The Assessing Officer passed an assessment order u/s 143(3) on 20.11.2018 in which the assessee committed the mistake of reducing the depreciation…

Issue Involved: The issue under consideration is whether the time limit of 4 years as per section 154 (7) would apply from the date of original assessment order or the order of the Appellate Authority. Provisions Applicable: As per section 154 (7) , no amendment under section 154 shall be made after the expiry of four years from end of the financial year in which the order sought to be amended was passed. Analysis and Conclusion: Once an appeal against the order passed by an authority is preferred and is decided by the appellate authority, the order of the Assessing Officer merges with the order of the appellate authority. After merger, the order of the original authority ceases to exist and the order of the appellate authority prevails. The final order passed by the appellate authority was dated 28.6.2023 and acting thereupon the AO passed assessment order, giving appeal effect thereto, on 23.7.2023. Thus, it is the order passed by the CIT(A) which remains on record for all intent and purposes as the original order of assessment has been merged. Once the matter is viewed from this angle, it does not matter that the error which is sought to be rectified occurred in the original assessment order and was not subject matter of appeal. Obviously, it was a calculation error which could not have been the subject matter of appeal. Thus, the period of limitation of 4 years for the purpose of section 154 (7) has to be counted from the date of the order of the Appellate Authority. Note – The facts given in the question are similar to the facts in CIT v. Tony Electronics Limited (2010) 320 ITR 378 (Delhi). The above answer is based on the rationale of the Delhi High Court ruling in the said case. Note – Since concept of partial merger is applicable in case of section 154, the rationale of Supreme Court rulings in case of CIT v. Alagendran Finance Ltd (2007) 293 ITR 1 or CIT v. Industrial Development Bank of India Ltd. [2023] 454 ITR 811 which is in relation to section 263, can be applied in the present case. Accordingly, the analysis and conclusion alternatively would be as follows: Analysis and Conclusion: Once an appeal against the order passed by an authority is preferred and is decided by the appellate authority, the order of the Assessing Officer merges with the order of the appellate authority but limited to the subject matter of appeal. In the present case, the final order passed by the appellate authority dated 28.6.2023 was on other issues. Thus, the period of limitation of 4 years for the purpose of section 154 (7) has to be counted from the date of the original order of the Assessing Officer on matters other than the matter decided by the Appellate Authority.