.1972.
"Circular No.73 dated 07.01.1972 Subject: Section 154(2)(b) - Applications for rectification of Mistakes - Statutory time-limit - Waiver of. In exercise of the powers conferred by clause (a) of sub0- section (2) of section 119 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby orders that in all the cases where a valid application under clause (b) of sub- section (2) of section 154 had been filed by the assessee within the statutory time-limit but was not disposed of by the authority concerned within the time specified under sub- section (7) of section 154, it may be disposed of by that authority even after the expiry of the statutory time-limit, on merits and in accordance with law."
As per the Circular No.4 dated 20.06.2012, the CBDT has authorized its subordinates to make appropriate corrections in the figures of disputed arrear demandsafter due verification and reconciliation and examining the merits of the case by way of rectification, irrespective of the fact that the period of limitation of four years as provided u/s.154(7) of the Act has
Page 9 of 12
ITA No.798/Del/2023
elapsed. The relevant portion of the Circular No.4 dated 20.06.2012 is extracted here under: -
"………… 3. In view of the above the following has been decided: - (b) In other cases, where the assessee disputes and requests for correction of the figures of arrear demand, whether uploaded on CPC or not uploaded and still lying in the records of the Assessing Officer, the jurisdictional Assessing Officer shall verify the claim of the assessee on merits and after due verification of such claim, will make suitable correction in the figure of arrear demand in his records and upload the correct figure of arrear demand on CPCportal." 12. In view of above facts and circumstances, we are of the considered opinion that neither the assessee’s application filed under section 154 of the Act on 10.11.2014 was disposed of nor the consequential effect to the order dated 04.01.2013 of the CIT(A) was given on or before the communication/order dated 04.07.2020. Hence, drawing of the inference by the appellant/ assessee that the communication/order dated 04.07.2020are nothing but refusal to admit its claim under section 154 of the Act is not misplaced.
Considering the totality of the facts and circumstances of the case as detailed above, we are of the considered opinion that the grievance of the assessee is well-founded. We therefore, direct the AO to entertain the said application filed before himunder section 154 of the
Page 10 of 12
ITA No.798/Del/2023
Act on 10.11.2014and dispose it off as per law after verification of records.
In the result, the appeal is allowed as above. Order pronounced in open Court on 30th May, 2024 Sd/- Sd/- (VIKASAWASTHY) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30/05/2024 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(Appeals) 5. DR,: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI
Page 11 of 12