Commissioner Income Tax (Appeals) cannot adjudicate issues already deleted by Assessing Officer in rectification order under section 154

 In a recent and noteworthy ruling, the Hon’ble Delhi Income Tax Appellate Tribunal has provided important clarity on the scope of appellate jurisdiction where an addition has already been removed by the Assessing Officer through rectification under section 154 of the Income-tax Act, 1961 (‘the Act’). The Tribunal has categorically held that once an addition no longer survives in the assessment by virtue of a rectification order, the Commissioner (Appeals) cannot adjudicate upon that issue, as there remains no subsisting subject matter for appeal.

In the facts of the case, the Assessing Officer had originally made an addition while completing the assessment. Subsequently, the assessee filed an application under section 154 pointing out an apparent mistake in the assessment order & an appeal before the CIT(A) regarding the same matter. After examining the issue, the AO accepted the assessee’s contention and passed a rectification order deleting the entire addition. This rectification order was validly passed, remained operative on record, and effectively modified the assessment itself. Despite this position, the CIT(A) proceeded to examine the merits of the very same addition and issued directions, proceeding on the footing that the issue continued to exist. The assessee challenged this approach before the Tribunal.

Allowing the appeal, the ITAT set aside the order of the CIT(A). The Tribunal observed that a rectification under section 154, once validly made, becomes an integral part of the assessment and alters its legal character. Once the Assessing Officer has himself removed an addition, the appeal on that issue becomes infructuous and academic. The appellate authority cannot disregard the legal effect of the rectification order and revive an issue that has already been resolved at the assessment stage, whether directly or indirectly through observations or directions. The Tribunal further clarified that if the Revenue is aggrieved by the rectification order passed by the AO, the Act provides specific remedies to challenge such rectification in accordance with law. However, the Commissioner (Appeals) cannot assume jurisdiction over an issue that has ceased to exist in the assessment merely because an appeal was originally filed.

This ruling operates as a meaningful procedural safeguard for taxpayers. It reinforces that appellate proceedings are intended to address only live and subsisting disputes, and not issues that stand concluded due to rectification by the Assessing Officer. In an environment increasingly driven by tight timelines and automated processes, the decision serves as a reminder that statutory consequences flowing from rectification orders must be fully recognised and respected by appellate authorities.