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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Shri P.M.Jagtap, AM & Sri N.V.Vasudevan, JM ]
Per Bench These are two appeals by two Assessees against two different orders both dated 29.5.2015 of the CIT(A)-4, Kolkata, relating to AY 2008-09. The issues that arise for consideration in both these appeals are identical and arise under identical facts and circumstances. They were heard together. We deem it convenient to pass a common order.
2. We shall take up for consideration because in the order of CIT(A) which is challenged in this appeal by the Assessee, the CIT(A) has passed a detailed order and he has merely relied on the said order while deciding the appeal of the Assessee in ITA No.975/Kol/2015. The facts and circumstances giving rise to the appeal by the Assessee in ITA No.976/Kol/2015 are that the Assessee is a company. The Assessee filed return of income for AY 2008-09 on 28.7.2008 declaring a total income of Nil. The same was processed u/s.143(1) of the Income Tax Act, 1961 ITA Nos.975&976/Kol/2015- Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 1 (Act). Subsequently notice u/s.148 of the Act was issued on 18.3.2010 on the basis of information that income under the head “Consultancy Fees” to the tune of Rs.35,000/- during the FY 2007-08 had escaped assessment. An order of assessment u/s.147/143(3) of the Act was passed on 9.4.2010 by the Assessing Officer, determining the total income of the Assessee at Rs.48,620/- after adding to the loss as per profit and loss account of Rs.6776 a sum of Rs.20,400 being prelimnary expenses for issue of share capital, which was treated as capital expenditure by the AO and a sum of Rs.35,000/- which was consultancy fees which was not offered to tax in the original return of income.
The address of the Office as per the records of the AO was No.164, M.G.Road, Kolkata-7. On 13th March, 2010, the registered office of the Assessee was changed to No.3, Queens Park, Kolkata-19. The Assessee had filed the requisite forms with the Registrar of Companies on 15.3.2010 regarding change of address. It had also applied for change of address in the PAN details to the Income Tax Department and vide intimation dated 31.1.2011, the change in address was recognised in the PAN details and intimation to the Assessee was sent at the new address. The Assessee had also filed returns for AY 2011-12 and subsequent years showing the changed address. The income tax department also sent intimations, refunds orders etc., at the changed address for AY 2011-12 onwards at the new address. In fact the AO himself had written letter to the Assessee on 7.9.2011 at its new address for payment of advance tax for AY 2012-13.
4. While so, the Assessee received intimation from the income tax department in which the Assessee was informed that refund due for AY 2012-13 was adjusted u/s.245 of the Act against the outstanding demand relating to AY 2008-09 vide order dated 31.3.2014 passed for that year. The Assessee did not receive any such order and therefore wrote to the AO on 8.9.2014 enquiring as to what was the outstanding demand for AY 2008-09 and out of what order it arose. Thereafter Directors of the Assessee were served a notice at new address dated 19.9.2014 informing them about the non-payment of outstanding demand for AY 2008-09. &976/Kol/2015- Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 2
Thereupon the Assessee wrote a letter to the AO dated 28.10.2014 requesting the AO to serve all the orders and notices of demand relating to AY 2008-09, if any, to enable the Assessee file appeal. By letter dated 3.11.2014, which was received by the Assessee on 11.11.2014, the AO served an order of assessment dated 31.3.2014 as well as orders of penalty u/s.271(1)(b) and (c) of the Act. In the said letter the AO informed the Assessee that the assessment order along with demand notice were served at 164, M.G.Road, Kolkata-7. The Assessee was also informed by the said letter that the order of assessment dated 9.4.2010 passed u/s.147/143(3) of the Act by the AO determining the total income of the Assessee at Rs.48,620/- was revised by the CIT in exercise of his powers u/s.263 of the Act vide order dated 22.3.2013 on the ground that the Assessee had received Share capital to the tune of Rs.2,05,28,201/- and that the AO did not make proper enquiries with regard to the identity and creditworthiness of the shareholders and therefore the order of the AO was erroneous and prejudicial to the interest of the revenue. By the said order dated 22.3.2013, the AO was directed to make the required investigation and enquiries with regard to the identity and creditworthiness of the shareholders. The Assessee was informed by the said letter dated 3.11.2014 that pursuant to the aforesaid directions, the AO took up the Assessment of the Assessee. The AO passed an order dated 31.3.2014 u/s.144/263/147/143(3) of the Act. The said order passed by the AO was an ex-parte order and the service of notice on the Assessee as stated in this order was as follows:
“…..Accordingly, the case was refixed for hearing on 21.11.20`13 through this office letter dated 7.11.2013 but the said letter came back unserved on 21.11.2013. Subsequently, a notice u/s.142(1) was issued on 10.02.2014 calling for, inter alia, details of shareholders on 20.2.2014. But, the said notice also came back unserved on 17.02.2014. Further, summons u/s.131 were also issued by speed post on 27.02.2014 to the two directors of the company, fixing the hearing on 10.03.2014. But, no compliance was made. Ultimately, the notice u/s.142(1) was served by affixation through the departmental inspector. Since there was no compliance on the part of the Assessee, the identity as well as the creditworthiness of the persons shown as shareholders of the Assessee company remained unverifiable.”…..
