Loknete Sunderraoji Solanke SSK Ltd vs ACIT: ITAT Pune on Section 154 Rectification Order Becoming Non-Est After Prior Set-Aside

This case examines a narrow but consequential procedural question: what happens to a Section 154 rectification order passed by the CIT(A) when, by the time it reaches the Tribunal, a prior ITAT order has already set aside the very order that the Section 154 proceeding sought to rectify? ITAT Pune's answer — that the rectification order becomes "non-est" — has direct relevance for income-tax practitioners tracking the interaction between appellate orders and rectification proceedings under Sections 154 and 250 of the Income Tax Act, 1961.

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

Loknete Sunderraoji Solanke SSK Ltd., a company with PAN AAABM0171G based at Sundarnagar, Telgaon, Tal. Dharur, District Beed, was before ITAT Pune in ITA No. 172/PUN/2024 for Assessment Year 2010-11. The appeal arose from an order passed by the ld. Commissioner of Income Tax (Appeals) [NFAC], Delhi under Section 154 read with Section 250 of the Income Tax Act, 1961, dated 15 January 2024. The substantive grievance of the assessee, as recorded in the grounds of appeal, was the disallowance and addition of Rs. 55,48,01,688/- on account of excess payment of sugarcane price.

The procedural backdrop is critical to understanding the outcome. The ld. CIT(A) [NFAC] had originally passed an order under Section 250 for AY 2010-11 on 16 November 2023. Subsequently, the ld. CIT(A) [NFAC] identified certain mistakes apparent from the record in that original order and, after affording an opportunity to the assessee, passed the impugned rectification order under Section 154 read with Section 250 on 15 January 2024.

In the meantime, the assessee had independently challenged the original CIT(A) order dated 16 November 2023 before ITAT Pune in ITA No. 1275/PUN/2023. That appeal was heard on 12 January 2024 and the ITAT Pune Bench pronounced its order on 31 January 2024, setting aside the ld. CIT(A)'s order for de novo adjudication. The Departmental Representative for the Revenue, before the Tribunal in the present appeal, agreed with the facts as presented by the assessee's Authorised Representative.

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Issues raised

• Whether the Section 154 rectification order dated 15 January 2024 passed by the ld. CIT(A) [NFAC] could survive, given that the original order it sought to rectify had already been set aside by ITAT Pune on 31 January 2024.
• Whether the doctrine of merger applied — specifically, whether the original CIT(A) order dated 16 November 2023 had merged with the ITAT Pune order dated 31 January 2024, thereby extinguishing the substratum of the rectification proceeding.
• Whether, as a consequence, the present appeal against the Section 154 r.w.s. 250 order had become academic.

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What the court held

The Tribunal allowed the appeal for statistical purposes. The dispositive sentence of the order reads: "In the result, appeal of the assessee is Allowed for statistical purpose."

The Tribunal's reasoning rested on the merger doctrine and the consequent non-existence of the impugned order. The Bench held that the original CIT(A) order dated 16 November 2023 had merged with the ITAT Pune Bench order dated 31 January 2024 (passed in ITA No. 1275/PUN/2023), by which that original order had been set aside for de novo adjudication. Since the Section 154 rectification order dated 15 January 2024 was directed at correcting mistakes in the original CIT(A) order — an order that had by then ceased to independently exist — the rectification order itself became "non-est" in the eyes of law.

The Bench further reasoned that once the substratum order had been set aside and remitted for fresh adjudication, any rectification proceeding building upon that order lost its foundation. The present appeal against the now non-est Section 154 r.w.s. 250 order accordingly became academic in nature, and the Tribunal disposed of it by allowing it for statistical purposes.

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Strategy observations

1. Parallel appeals and prior ITAT disposal: An appeal against the original CIT(A) order dated 16 November 2023 was filed before ITAT Pune (ITA No. 1275/PUN/2023) and was decided on 31 January 2024 — before the present appeal was filed or heard. The prior ITAT order setting aside the CIT(A) order for de novo adjudication was the operative fact that rendered the Section 154 order non-est.

2. Revenue's concurrence: The ld. Departmental Representative agreed with the factual position advanced by the assessee's Authorised Representative. This concurrence on facts is recorded in the order and likely facilitated the Tribunal's swift disposal.

3. Statistical allowance as a procedural tool: The Tribunal's use of "allowed for statistical purposes" reflects an established ITAT practice for disposing of appeals that have become infructuous or academic — the appeal is formally disposed of in the assessee's favour without adjudicating the merits of the substantive disallowance of Rs. 55,48,01,688/-.

4. Timing of the rectification proceeding relative to the appellate order: The Section 154 order was passed on 15 January 2024; the ITAT order setting aside the original CIT(A) order was pronounced on 31 January 2024. The rectification order thus predated the ITAT order, yet the merger and non-est conclusion still applied because the Tribunal's disposal in the earlier ITA extinguished the foundation of the rectification order.

5. De novo adjudication scope: The matter on the substantive disallowance of excess sugarcane price payment stands remitted to the ld. CIT(A) for fresh adjudication pursuant to the earlier ITAT order in ITA No. 1275/PUN/2023. The present order does not decide those merits.

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Why this case matters

This order is a concise illustration of the principle that a Section 154 rectification proceeding cannot survive the annulment of the order it seeks to correct. Where an appellate authority's order is set aside by a superior forum and merges with that forum's order, any rectification of the set-aside order becomes legally non-est — it corrects something that no longer independently exists. For tax researchers, the case underscores the importance of tracking the status of parallel appellate proceedings when a rectification order under Section 154 is passed; if the underlying order has already been disturbed, the rectification order's validity is immediately in question regardless of whether the rectification itself was procedurally regular.

The order also highlights how the doctrine of merger operates in the ITAT context. Once the CIT(A) order merged with the ITAT's set-aside order in ITA No. 1275/PUN/2023, the CIT(A) ceased to have a standalone order capable of being rectified. This sequencing issue — where rectification and appellate proceedings run concurrently — is a recurring feature of litigation involving NFAC orders, where high volumes of matters and staggered hearing dates can create precisely this kind of procedural overlap.

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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/