The Tax Publishers2022 TaxPub(DT) 7000 (Hyd-Trib) INCOME TAX ACT, 1961
Section 154
Once law had given a right to assessee to challenge order of AO by following consolidated appeal whereby assessee could challenge assessment order and rectification order then assessee could not be non-suited merely because he had only challenged orders under section 154.
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Rectification - Consolidated appeal - Subject-matter of assessment proceedings under section 143(3) read with section 144B included in rectification appeal -
Assessee filed return of income declaring total income of Rs.57,23,200. Case was selected for scrutiny through computer aided scrutiny selection system. Accordingly, notice under section 143(2) was issued which was duly served upon the assessee through email. A perusal of STR on system showing that assessee made huge credit of Rs. 3,12,84,71,392 including a cash deposit of Rs.66,68,25,000 during year. Through this office notice under section 142(1) assessee was asked to provide details of bank account details of cash deposit, details of the source of cash, copy of the sales ledger & bills and other relevant information along with documentary evidence. Cash realized on sale of pure gold, pure silver, etc., was deposited in bank accounts. AO had only made additions of Rs.3,12,29,580 to returned income of assessee as against cash deposit of Rs. 66,68,25,000 during demonetization period. Assessee being aggrieved, received a copy of assessment order and noticed that AO while estimating income of assessee, had estimated income to tune of Rs.3,12,29,580 on a/c of Gross Profit, and it was added to returned income of Rs.57,23,200 and thus made additional taxable income at Rs.3,69,52,780. Assessee filed a rectification application immediately after receiving order to which AO passed rectification order and assessed total income of assessee at Rs.3,69,52,780 instead of Rs.36,95,27,799. Still being aggrieved, assessee filed an appeal before CIT(A) who dismissed appeal on ground that against order under section 154, appellant filed an appeal wherein it had contested estimation of profit which was subject-matter of assessment proceedings under section 143(3) read with section 144B and did not pertain to order under section 154. Held: In the present case, assessee received copy of assessment order on 28-10-2021 and thereafter, on very same day, assessee filed a rectification application before AO, and rectification order was passed on 1-11-2021. Immediately after receipt of order dt-1-11.2021, assessee filed an appeal before CIT(A) on 27-11-2021. Thus, appeal filed by assessee was within one month from date of receipt of assessment order / rectification order. Though, assessee had only mentioned 154 order in Col.2A in Form 35. However, CIT(A) was not expected to oblivious of statement of fact mentioned against Sl.No.11 of form, which only talks about wrong adjudication of G.P estimated by AO and for that purpose, assessee in Para 11 had relied upon decision of the Tribunal in assessee's own case for assessment year 2012-13. In fact, in grounds of appeal before CIT(A) assessee had categorically mentioned: that “your petitioner not accepting estimation of income of Rs.57,23,200 to estimated income of Rs.3,12,29,580 when book results are not accepted by AOâ€. It was further ground of appeal before CIT(A) that AO could not make estimation of profit when book results were not accepted by assessee. Substance of grounds raised before CIT(A) was only to challenge order passed by AO under section 143(3) on 1-6-2021, which was subsequently rectified on 1-11-21. For all purposes, assessee's appeal only challenged addition of Rs.3,12,29,580 to assessee's income. In view of above, once assessee had challenged order of AO in appellate proceedings, pedantic hyper-technical approach of revenue officer was required to be rejected as it was an admitted position that assessment proceedings were not adversarial litigation. Further, doctrine of merger will go into play for rescue of assessee. Once law has given a right to assessee to challenge order of AO by following consolidated appeal whereby assessee can challenge assessment order and rectification order then assessee cannot be non-suited merely because he has only challenged orders under section 154. In view of above, though AO had only made an addition of Rs.3,12,29,580 to returned income of assessee as against cash deposit of Rs.66,68,25,000 during demonetization period, however, still assessee had chosen to challenge the meagre addition of Rs.3,12,29,580 on above said technical ground, order of CIT(A) was required to be quashed, and case was remanded back to file of AO with a direction to pass order on merit after treating appeal of assessee as an appeal challenging order under section 143(3) read with section 154.
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