&976/Kol/2015- Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 3 Subsequently an order imposing penalty u/s.271(1)( c) and Sec.271(1)(b) of the Act was also passed and notice of hearing prior to passing of those orders were also issued and served by affixation by the Inspector of income tax. A copy of the order of assessment dated 31.3.2014 and orders imposing penalty u/s.271(1)( c) and 271(1)(b) of the Act, were also served on the Assessee alongwith the letter dated 3.11.2014 sent by the AO to the Assessee. However the order passed u/s.263 of the Act dated 22.3.2013 was not served on the Assessee by the AO. The address at which notices were sent in all these proceedings which were concluded ex-parte and the address at which orders were sought to be served in all the above proceedings was at No.164, M.G.Road, Kolkata-7.
6. It is the plea of the Assessee that it was only on receipt of the letter dated 3.11.2014 issued by the AO that he came to know about the ex-parte order dated 22.3.2013 passed by the CIT u/s.263 of the Act, the ex-parte order of assessment dated 31.3.2014 passed by the AO pursuant to the order dated 22.3.2013. Thereupon the Assessee filed an appeal before the first appellate authority viz., CIT(A) against the order of assessment dated 31.3.2014 passed by the AO. The CIT(A) admitted the appeal of the Assessee as one filed within the period of limitation from the date of receipt of the order dated 31.3.2014 by the Assessee which was received by the Assessee only on 11.11.2014.
7. The Assessee contended before CIT(A) that the address of the Assessee was changed from 2010 and the same was within the knowledge of the Assessing Officer as intimated to the Assessee in January 2011 and also by the fact that the Return for the assessment years 2011-12 onwards were filed wherein the current address of the appellant was reflected. The Assessee pointed out that the AO himself wrote a letter to the Assessee at new address on 7.9.2011. It was submitted that if the AO did not know in February 2014 who are the Directors of the Assessee then the AO would not have served notice in September 2014 to the present Directors informing them about non- payment of the outstanding demand. It was submitted that notice under section 263 of the Act, order under section 263 of the Act, notice under section 142(1) and 143(2) of Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 4 the Act as well as the order of Assessment and orders of penalty were issued at a wrong address and never served on the Assessee in spite of the AO fully knowing about the change in its address. It was submitted that the Assessing Officer erred in addition of income on the basis of an ex-parte order passed by him. The Assessee did not receive any notice in respect of the hearing. Though there is no finding in the order that there are any inaccurate particulars of the income on the part of the Assessee, all the details and evidences in connection with bonafide claim by the Assessee were disclosed in the course of the original/re-opened assessment proceeding and there was no material whatsoever on the basis of which addition to total income could have been made by the AO and order dated 31.03.2014 is not justified on the facts and circumstances of the case. It was therefore prayed that the order u/s 144/263/147/143(3) dated 31.03.2014 be declared as illegal, ab-initio void and is liable to be cancelled.
The CIT(A) formulated the following points for determination by him: “6.1. Upon going through the Grounds of Appeal
, the Points for Determination arising are : A. Validity of the fresh assessment made [pursuant to the revision order u/s 263]: Grounds No.1,2, 3 and 5. B.Validity of the revision order u/s 263: Ground No.4. C. On the merits of the addition made at Rs.2,05,00,000/- claimed as being share application-cum-premium moneys received: Grounds No.6 and 7.”
