AO cannot pass order suo motu u/s 154, once same passed by superior authority.

1. During the assessment year under consideration, the assessee has shown that he had purchased a property in the urbanized village Masjid Moth, New Delhi.

2. The matter was referred to the valuation cell. Finally, the A.O. has made the addition, while passing the assessment order dated 31.3.2000, which was challenged before the CIT(A), who vide its order dated 4.9.2000 has set aside the assessment order and remanded the matter to the A.O. for fresh adjudication.

3. In pursuance to the order of the CIT(A), the A.O. again passed assessment order on 21.3.2002 under Section 143(3)/251 of the Act. The A.O. has also mentioned that the interest may be charged as per the rules.

4. Being aggrieved, the assessee has assailed the order before the CIT(A), who vide its order dated 27.3.2003 has allowed the claim of the assessee by observing that no interest can be charged. In other words, the CIT(A) observed that no interest can be charged as no specific mention was made in the assessment order.

5. However, the A.O. took a suo motu action and passed an order under Section 154 of the Act on 18.8.2003, where he has clarified that the interest can be charged under Sections 234B and 234C. Being aggrieved, the assessee has again assailed the order before the CIT(A), who vide its order dated 4.11.2003 has cancelled the order passed by the A.O. under Section 154 of the Income-tax Act. The Department has challenged the same before the Tribunal. The Tribunal has dismissed the appeal filed by the Department and uphold the order passed by the CIT(A). Still not being satisfied, the Department has filed the present appeal.

HC held as under:

6. In the case of Utkal Galvanizers (P.) Ltd. v. Asstt. CIT [2008] 298 ITR 53/172 Taxman 149 (Orissa) it was observed that :

'Only when the regular assessment under section 143(3) was initiated and the income of the assessee was enhanced, did the additional income-tax become payable and, thus, no question of levy of interest for non-payment of advanced tax could arise. Since, the additions effected by the Income-tax Officer were deleted by the Commissioner (Appeals), no question of payment of interest under section 234B arose and non-charging of interest could not be a "mistake capable of rectification" for initiating a proceeding under section 154.'

7. Further, it may be mentioned in the case of Addl. CIT v. India Tin Industries (P.) Ltd. [1987] 166 ITR 454/[1986] 29 Taxman 128 (Kar.) it was observed that :

"Sub-section (1A) of section 154 specifically provides that any matter which has not been considered and decided in any proceeding by way of appeal or revision, may be amended by the authority passing such an order in exercise of its power under Section 154(1). The doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by an inferior Tribunal and the other by a superior Tribunal passed in an appeal or revision, there is a fusion or merger of the two orders irrespective of the subject matter of the appeal. The order of assessment made by the Income-tax Officer merges in the order of the Commissioner insofar as it relates to items considered and decided by the Commissioner. That part of the order of assessment, which relates to items not forming the subject matter of the appellate order and left untouched does not merge in the order of the Commissioner. Even after an appeal from an order of assessment is decided by the Commissioner, a mistake in that part of the order of assessment which was not the subject matter of the appeal and was thereafter left untouched by the Commissioner, can be rectified by the Income-tax Officer".

8. In view of above, without going into the merits of the case, we are of the view that the Assessing Officer cannot pass order suo motu under Section 154 of the Act, when the superior authority has already passed the order.

9. Therefore, we find no reason to interfere with the impugned order passed by the Tribunal. The same is hereby sustained alongwith the reasons mentioned therein.

10. The answer the substantial questions of law in favour of the assessees and against the Department.

11. In the result, appeal filed by the Department is dismissed.

Case Reference-Commissioner of Income-tax, Meerut v. Smt. Brinda Arneja

HIGH COURT OF ALLAHABAD