I withdrew my appeal against the section 143(1) intimation because the case went into scrutiny. Can the Assessing Officer now rectify under section 154 to bring back the intimation addition the scrutiny order left out?
Yes, on these facts. The Delhi Bench of the Tribunal held that there was no merger of the section 143(1) intimation into the section 143(3) assessment, because the two orders proceeded on different issues, and that the intimation stood final once the assessee withdrew its appeal against it. The scrutiny order had started from the returned income instead of the income determined by the intimation, leaving the intimation's addition of Rs 12,82,64,760 out of the assessed figure. That, the Tribunal held, was a mistake apparent from the record, and the Assessing Officer was entitled to correct it under section 154.
Decided by the ITAT (Income Tax Appellate Tribunal, Delhi Bench - M. Balaganesh, Accountant Member and Anubhav Sharma, Judicial Member) on 2023-10-31, reported as [2024] 110 ITR(T) 622 (Delhi - Trib.); IT Appeal No. 1097 (Delhi) of 2023, assessment year 2017-18. It bears on section 154, section 143(1), section 143(3), section 36(1)(va), section 246A of the Income Tax Act 1961, in Assessment & Scrutiny and Appeals matters.
The reflex when a return goes into scrutiny is to withdraw the appeal against the intimation, on the assumption that the intimation is swallowed by the regular assessment. This order shows the cost of that assumption where the two proceedings deal with different additions: the intimation does not merge, it becomes final, and the figure it determined becomes the base the assessment ought to have started from. Any shortfall is then a mistake apparent from the record, open to rectification within the section 154 time limit - and by then the assessee has given up the only forum in which the intimation's addition could have been challenged. Read it against South India Club v ITO, where the intimation and the assessment covered the same issue and the intimation was held to merge and lose its individuality.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For assessment year 2017-18 the assessee returned income of Rs 18,10,42,260. In processing the return under section 143(1), by intimation dated 28 March 2019, the Centralised Processing Centre added Rs 12,82,64,760 for employees' contributions to provident fund and ESI deposited beyond the due dates under the respective welfare enactments, and Rs 24,000 of house property income, taking the total to Rs 30,93,07,020. The assessee appealed against the intimation and later withdrew that appeal, the case having been picked up for scrutiny. The scrutiny assessment under section 143(3), dated 29 December 2019, made its own, different additions and arrived at an assessed income of about Rs 59.88 crore - but it computed that figure starting from the returned income, so the intimation's disallowance never found its way in. By an order under section 154 dated 31 March 2021 the Assessing Officer added the Rs 12,82,64,760 back, taking the assessed income to about Rs 72.70 crore.
The Tribunal upheld the rectification and dismissed the appeal. It rejected the plea that the intimation merged in the regular assessment. The additions in the two orders were on different issues, and once the appeal against the intimation was withdrawn - whatever the belief on which it was withdrawn - the intimation stood final and continued to operate. The assessment under section 143(3) ought therefore to have been built on the income determined by the intimation, and its failure to do so produced an under-assessment that was apparent on the face of the record. The Tribunal distinguished the line of cases in which the rectification sought to bring in something never examined at all, pointing out that here the addition had actually been made in the intimation. The order of the first appellate authority sustaining the section 154 order was confirmed.
The Tribunal's route is short. Merger is not automatic; it depends on whether the later order deals with the subject-matter of the earlier one. Here the section 143(3) order addressed additions unconnected with the section 36(1)(va) disallowance, so nothing about the disallowance was reconsidered and there was nothing for it to merge into. The withdrawal of the appeal against the intimation then did the rest of the work: an unchallenged intimation is a determination of income that binds, and the assessee cannot both give up its challenge and treat the determination as spent. From that point the arithmetic follows. The total income assessed under section 143(3) should have proceeded from the figure determined under section 143(1), and the difference between the two was a plain computational shortfall - not a debatable question of law, which is the only thing that would put it outside section 154. The Tribunal separated this case from Sanjay Kumar v. ITO, where the item sought to be rectified had never been the subject of any adjustment; here it had been adjusted, appealed and then left unchallenged. The merits of the section 36(1)(va) disallowance itself were not reopened.
Certainly that was a mistake apparent from record as the intimation under 139(1) stood final after withdrawal of the appeal by the assessee.
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Handle my notice → Ask a CA on WhatsAppYes, on these facts. The Delhi Bench of the Tribunal held that there was no merger of the section 143(1) intimation into the section 143(3) assessment, because the two orders proceeded on different issues, and that the intimation stood final once the assessee withdrew its appeal against it. The scrutiny order had started from the returned income instead of the income determined by the intimation, leaving the intimation's addition of Rs 12,82,64,760 out of the assessed figure. That, the Tribunal held, was a mistake apparent from the record, and the Assessing Officer was entitled to correct it under section 154. This was decided by the ITAT (Income Tax Appellate Tribunal, Delhi Bench - M. Balaganesh, Accountant Member and Anubhav Sharma, Judicial Member) and bears on section 154, section 143(1), section 143(3), section 36(1)(va), section 246A of the Income Tax Act 1961. It is reported as [2024] 110 ITR(T) 622 (Delhi - Trib.); IT Appeal No. 1097 (Delhi) of 2023, assessment year 2017-18. The reflex when a return goes into scrutiny is to withdraw the appeal against the intimation, on the assumption that the intimation is swallowed by the regular assessment. This order shows the cost of that assumption where the two proceedings deal with different additions: the intimation does not merge, it becomes final, and the figure it determined becomes the base the assessment ought to have started from. Any shortfall is then a mistake apparent from the record, open to rectification within the section 154 time limit - and by then the assessee has given up the only forum in which the intimation's addition could have been challenged. Read it against South India Club v ITO, where the intimation and the assessment covered the same issue and the intimation was held to merge and lose its individuality. If it applies to you, the first step is this: Before withdrawing an appeal against a section 143(1) intimation, check whether the scrutiny order deals with the same issue - if it does not, keep the appeal alive.
