By TIOL News Service

ALLAHABAD, DEC 28, 2018: THE ISSUE BEFORE THE BENCH IS - Whether the CIT(A) can entertain issues for the second time in a rectification application, after its order in the first instance gets merged with that of the ITAT on the same issue. NO IS THE VERDICT.

Facts of the case

The assessee is in the business of banking. In its course of business the assessee received deposits from the one NOIDA for fixed/contracted rates of interest which was to be paid by the assessee. On interest becoming due, the bank paid the interest to the NOIDA without deducting TDS. During assessment of income return of the assessee, the AO raised the issue of failure to deduct TDS and passed an order u/s 201 (1) & (1A) r/w s. 194A of the Income Tax Act holding the assessee under default. On appeal, the CIT(A) set aside the order of the AO. The Revenue appealed to the ITAT and alternatively, also preferred a rectification application. The ITAT dismissed the appeal. Further appeals to the HC and the SC from the order of the ITAT were also dismissed. Subsequently, after three months of the Tribunal's order, the CIT(A) allowed the rectification application of the Revenue. The assessee challenged the order before HC by writ petition.

In writ, the High Court held that,

++ observing the chain of events of proceedings from the AO to the SC and back again at the CIT(A), it was seen that the same branch of the CIT(A) confirmed the claim of the assessee reasons for non-deduction of TDS. The reason was that NOIDA being established under an enactment of the State of U.P, interest paid on deposits was exempt from the compliance of TDS u/s 194A(3)(iii)(f). When the Revenue carried the matter to the Tribunal, it accepted the assessee's reasons while upholding the order of the CIT(A) in the first instance. On passing of such order by the Tribunal, the order of the CIT(A) was merged with the order of the Tribunal along the lines of the doctrine of merger. The same matter when carried to the HC and the Apex Court was merged with the respective courts order. Hence, there was no room left for the CIT(A) to again entertain the matter and issuing order on rectification application of the Revenue on jurisdictional ground,

++ also considering the observation reached by the Kunhayammed v. State of Kerala that "...the logic underlying the doctrine of merger is that there cannot be more than one decree or operative orders governing the same subject-matter at a given point of time...", the CIT(A) lacked jurisdiction to pass order accepting the Revenue's rectification application.

(See 2018-TIOL-2709-HC-ALL-IT)