OCEAN SPARKLE LIMITED, HYDERABAD,HYDERABAD vs. ACIT, CIRCLE-16(2), HYDERABAD, HYDERABAD

Brief facts of the case are that the assessee is engaged in the business of O & M of ports and marine services, filed its return of income admitting total income of Rs.10,16,37,986/- under normal provisions after claiming deduction u/s 80IA amounting to Rs. 2,12,27,868/- and book profit u/s 115JB at Rs. 21,01,79,679/-. Assessment was completed u/s 143(3) of the Act by determining total taxable income at Rs. 12,29,39,428/-. Subsequently, the Commissioner, by exercising the power u/s 263 of the Act, issued a show cause notice and after receiving reply from the assessee, the Commissioner came to a conclusion that the assessment order passed by the AO dated 26/12/2012 is erroneous and prejudicial to the interest of Revenue and directed the AO to re-do the assessment afresh de novo in accordance with law. Subsequently, the AO passed assessment order u/s 143(3) r.w.s 263 of the IT Act, 1961 dated 30/06/2015 by making various additions.

Aggrieved, assessee carried the matter in appeal before the CIT (A), who dismissed the appeal and observed that the Commissioner of Income Tax (Appeals) and Commissioner of Income Tax are the equal authorities, and the AO has passed the assessment order consequent to the order passed by the Commissioner u/s 263 of the Act and therefore, the appeal filed by the assessee is not maintainable. Aggrieved, assessee is in further appeal before the Tribunal by raising the above mentioned grounds of appeal.

Before us, Learned Counsel for the assessee submitted that the Commissioner passed order u/s 263 of the Act and directed the AO to pass assessment order de novo in accordance with law after giving an opportunity of being heard to the assessee. Accordingly, the AO passed the assessment order u/s 143(3) r.w.s 263 by making various additions and therefore, the appeal is maintainable and the CIT (A) ought to have adjudicated the appeal on merits. He prayed that the order passed by the CIT (A) may be set-aside and he may be directed to adjudicate the appeal on merits.

On the other hand, learned Departmental Representative has not raised any objection to the Ld AR’s submissions.

We have heard both the parties and perused the material available on record. We find that the Commissioner while passing the order u/s 263 of the Act, directed the AO to re-do the assessment de novo after giving an opportunity to the assessee. Subsequently, the Assessing Officer passed the order u/s 143(3) r.w.s 263 of the Act dated 30/06/2015 by making certain additions. Assessee carried the matter in appeal before the CIT (A), who dismissed the appeal by observing that the Commissioner of Income Tax and the Commissioner of Income Tax (Appeals) are the equal authorities and therefore, an appeal against the assessment completed as per the directions of the Commissioner of Income Tax u/s 263 of the Act could not be decided by the Commissioner of Income Tax (Appeals). We find that when the AO has passed the assessment order u/s 143(3) r.w.s 263 on merits of the case, it is the duty of the CIT (A) to adjudicate the appeal on merits and in accordance with law. Therefore, in our opinion, the CIT (A) is not correct in dismissing the appeal of the assessee. Thus, we set-aside the order of the CIT (A) and direct the CIT (A) to adjudicate the appeal on merits, in accordance with law after giving a reasonable opportunity of being heard to the asssessee in accordance with law. Thus, the grounds of appeal raised by the assessee are allowed for statistical purposes.

In the result, appeal filed by the assessee is allowed for statistical purposes.