9. The CIT(A) gave the following findings on the knowledge of the AO and CIT about change of address. “7.11. I have considered the issue. Strictly on the ‘service ‘point, even so there is dichotomy. Technically taking all components of the Income tax Department including the outsourced service agencies for PAN, the appellant having intimated the PAN Services, it may be said that the appellant had informed the Department. But this is also rather stretching the assumption too far to just simply assume that the AO will also have been duly informed. What ultimately matters is that the AO should be informed. In fact in the provisions of the concerned section dealing with PAN - section 139A - all the provisions mention the Assessing Officer only. And specifically it is laid down at clause (d) to sub- section (5) to section 139A that: (5) Every person shall - (a) . ............. (b) . ............. (c) . .......... Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 5
(d) intimate the Assessing Officer any change in his address or ............• Thus therefore, the intimation of change in address should have primarily been made to the AO, and then also to the PAN Services. After all now in this e-world and vast internet databases, it is just not humanly possible for an AO to be aware of any change in the e-databases, Intimating the AO is the correct intimation as per the statute. Having said so, even so I observe in the assessment records that the Postal authorities upon the envelopes returned have remarked as "Addressee Moved". So, it should have struck the AO to check from the PAN Database, or, from the AR/person who had attended in the earlier assessment or to resort to sections 283, 284 to serve on the principal officer /member. It is also not the case where deeming provisions of section 292BB could be invoked - for there was no appearance at all. Thus on this issue of whether there was valid service of notice, the appellant having not intimated to the AO the change in address as required by law u/s 139A(5)(d), thus it cannot be fully taken that the appellant had duly intimated as required under the Act. The PAN Services per se is not the Department - it is only an outsourcing service agency. At the same time though, the Act specifically mentions that the notice for assessment 'shall be served on the .assessee' - which has not been the case here. So, impasse!! - which now requires that the episode be considered in entirety.”
At end of page-16 of his order the CIT(A) agreed that notice in proceedings u/s.263 of the Act as well as in the proceedings relating to the fresh assessment were not served on the Assessee. The following were his findings in this regard:
But I would not like to extend to assume that the notices u/s.263 and for the fresh assessment were serve- else everything will become matter of assumptions only.
On the other aspects of the appeal, the CIT(A) reached the following conclusion: 7.21. Now back to our case here, to sum up the facts and features: A. The appellant has not appealed against the revision order u/s 263, and it has stated that it is not contemplating to do so. The show cause notice for the initiation of the revision proceeding was issued at the same address as has been in the show cause notice for the fresh assessment. The mode to service the notices were identical in both proceedings - first by Post, then, by affixture. B. The appellant's intimation of change of address was not as per statutory requirement u/s 139A(5)(d) - requiring that the assessee shall mandatorily intimate the Assessing Officer.
&976/Kol/2015- Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 6
C. The odd features of the suo-moto intimation by the assessee to the AO enticing to make formal assessment; and thence immediately after completion of the assessment - change of address.
D. Identical like-wise feature in another case (if not maybe more) of another such company at the same address(s).
E. The characteristic financial features in the financial statements - the paltry returned incomes yet heavy Balance Sheets, the instant routing of the purported share capital/ share premium funds to numerous other such private companies, and so on, and so on.
F. No understandable logic as to how unknown just incorporated private companies with no actual business activity, could have garnered to say the least - share-capital; and to say the unbelievable extreme - astronomical premiums. All these features and facts need to be considered. This is not a simpleton case of just change in address - it is a deeply strategised design and network(s).
7.22 Thus returning back to our seemingly simple issue of 'service of notice', on purely technical aspect I therefore hold that the service of notice for the fresh assessment pursuant to the directions in the revision order u/s 263 is per se not invalid for the appellant had not properly intimated the AO of change of address as per specific requirement u/s 139A(5)(d); because the appellant's intimation to the Income Tax PAN Services Unit [managed by NSDL] is intimation to an outsourcing data services agency only. On the other hand, it also is that there had not been 'service' of the notice upon the assessee/appellant. There is thus technical deficiency on both the part of the appellant as also the AO.
Other than the technical aspect, very much hideous design is revealed from the assessment records and the proceedings till before the initiation of the revision proceeding u/s 263.
The appellant has not appealed against the revision order u/s 263, and has intimated that it is not contemplating to appeal. So, what is the grievance left? Thus the only grievance left is for opportunity to be heard at the assessment. Ultimately the harping on 'service' only translates to opportunity to be heard.
I thus would have remitted the matter back to the AO, but the power for CIT(A) to set-aside assessment and direct for fresh assessment is no more there in the statute [section 251(1)(a)] since many years now. Calling for remand report/proceedings by the AO would also not do. This is because at the outset itself - there has, in the strict technical sense, not been service of notice upon the assessee.
