MR. CHANDANMAL NAGARAJ,CHENNAI vs. ACIT, NCC-4(1), CHENNAI

Briefly the facts of the case are that the assessee is an Individual engaged in the business of trading in stainless steel pipes, rods etc, under the name and style of Manoj Metals. The Return of Income for the Assessment Year 2017-18 was filed on 21.03.2018 disclosing total income of Rs.14,37,640/-. Against the said return of income, assessment was completed by ACIT, Non-Corporate Circle-4(1), Chennai (hereinafter called ‘AO’) vide order dated 31.12.2019 passed u/s.143(3) of the Income Tax Act, 1961 at a total income of Rs.7,88,19,828/-. While doing so, the Assessing Officer observed that during the previous year relevant to assessment year under consideration, the appellant made following payment towards purchase of materials : Ganapathy Trading - Rs.95,10,000/- Rohit Enterprises - Rs.2,16,60,000/- Geet Trading - Rs.3,12,36,000/- Gooluck International - Rs.2,17,19,000/-

However, it was found by the Assessing Officer that on perusal of purchase register, no purchases were made from the above parties to the extent of Rs.7,73,82,188/- made addition of the same as unexplained expenditure.

Being aggrieved by the above assessment order, an appeal was filed before the ld.CIT(A) who vide impugned order allowed the appeal by accepting the submissions of the appellant that the payments to the above parties were made not towards purchases for the current year, but for the purchases of earlier years and the current year purchases wee made from the parties of Raj Enterprises, MTC Enterprises and Yogesh Agencies and Geetha Trading Company. Further, the ld.CIT(A) proceeded to hold that all the impugned payments of the above parties had been made through banking channel and the same had been reflected in the books of accounts of appellant and therefore the question of addition u/s.69C does not arise, accordingly directed the assessing Officer to delete the addition. However, the ld.CIT(A)was of the opinion that the purchases made from the above parties during the previous year relevant to Assessment Year 2016-17 and 2015-16 were not genuine and requires verification and therefore directed the Assessing Officer to reopen assessments for A.Y.2015-16 and A.Y.2016-17 u/s.150 of the Act.

Being aggrieved by this part of the order, the appellant is in appeal before us in the present appeal. The ld.Counsel submits that the directions of the ld.CIT(A) to reopen the assessment for the A.Y.2015-16 and A.Y.2016-17 is contrary to the plain provisions of section 150 of the Act as the ld.CIT(A) cannot give a direction to reopen the assessments in respect of those assessment years which had become time barred and in this direction, he relied on the decision of Hon’ble Supreme Court in the case of K.M.Sharma Vs. ITO [2002] 254 ITR 772 (SC), Hon’ble Madras High Court in the case of CIT Vs. Vellore Technical Corporation Limited 287 ITR 50 and the Hon’ble Bombay High Court in the case of Lotus Investments Ltd., vs. G.Y.Wagh, ACIT & Ors 288 ITR 459 (Bom).

On the other hand, the ld.CIT-DR opposed the above submission and submits that the direction of the ld.CIT(A) had no impact for the assessment year consideration, therefore, the appeal is not maintainable.

We heard rival submissions and perused the material available on record. The issue that arises for our consideration is with regard to correctness of the finding given by the ld.CIT(A) directing the Assessing Officer to reopen the assessment for the A.Y.2015-16 and A.Y.2016-17 in order to verify the genuineness of purchases made. Undoubtedly, these directions does not pertain to the assessment year under consideration. Therefore, the issue that arises for our consideration is whether the ld.CIT(A) was empowered to give direction which does not relate to the particular assessment year. When appeal relates to a particular assessment year, the findings and direction must necessarily be limited to that particular year. The ld.CIT(A) has no jurisdiction to give direction with regard to the proceedings of the earlier years. In other words, the ld.CIT(A) cannot travel outside the scope of appeal and purport to give a direction beyond the assessment year under consideration.

Therefore, in the light of above findings, we consider it unnecessary to go into validity of the reopening of the assessments for the A.Y.2015-16 and A.Y.2016-17. Therefore, the directions of the ld.CIT(A) contained in this para no.6.4 as “the AO is directed to reopen the case of the appellant for AY 2015-16 & 2016-17 u/s 150 of the Act to verify the genuineness of the purchases made from the above-mentioned parties during the FY 2014-15 & 2015-16 and if the said transactions is found to be not genuine, the resultant suppressed income may be brought tax accordingly”. The above direction of ld.CIT(A) are hereby stands expunged.

In the result, appeal of the assessee stands allowed in the above terms. Order pronounced in the open Court on 30th April, 2026. (INTURI RAMA RAO) ACCOUNTANT MEMBER Chennai; "दनांक / Dated : 30th April, 2026 SGR, Sr.PS आदेश क" ""त"ल"प अ"े"षत / Copy of the Order forwarded to : अपीलाथ" / The Appellant.