For assessment year 2017-18 the assessee returned income of Rs 18,10,42,260. In processing the return under section 143(1), by intimation dated 28 March 2019, the Centralised Processing Centre added Rs 12,82,64,760 for employees' contributions to provident fund and ESI deposited beyond the due dates under the respective welfare enactments, and Rs 24,000 of house property income, taking the total to Rs 30,93,07,020. The assessee appealed against the intimation and later withdrew that appeal, the case having been picked up for scrutiny. The scrutiny assessment under section 143(3), dated 29 December 2019, made its own, different additions and arrived at an assessed income of about Rs 59.88 crore - but it computed that figure starting from the returned income, so the intimation's disallowance never found its way in. By an order under section 154 dated 31 March 2021 the Assessing Officer added the Rs 12,82,64,760 back, taking the assessed income to about Rs 72.70 crore. The matter was decided on 2023-10-31 by the ITAT (Income Tax Appellate Tribunal, Delhi Bench - M. Balaganesh, Accountant Member and Anubhav Sharma, Judicial Member). On those facts the ITAT held as follows. The Tribunal upheld the rectification and dismissed the appeal. It rejected the plea that the intimation merged in the regular assessment. The additions in the two orders were on different issues, and once the appeal against the intimation was withdrawn - whatever the belief on which it was withdrawn - the intimation stood final and continued to operate. The assessment under section 143(3) ought therefore to have been built on the income determined by the intimation, and its failure to do so produced an under-assessment that was apparent on the face of the record. The Tribunal distinguished the line of cases in which the rectification sought to bring in something never examined at all, pointing out that here the addition had actually been made in the intimation. The order of the first appellate authority sustaining the section 154 order was confirmed.
The Tribunal's route is short. Merger is not automatic; it depends on whether the later order deals with the subject-matter of the earlier one. Here the section 143(3) order addressed additions unconnected with the section 36(1)(va) disallowance, so nothing about the disallowance was reconsidered and there was nothing for it to merge into. The withdrawal of the appeal against the intimation then did the rest of the work: an unchallenged intimation is a determination of income that binds, and the assessee cannot both give up its challenge and treat the determination as spent. From that point the arithmetic follows. The total income assessed under section 143(3) should have proceeded from the figure determined under section 143(1), and the difference between the two was a plain computational shortfall - not a debatable question of law, which is the only thing that would put it outside section 154. The Tribunal separated this case from Sanjay Kumar v. ITO, where the item sought to be rectified had never been the subject of any adjustment; here it had been adjusted, appealed and then left unchallenged. The merits of the section 36(1)(va) disallowance itself were not reopened. In the words reproduced by the source cited on this page: "Certainly that was a mistake apparent from record as the intimation under 139(1) stood final after withdrawal of the appeal by the assessee."
It was decided by the ITAT on 2023-10-31 and is reported as [2024] 110 ITR(T) 622 (Delhi - Trib.); IT Appeal No. 1097 (Delhi) of 2023, assessment year 2017-18. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 154, section 143(1), section 143(3), section 36(1)(va), section 246A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The Tribunal upheld the rectification and dismissed the appeal. It rejected the plea that the intimation merged in the regular assessment. The additions in the two orders were on different issues, and once the appeal against the intimation was withdrawn - whatever the belief on which it was withdrawn - the intimation stood final and continued to operate. The assessment under section 143(3) ought therefore to have been built on the income determined by the intimation, and its failure to do so produced an under-assessment that was apparent on the face of the record. The Tribunal distinguished the line of cases in which the rectification sought to bring in something never examined at all, pointing out that here the addition had actually been made in the intimation. The order of the first appellate authority sustaining the section 154 order was confirmed. It arises in Assessment & Scrutiny and Appeals matters, on section 154, section 143(1), section 143(3), section 36(1)(va), section 246A of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Delhi Bench - M. Balaganesh, Accountant Member and Anubhav Sharma, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. When a scrutiny order issues, check that it starts from the income determined by the intimation and not from the returned income; if it does not, expect a section 154 notice. If you have already withdrawn, do not argue merger where the additions are on different issues - argue instead that the point is debatable and so outside section 154. Keep a note on the file of why an appeal was withdrawn; the Tribunal here was unmoved by the plea that the withdrawal rested on a mistaken belief.
Still good law. No appeal against this order was traced. It is referred to by the Cochin Bench in The Chorode Service Co-operative Bank Ltd v ITO (5 November 2024). I did not find any later decision doubting it. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The sentence quoted reads 'the intimation under 139(1)' where the order plainly means section 143(1); the slip is the Tribunal's and is reproduced as it stands. The assessed figures in the section 143(3) order and the rectified order are given in the text with a rounding difference of a few rupees, so they are stated here approximately. The order does not record what became of the assessee's separate appeal against the section 143(3) assessment. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Tribunal upheld the rectification and dismissed the appeal. It rejected the plea that the intimation merged in the regular assessment. The additions in the two orders were on different issues, and once the appeal against the intimation was withdrawn - whatever the belief on which it was withdrawn - the intimation stood final and continued to operate. The assessment under section 143(3) ought therefore to have been built on the income determined by the intimation, and its failure to do so produced an under-assessment that was apparent on the face of the record. The Tribunal distinguished the line of cases in which the rectification sought to bring in something never examined at all, pointing out that here the addition had actually been made in the intimation. The order of the first appellate authority sustaining the section 154 order was confirmed.
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