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Income Tax Appellate Tribunal, DELHI BENCH ‘C’ : NEW DELHI
Before: SHRI N.K. BILLAIYA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, M/s. Globe Agencies (hereinafter referred to as ‘the assessee’) by filing the present appeal sought to set aside the impugned order dated 20.09.2017 passed by the Commissioner of Income-tax (Appeals)-25, New Delhi under section 154/143(3) of the Income-tax Act, 1961 (for short ‘the Act’) on the grounds inter alia that :-
“On the facts and in the circumstances of the case, the CIT(A) has erred both on facts and in law, in exceeding his jurisdiction and directing the AO to take action u/s 147/148 read with the provisions of section 150 of the Income Tax Act, 1961 which is beyond the scope of the statutory powers and provisions and hence, the direction should be deleted by expunging the same.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessment in this case was framed u/s 143(3) of the Act by the Assessing Officer (AO) vide order dated 28.02.2013 by making disallowances of Rs.29,62,490/-. However, thereafter, AO by invoking the provisions contained u/s 154/143(3) of the Act rectified the assessment order dated 28.02.2013 by making disallowances of Rs.44,00,000/- on account of salary paid to the partner and assessed the total income at Rs.73,62,490/-.
Assessee carried the matter before the ld. CIT (A) by way of filing an appeal against the order u/s 154/143(3) of the Act who has allowed the appeal but given direction to the AO to proceed against the assessee u/s 147/148 read with section 150 of the Act. Feeling aggrieved by the directions issued by the ld. CIT (A), the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
From the facts narrated above, the sole question arises for determination in this case is :-
“as to whether ld. CIT (A) has erred on law and facts by exceeding statutory powers in directing the AO to proceed u/s 147/148 read with section 150 of the Act against the assessee?”
Ld. AR for the assessee challenging the impugned order contended that ld. CIT (A) has no statutory power to issue directions to the AO to proceed u/s 147/148 of the Act and relied upon the order passed by Hon’ble Allahabad High Court in case of CIT vs. Atul Engg. Udyog TC-609-HC-2014(All.) and order passed by coordinate Bench of the Tribunal in case of M/s. GI Power Corporation Ltd. vs. DCIT in for AY 2007-08 order dated 23.03.2016.
However, on the other hand, ld. DR for the Revenue relied upon the order passed by the ld. CIT (A).
For ready perusal, directions issued by the ld. CIT (A) are extracted as under :-
“8.7 In the instant case, it is quite clear that the nature of the income involved i.e. the allowance of expenditure of RS.44,00,000/- towards salary to partners was not, in the facts and circumstances of the case, a mistake which was to be rectified u/s 154. Hence the action of the Assessing Officer of reassessing the Income of the Appellant Firm u/s 154/143(3) by adding the amount of Rs.44,00,000/- cannot be approved. Accordingly, the addition of Rs.44,00,000/- is hereby deleted. However, in view of the fact that the expenditure of Rs.44,00,000/- claimed by the appellant as salary to partners was not allowable, particularly in view of the partnership deed dated 01.04.92, the Assessing Officer is hereby directed to take action u/s 147/148 read with the provisions of section 150 of the Income Tax Act, 1961.”
Bare perusal of the directions issued by the ld. CIT (A) goes to show that when ld. CIT (A) has exercised his statutory power in deciding the issue raised by the assessee he has no power to issue directions to the AO to proceed against the assessee u/s 147/148 of the Act. Because a cursory reading of sections 147/148 of the Act makes it clear that power u/ss 147/148 conferred by the Act on AO are to be used by him independently only if he has reason to believe that any income and also other income chargeable to tax has escaped assessment for the year under consideration.
AO is not obliged to proceed on the basis of directions issued by his higher authority which would otherwise amounts to borrowed satisfaction. So, the directions issued by ld. CIT (A) are beyond his power conferred by section 250 of the Act.
Hon’ble Delhi High Court in case of Banwari Lal & Sons (2002) 254 ITR 518 (Del.) while deciding the identical issue held that, “the appellate authority cannot extend the statutory time limit for reassessment by issuing suo motu directions illegally or unrelated to the subject matter of the appeal being decided by the ld. CIT (A) against the impugned order of rectification.”
In view of what has been discussed above, since ld. CIT (A) being a statutory authority has no power to exceed his jurisdiction beyond the subject matter of the appeal being decided by him against the impugned order of rectification, the directions issued by him are not sustainable, hence set aside. However, concerned AO is at liberty to proceed against the assessee if so desires only in accordance with the provisions contained u/s 147/148 of the Act. Resultantly, the appeal filed by the assessee is hereby allowed. Order pronounced in open court on this 26th day of November, 2021.