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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI B R BASKARAN
Per N.V. Vasudevan, Vice President is an appeal by the assessee against the order dated 28.02.2018 of the CIT(Appeals)-4, Bangalore relating to assessment year 2009-10 arising out of an order passed by the AO u/s. 154 of the Income-tax Act, 1961 [the Act] dated 6.4.2017.
& 1455/Bang/2018 Page 2 of 7 2. 28.02.2018 of the CIT(Appeals)-4, Bangalore relating to assessment year 2009-10 which arises out of an order passed by the AO u/s. 154 of the Income-tax Act, 1961 [the Act] dated 28.4.2017.
The facts and circumstances under which these appeals arise for consideration are that the assessee is a partnership firm. The business of assessee was acquiring land and carrying out construction of commercial complexes, shopping malls, residential apartments, etc. For the AY 2009- 10, the assessee filed a return of income in response to notice u/s. 142(1) dated 17.3.2010 declaring total income of Rs.3,42,45,991. The assessee filed a revised return of income on 31.3.2010 declaring total income of Rs.1,27,50,047. An order of assessment dated 17.10.2011 was passed by the ITO, Ward 4(3), Bangalore. The assessee challenged the order of assessment before the CIT(Appeals). By an order dated 17.10.2011 the CIT(Appeals) confirmed the order of AO. The assessee preferred appeal against the order of CIT(A) in ITA No.631/Bang.2013. The Tribunal by its order dated 23.9.2016 held that the ITO, Ward 4(3) did not have jurisdiction over the case of assessee and that the competent Officer was ACIT/DCIT. The order of assessment was set aside and the same was restored back for framing a de novo assessment by a competent Officer being ACIT /DCIT.
Pursuant to the order of Tribunal, the AO i.e., ITO, Ward 4 (3), Bangalore, passed an order dated 17.2.2017 giving effect to the order of the Tribunal dated 23.9.2016 in which he determined the total income of the assessee as per the revised return of income @ Rs.1,27,50,050. By virtue of this order, a refund became payable to the Assessee as per the following calculations: & 1455/Bang/2018 Page 3 of 7 Amount in Rs. Revised income as per OGE to order of 14,99,13,600 CIT(A)-II, Bangalore dated 20.05.2013 Less: Relief allowed by ITAT 13,71,63,550 Total Taxable Income as per the revised 1,27,50,050 return of income filed on 31.3.2010
Tax thereon 38,25,015 Add : Surcharge 10% 3,82,502 Add : Educational Cess @ 3% 1,26,226 Total Tax Payable 43,33,743 Add: Interest 234A 2,60,025 Interest 234B 5,20,050 Interest 234C 1,60,348 9,40,423 Total Tax and Interest payable 52,74,166 Less: Tax paid 1,00,00,950 Balance refundable 47,26,784 Add: Interest u/s. 24A 13,86,268 61,13,052 Total tax and interest refundable 61,13,050 Rounded off u/s. 288B 5. The AO thereafter passed an order u/s. 154 of the Act dated 6.4.2017 in and by which he observed that as per the CBDT Instruction No.1725 dated 22.8.2016 whereby the CBDT has laid down that if an assessment is set aside for being done afresh, the demand relating to the point on which the assessment has been remanded should not be enforced, but should be kept in abeyance, till fresh orders on the points are passed. The AO therefore modified the order giving effect to the order of the Tribunal passed by him on 17.2.2017 by observing that the demand raised pursuant to the order giving effect should be kept in abeyance till the assessment is completed by a competent Officer as per the directions of the Tribunal. The Officer passed this order because as we have already observed, by virtue of order dated 17.2.2017, a refund was to be issued to the assessee and with a view to ensure that refund is not issued to the Assessee.
