S R NANDAKISHORE,CHENNAI vs. ACIT NON CORP CIRCLE 23, TAMBARAM

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-10, Chennai dated 27.03.2018 relevant to the assessment year 2009-10.

Brief facts of the case are that the assessee has filed his return of income for the assessment year 2009-10 on 31.10.2009 by declaring total income of ₹.1,07,35,030/-. The Assessing Officer accepted the income returned by the assessee. Subsequently, the ld. CIT, by exercising power conferred under section 263 of the Income Tax Act, 1961 [“Act” in short], directed the Assessing Officer to redo the assessment in accordance with law on the ground that no proper enquiry was made by revision order dated 21.03.2014. Against the order passed by the ld. CIT under section 263 of the Act, the assesse filed an appeal before the ITAT and vide order dated 19.08.2015 in the ITAT dismissed the appeal of the assessee on the ground that the ld. CIT by order dated 21.03.2014 only directed the Assessing Officer to redo the assessment in accordance with law and therefore, there was no error in the order passed by the ld. CIT. Subsequently, the Assessing Officer completed the assessment under section 143(3) r.w.s. 263 of the Act vide order dated 31.03.2015 by taxing the income under the head of business as against the claim of income from capital gains. The assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT(A), by order dated 27.03.2018, dismissed the appeal of the assessee by observing as under: “5.3 CIT(A)’s remarks and decision: I have gone through the facts of the case, observation of the AO and the AR’s contentions. It is also brought on the record that the Hon’ble ITAT, Chennai vide its order dated 19/8/2015 has confirmed the order passed u/s. 263 of the IT Act by the Commissioner of Income Tax-VII, Chennai on 21/3/2014 for the relevant Assessment Year 2009-10. 4.3.1 In the light of the above, the AO’s action in passing the order u/s. 143(3) r.w.s. 263 dated 31/3/2015 is in order and needs no interference.”

On being aggrieved, the assessee carried the matter in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the ITAT has not given any findings consequent to the order passed by the ld. CIT and the ld. CIT also directed the Assessing Officer to redo the assessment. When the Assessing Officer completed the assessment consequent to the order passed by the ld. CIT, it is open to the assessee to challenge that order before the ld. CIT(A) and the ld. CIT(A) has to pass order on merits. Without passing order on merits, the ld. CIT(A) simply dismissed the appeal of the assessee on the ground that the ITAT has confirmed the order of the ld. CIT under section 263 of the Act is not valid. On the other hand, the ld. DR dutifully relied on the order passed by the authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee has filed his return of income by declaring capital gains. The Assessing Officer completed the assessment under section 143(3) of the Act by accepting the return filed by the assessee. Subsequently, the ld. CIT, by exercising the power conferred under section 263 of the Act was of the opinion that the Assessing Officer, without making necessary enquiry, accepted the return filed by the assessee and thus, directed the Assessing Officer to redo the assessment in accordance with law. The same was challenged by the assessee before the ITAT and the ITAT dismissed the appeal of the assessee on the ground that the ld. CIT has only directed to redo the assessment and therefore, no injustice was caused to the assessee. Subsequently, the Assessing Officer, by order dated 31.03.2015 passed an order under section 143(3) r.w.s. 263 of the Act and taxed the entire income of the assessee under business income as against the claim of the assessee under income from capital gains. On appeal, the ld. CIT(A) simply dismissed the appeal without considering merits of the case on the ground that the appeal carried by the assessee against the order passed by the ld. CIT was confirmed by the ITAT. The ld. CIT(A) misunderstood the order passed by the ITAT in dated 19.08.2015. Once the ld. CIT directed the Assessing Officer to redo the assessment means, it is open to the assessee to challenge the order before any appellate authority. Thus, the ld. CIT(A) is under obligation to pass order by considering merits of the case. In view of the above, the order passed by the ld. CIT(A) is set aside and remit the matter back to the file of the ld. CIT(A) to adjudicate the appeal on merits in accordance with law by affording an opportunity of being heard to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 15th December, 2021.