In a recent judgment, ITAT Kolkata has held that the re-assessment under section 143(3)/147 is independent and separate from the original assessment order passed u/s 143(3) and it can not be said that the both the orders of assessment made u/s 143(3) originally and the assessment made subsequently u/s 143(3)/147 get merged.
Case Law Details:
ITA No. 01/Kol/2016 Assessment Year : 2005-06|
Gopinath Ghorai vs. ACIT
Date of Judgment/Order: 29/04/2016
Brief Facts of the Case:
The assessee was engaged inter alia in the business of transportation of oil for Indian Oil Corporation. During the course of this business, he took tanker on hire from other parties. During the year under consideration, he had paid charges for taking such tanker on hire without deduction of tax at source as required by the provision of section 194 C. The Assessing Officer invoking the provision of section 40(a)(ia) of the Income Tax Act, 1961 disallowed expenses on account of tanker hire charges and the assessment was completed u/s 143(3) vide order dated 18.12.2007.
CIT(A) also confirmed the disallowance made by AO u/s 40(a)(ia).
Thereafter the case of the assessee was reopened u/s 147. In the return filed in response to the notice issued by the AO u/s 148, the assessee offered an additional income on account of undisclosed investment with interest thereon. Accordingly, the assessment was completed u/s 143(3) r.w.s. 147 vide order dated 24.12.2010.
Thereafter an application u/s 154 was moved by the assessee before AO on 12.11.2014 claiming that the payments made on account of tanker hire charges not being in pursuance of any contractual obligation, section 194C had no application and the order of AO passed u/s 143(3)/147 in not considering this aspect was wrong. The AO observed that the issue was decided in the assessment after he having he applied his mind to all the facts and circumstances of the case. He held that scope of rectification is limited as it does not permit the review of order on any point. Accordingly the application moved by the assessee u/s 154 was rejected.
Against the order of rejection passed by the AO u/s 154, an appeal was preferred by the assessee before CIT(A). One of the contention of the assessee was that the order passed u/s 143(3) dated 18/12/2007 got merged with the order passed u/s 143(3) r.w.s 147 dated 24/12/2010 by the theory of doctrine of merger and the time limit for rectification should be reckoned from the date of passing the reassessment order dated 24/12/2010 not from the date of original assessment. That the order passed under section 143(3) dated 18.12.2007 stepped into the shoes of the order under section under section 143(3) read with section 147 dated 24.12.2007 and the time limit for making rectification under section 154 commenced from the relevant financial year of 2010-11.
However CIT(A) rejected all the contentions of the assessee.
Important Excerpts from ITAT Judgment:
According to him, there was thus a mistake apparent from records in the order of AO which is liable to be rectified u/s 154. We are unable to accept this contention of the learned counsel for the assessee for the reasons more than one. Firstly the disallowance u/s 40(a)(ia) on account of tanker hire charges was made by AO in the order passed u/s 143(3) on 18.12.2007 and not in the order passed u/s 143(3)/147 on 24.12.2010 and as rightly held by CIT(A), the application filed by the assessee for rectification u/s 154 of the order passed by AO on 18.12.2007 was clearly barred by limitation as per subsection (7) of section154 which provides that no amendment u/s 154 shall be made after expiry of four years from the end of the financial year in which the order sought to be amended was passed. In this regard, the contention raised on behalf of the assessee before CIT(A) as well as before us is that order passed u/s 143(3) by the AO was merged with the order passed by him subsequently on 24.12.2010 u/s 143(3)/147 and therefore the application filed u/s 154 was well within the time limit stipulated in the statute. We find no merit in this argument raised on behalf of the assessee. The assessment made by AO u/s 143(3)/147 is independent and separate from the order passed u/s 143(3) in as much as the scope of such assessment is limited to bringing to tax the income which has escaped assessment made originally inter alia u/s 143(3) and the theory of doctrine of merger does not apply in the case of assessment made u/s 143(3) originally and the assessment made subsequently u/s 143(3)/147. Both these assessments stand independently on their own footing. We therefore find ourselves in agreement with ld. CIT(A) that the application filed by the assessee for rectification u/s 154 was barred by limitation and the action of AO in rejecting the same was justified on this ground also.