The AO again issued another notice u/s. 154 of the Act by an order dated 28.4.2017 whereby the AO rectified the order dated 6.4.2017 working out the outstanding demand as follows:-
Income Assessed as per Assessment Order dated 26.12.2011 18,87,86,930 Less: Relief allowed by CIT(A)-II, vide order dated 14.03.2013 3,88,73,330 Total Taxable income 14,99,13,600 Tax thereon 4,49,74,080 Add: Surcharge @ 10% 44,97,408 Education cess @ 3% 14,84,145/- 59,81,553 Total tax payable 5,09,55,633 Interest* 234A 30,57,336 234B 1,54,96,205 234C 1,60,348 Total Interest 1,87,13,889 Less: Tax Collected 1,00,00950 Balance Tax Collectible 5,96,68,572 * Interest computed only till 26.12.2013 7. This order is based on the computation after giving effect to CIT(A)’s order dated 14.3.2013. The reason given for passing this order was that the demand as determined in the order dated 6.4.2017 was incorrect and hence was being rectified by order dated 28.4.2017.
Aggrieved by the two orders passed u/s. 154 of the Act dated 6.4.2017 and 28.4.2017, the assessee filed two appeals before the CIT(Appeals). The CIT(A) dismissed both the appeals holding that the order of AO was legally and factually correct. Aggrieved by the aforesaid orders, the assessee has preferred the present appeals before the Tribunal.
We have heard the rival submissions. In both the impugned orders passed u/s. 154 of the Act, the revenue has relied on the CBDT Circular No.1725 dated 22.8.2016 of the CBDT which reads as follows:- & 1455/Bang/2018 Page 5 of 7 “Instruction No: 1725 Date of Issue: 22/8/1986 Allahabad and Andhra Pradesh High Courts have in their judgements in CIT Vs. Bandaru Sanyasi Raju (1981) 127 ITR 453 (AP) and S.P. Kocher Vs. ITO (1984) 145 ITR 255 (Alld) held that first appellate authorities have power to set aside assessments partially by deciding some of the points in appeal before them and remanding the case to the assessing officer for fresh assessment on other points.
It is found that in giving appeal effect to such appellate orders as partially set aside assessment orders different practices are followed in different charges. After considering various practices being followed in different charges, the Board has decided that in giving effect to such appellate orders, the original order should be revised as per appellate order in respect of the points which are decided in the appellate order. In regards to points on which the assessment has been remanded for fresh order, the amount as originally assessed may be included and the demand be raised accordingly subject to rectification on completion of fresh assessment on those points. The demand relating to the points on which the assessments has been remanded should not be enforced and should be kept in abeyance tilt the fresh order on those points is passed and the demand is rectified accordingly.
The Board desires that this practice should be uniformly followed in all charges.”
A bare perusal of the aforesaid Instruction would show that it is only applicable to order giving effect to the order of the first appellate authority viz., the CIT(Appeals). By virtue of amendment to the provisions of section 251 of the Act w.e.f. 1.6.2001, the first appellate authority does not have any power to set aside an assessment or issue for consideration by the AO. Hence, as rightly contended by the assessee, the aforesaid Instruction cannot be the basis for passing the impugned orders.
Secondly, the Tribunal vide order dated 28.3.2016 in has held that the assessment order framed by the ITO is not valid and that the assessment has to be framed de novo by a & 1455/Bang/2018 Page 6 of 7 competent Officer either ACIT/DCIT. By virtue of this order of Tribunal, the order of the AO which is sought to be rectified in the proceedings u/s. 154 of the Act is no longer in existence and even on this ground, the proceedings u/s. 154 of the Act are thoroughly misconceived, and in our view, deserves to be quashed.
Thirdly, it was also brought to our notice by the ld. counsel for the assessee that pursuant to the order of the Tribunal, the ACIT, Circle 4(3)(1), Bangalore has passed an order u/s. 254 of the Act r.w.s. 143(3) dated 30.12.2017 determining the total income of assessee at Rs.18,87,86,930. By virtue of this order of assessment, the previous determination of total income and tax payable no longer survives and therefore the orders passed u/s. 154 of the Act are purely academic. The assessee has already filed an appeal against the order dated 30.12.2017 and the same is stated to be pending for adjudication before the first appellate authority.
In the circumstances, we are of the view that the orders passed u/s. 154 of the Act are required to be quashed and are accordingly quashed.
In the result, both the appeals are allowed.
Pronounced in the open court on this 10th day of June, 2020.