Loknete Sunderraoji Solanke SSK Ltd vs ACIT: ITAT Pune on Sec 154 Merger

This case study examines an ITAT Pune order concerning Loknete Sunderraoji Solanke SSK Ltd, where a rectification order passed by the CIT(A)[NFAC] under Section 154 read with Section 250 was held to have lost independent legal existence once the original order it purported to rectify was separately set aside by the Tribunal in an earlier, parallel appeal. The ruling is a useful illustration of how the doctrine of merger operates when a taxpayer is pursuing simultaneous remedies against an original appellate order and a subsequent rectification of that order.

This page is a research summary of one specific Indian tax judgment, NOT legal advice. Always verify against the full judgment and consult a professional for case-specific guidance.

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The case at a glance

• Parties: Loknete Sunderraoji Solanke SSK Ltd vs ACIT Circle, Jalna, Jalna
• Bench: Income Tax Appellate Tribunal - Pune
• Date: 7 May 2024
• Court level: Tribunal (ITAT)
• Sections engaged: 154, 250
• Outcome: Taxpayer succeeded (appeal allowed for statistical purposes)

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Facts of the case

The appeal (ITA No.172/PUN/2024) arose for Assessment Year 2010-11 and was directed against an order passed by the CIT(A)[NFAC] under section 154 read with section 250 of the Income Tax Act, 1961, dated 15.01.2024. That order purported to rectify "certain mistakes apparent from the record" in an earlier order the same CIT(A)[NFAC] had passed under section 250 on 16.11.2023.

The assessee's sole substantive ground in the present appeal concerned disallowance and addition of Rs.55,48,01,688/- on account of excess payment of sugarcane price — the subject matter carried over from the original 16.11.2023 order. However, before this Section 154 appeal could be decided, the Tribunal records that the assessee had already filed, and separately pursued, an appeal against the original 16.11.2023 order itself, which was registered as ITA No.1275/PUN/2023 and decided by the ITAT Pune Bench on 31.01.2024, setting aside the CIT(A)'s order for denovo adjudication.

The AR explained this sequence of events to the Bench, and the Departmental Representative agreed with the facts as presented, meaning there was no factual dispute before the Tribunal on the chronology of the two sets of proceedings.

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Issues raised

• Whether a rectification order passed under section 154 r.w.s. 250 continues to have independent legal existence after the original order it sought to rectify has been set aside by the Tribunal in a separate, earlier-decided appeal.
• Whether the doctrine of merger applies so as to render the section 154 rectification order "non-est" once the underlying section 250 order merges with the Tribunal's subsequent order.
• Whether the disallowance of Rs.55,48,01,688/- on account of excess sugarcane price price required independent adjudication in this appeal, or whether it stood subsumed in the denovo adjudication already directed.

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What the court held

The Tribunal held that since it had "already set-aside the order of the ld.CIT(A)'s order vide ITAT Pune Bench order in ITA No.1275/PUN/2023 on 31.01.2024 for denovo adjudication, the impugned order under section 154 r.w.s.250 of the Income Tax Act, 1961 dated 15.01.2024 becomes 'non-est'." On this basis, it concluded that "the appeal of the assessee becomes academic in nature" and, "in the result, appeal of the assessee is Allowed for statistical purpose."

The reasoning proceeds in two steps. First, the Bench noted that the original CIT(A) order dated 16.11.2023 — the order that the subsequent rectification order of 15.01.2024 was purporting to correct — had itself been appealed separately and was set aside by the Tribunal's own earlier order dated 31.01.2024 for fresh (denovo) adjudication. Second, applying the principle that the order of the CIT(A) "has merged with order of the ITAT Pune Bench dated 31.01.2024," the Tribunal found that there was no longer any surviving original order capable of being rectified, and therefore the section 154 rectification order built on top of it could not stand on its own.

Because the rectification order was declared non-est, the substantive grievance regarding the Rs.55.48 crore sugarcane-price disallowance did not require separate adjudication in this appeal — that issue will instead be addressed as part of the denovo proceedings directed in the earlier ITA No.1275/PUN/2023 order. The present appeal was accordingly allowed, but only "for statistical purpose," reflecting that the outcome turned on procedural merger rather than a fresh examination of the sugarcane-price disallowance.

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Strategy observations

1. The assessee's representative placed before the Bench the full procedural chronology — including the parallel appeal (ITA No.1275/PUN/2023) against the original 16.11.2023 order and its outcome dated 31.01.2024 — which allowed the Tribunal to identify the merger without needing further fact-finding.
2. The Departmental Representative did not dispute the chronology of events presented by the assessee's representative, narrowing the hearing to a legal question about the effect of the earlier denovo-adjudication order on the later rectification order.
3. By pursuing an appeal against the original section 250 order independently of the section 154 rectification order, the taxpayer ensured that a favourable outcome in the earlier appeal (setting aside for denovo adjudication) could be leveraged to dispose of the later appeal as academic.
4. The order illustrates that relief obtained "for statistical purposes" in such situations does not resolve the underlying quantum dispute (here, the sugarcane-price disallowance) — that issue remains live for the denovo proceedings directed in the earlier order.

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Why this case matters

The order is a concise application of the doctrine of merger in the context of successive appellate and rectificatory orders passed by the same first-appellate authority. It clarifies that where an assessee challenges both an original appellate order and a subsequent rectification of that order in separate proceedings, a Tribunal decision setting aside the original order for denovo adjudication operates to extinguish the independent existence of the later rectification order, rendering any appeal against the rectification order academic.

For practitioners tracking procedural outcomes before the ITAT, the case is a reminder that appeals disposed of "for statistical purposes" can still represent a substantive win for the taxpayer where the disposal flows from the extinguishment of the order under challenge, even though the underlying quantum issue — here, the large sugarcane-price disallowance — remains to be examined afresh in connected proceedings.

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Source

This case is drawn from the TaxNoticeAI structured legal corpus (16,101 Indian tax judgments, CBIC circulars, ITAT rulings, AAR rulings, GSTAT rulings), sourced from indiankanoon.org and official court portals. Original document: https://indiankanoon.org/doc/19231736/