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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-3’ NEW DELHI
Before: SMT DIVA SINGH
The present appeal has been filed by the assessee assailing the correctness of the order dated 14.11.2014 of CIT(A)-III, New Delhi pertaining to 2010-11 assessment year wherein various grounds have been raised by the assessee in the present appeal including Ground No.7 assailing the enhancement made by the CIT(A).
The relevant facts qua the grounds raised in the present appeal are that the AO invoking Rule 8D made additions by way of disallowances u/s 14A totaling to Rs. 16,37,007/-. These additions were confirmed in appeal by the CIT(A) relying upon the view taken in the earlier years. The Ld.AR submitted that the addition was challenged in appeal and the CIT(A) apart from sustaining the addition further enhanced the additions made by the AO without issuing a show cause notice for enhancement. The said fact was not disputed by the Revenue.
Both the parties have been heard. A perusal of the impugned order shows that no notice was issued to the assessee by the CIT(A) before the I.T.A .No.-6595/Del/2014 enhancement. Considering this obvious and patent shortcoming in the impugned order, the impugned order is set aside and the issue is restored back to the file of the CIT(A) with the direction to pass a speaking order in accordance with law. It would be appropriate to extract Section 251 of the Income Tax Act, 1961 which sets out the Powers of the Commissioner (Appeals). The same is reproduced hereunder for ready-reference:-
Powers of the Commissioner (Appeals). 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit.
(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.” (emphasis provided)
A perusal of the above would show that incase while deciding the appeal, the CIT(A) exercising the power vested in him u/s 251(1) proposes to enhance the assessment then in terms of sub-section (2) of section 251 the Statute mandates that he is required to show cause why enhancement should not be carried out and provide a reasonable opportunity to the assessee for addressing
I.T.A .No.-6595/Del/2014 the same. We find that the said exercise is missing in the facts of the present case. Thus, we make it clear that Incase any enhancement is proposed by the CIT(A) then as per accepted legal standards to which the CIT(A) is expected to adhere to a specific show cause notice putting the assessee to notice of the reasons for contemplating enhancement. The assessee’s explanation if offered to the show cause notice is necessarily required to be addressed and thereafter the CIT(A) is required to pass a speaking order in accordance with law justifying the reason to agree/disagree or partially agree with the explanation offered. In the absence of any such exercise the impugned order cannot be sustained as the procedure followed by the CIT(A) is not in conformity with the Statutory mandate. The impugned order is accordingly set aside. The remaining issues addressing the addition made at the assessment stage since is linked to the very same income. Accordingly, no comment on the correctness of the same is being made at this stage and issues are restored back to the CIT(A) with a direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. The said order was pronounced in the open Court at the time of hearing in the presence of the parties.
In the result the appeal of the assessee is allowed for statistical purposes.