CPC order u/s 143(1) is appealable and hence no merger with order u/s 143(3) – ITAT

CPC order u/s 143(1) is appealable and hence the doctrine of merger with order u/s 143(3) do not arise – ITAT

In a recent judgment, ITAT Chennai has held that CPC order u/s 143(1) is appealable and hence the doctrine of merger with order u/s 143(3) do not arise

ABCAUS Case Law Citation:
ABCAUS 4151 (2024) (07) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A), National Faceless Appeal Center (NFAC) dismissing the appeal of the assessee rejecting the doctrine of merger of order of Central Processing Centre (CPC).

The return of income filed by the appellant assesse was passed by the CPC u/s 143(1) of the Income Tax Act, 1961 (the Act) making addition towards income from other sources and also denied claim of exemption. However, the assessee did not challenge the order passed by the CPC.

Subsequently, the case was selected for scrutiny and the Assessing Officer (AO) passed order u/s 143(3) without making any addition. The AO however proceeded to adopt the income as determined by CPC u/s 143(1) of the Act..

The assesse challenged the order passed u/s 143(3) raising the total demand consequent to order u/s 143(3). In appeal, the first appellate authority observed that the appellant had agreed by the order u/s 143(1) of the CPC and did not contest it. However, the assessee filed an appeal against order u/s 143(3) wherein no additions have been made by the AO. Hence, the CIT(A) dismissed the appeal as the grounds of appeal to be adjudicated were not emanating from the order u/s 143(3) of the Act.

Before the Tribunal the assessee contended that even though the impugned amount was shown under schedule-EI of the return as exempted income, but when actually it had offered under the other sources. Thus it was doubly taxed.

It was argued that as per the principles of doctrine of merger the order u/s 143(1) had merged with the assessment order u/s 143(3) of the AO and consequently CIT(A) ought to have adjudicated the grounds contested before it qua order u/s 143(3).

The Tribunal noted that it was an undisputed fact of the case that the assesse itself had committed the mistake of showing the amount of dividend income from foreign company, under schedule-EI of the return as exempted income. It was also an undisputed fact of the case that the impugned interference to the assessee’s returned income and the corresponding generation of demand had has arisen from u/s 143(1) of the Act.

The Tribunal observed that Section 246 of the Act provides that an assesse aggrieved by orders passed by Income Tax Authorities under various sections are entitled to file appeal before the CIT(A). Section 143(1) is one such section included in section 246(1)(a) of the Act.

The Tribunal further observed that the assesse was aggrieved by the order u/s 143(1) and hence was eligible to file an appeal against the same before the first appellate authority. The action of the CPC in alleged double taxation and incorrect application of tax rates etc. squarely constituted an event to cause grievance to the assesse.  The Tribunal also observed that in view of the clear statutory position of section 246(1)(a) above, the hypothesis of doctrine of merger do not arise in this case.

The ttt opined that the first appellate authority had rightly dismissed the assessee’s appeal as it was not aggrieved by any action of the AO qua order u/s 143(3). The assesse in the right scheme of things should have contested the order u/s 143(1) passed by the CPC. The Tribunal upheld the view that the Tribunal comes to rescue of an assesse only when there is an error in the order of the first appellate authority. The CIT(A) had rightly concluded that there was no error in the order of the AO and that the grounds of appeal raised before him were not emanating order u/s 143(3).

Accordingly, the Tribunal dismissed the appeal. 

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