Having considered all these aspects, I hold that this appeal though it is presented against assessment order, however the issues encompass much deeper and larger matters, and so I hold that this appeal is in the category as envisaged in clause (d) to sub-section (1) to section 251, which is:
Section 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers - Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 7
(a) .............................. (aa).............................. (b) ................................. (c) in any other case, he may pass such orders in the appeal as he thinks fit. So, having duly considered this impasse, I consider that the solution to both the appellant as also the revenue will be by giving direction u/s 150 to the Assessing Officer to consider for initiation of proceedings u/s 147 and thus issue of notice u/s 148 for this AY 2008-09. This will settle the dispute of service of notice, as well as redress the grievance of opportunity to be heard in the assessment. I further want to clarify here that the limitation period to issue the notice u/s 148 shall not apply in view that the provision of sub-section (2) to the section 150 is not applicable - for, at the relevant time when the impugned assessment which is the subject matter of appeal here, was being made, at that time it was within the limitation period to have initiated proceedings for issue of notice u/s 148. Thus in this appeal, I have adjudicated only on Point for Determination 'A' listed at Para 6 in this order, relating to Grounds of Appeal
I, 2, 3 and 5. As regards Point for determination 'B' - validity of the revision order u/s 263 - it is not competent at this level to adjudicate, and in any case the appellant has not appealed to the ITAT against the revision order u/s 263, nor is it contemplating to do so; and as regards Point for Determination ‘C ‘- on the merits of the additions - as I have invoked to give direction u/s 150 for consideration for the AO to issue of notice u/s 148, the AO will obviously consider the matter after giving opportunity to the appellant as also taking into consideration the observations made in this order and also the observations and guidance given in the order of revision u/s 263. Thus, as regards the impugned assessment order it hereby stands vacated only qua my direction given u/s 150. Thus, the main starting issue which has been harped upon - 'service of notice' - which in effect translates to opportunity to be heard - has been hereby addressed. It will be regularized and settled by my direction u/s 150 to the Assessing Officer. I am sure the appellant, considering that it had suo-moto intimated and pursued for regular assessment in the initial assessment - will definitely co-operate in the matter and the assessment. The Appeal is thus disposed of as per directions above.”
Aggrieved by the order of the CIT(A), the Assessee has preferred before the Tribunal. The grounds of appeal raised by the Assessee read thus:
“1. For that the Learned Commissioner of Income Tax (Appeals) (CIT(A)) should have allowed the appeal of the appellant and quashed the order of assessment appealed &976/Kol/2015- Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 8 against. The CIT(A) should have held that the said order of assessment was vitiated on facts and in law and had to be quashed.
For that the CIT(A) in his order ignored the material facts apparent from the records and as also recorded in the order of the Hon'ble High Court showing that the Income Tax Officer was fully aware of the changed address of the appellant and had even corresponded thereat. The Learned CIT(Al's finding that there was any omission on the part of the appellant as to the communication of the changed address is perverse and illegal.
3. For that the CIT(A) exceeded his jurisdiction and/or authority in giving directions under Section 150 of the Income Tax Act, 1961 (the Act) to reopen the assessment. The said direction is wholly illegal and uncalled for and there were no grounds and/or materials to justify the same.
For That further and in any event and without prejudice to ground no.3 the direction under section 150 of the Act for reopening of an assessment, where admittedly six years have already elapsed on 31 st March 2015 from the end of the assessment year 2008-09, is barred by limitation and illegal and cannot be given effect to.
5. For that the order of the Learned CIT(A) is vitiated being based on surmises, conjectures and unsubstantiated, general, vague allegations as to the conduct of companies involved into alleged illegal activities and/ or conduct.
For that the order passed by the CIT(A) in not quashing and setting aside the assessment is otherwise erroneous on facts and in law.
The appellant craves leave to add, amend and/ or modify the grounds taken hereinabove.”
The learned counsel for the Assessee drew our attention to the provisions of Sec.251 of the Act which reads thus: “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 Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 9
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.” It was pointed out by him that in an appeal against an order of assessment, prior to the amendment to Sec.251 of the Act by the Finance Act, 2001 w.e.f. 1.6.2001, the CIT(A) had the power to set aside an assessment. But after 1.6.2001, his powers are limited only to either, confirming, reducing, enhancing or annulling the assessment. The impugned order was passed by the AO in an appeal against an order of assessment and therefore was governed by the provisions of Sec.251(1)(a) of the Act and therefore the CIT(A) has power only to confirm, reduce, enhance or annul the assessment. He does not have the power to set aside the assessment and direct the AO to frame an assessment afresh u/s.148 of the Act. According to him therefore the directions of the CIT(A) are illegal and cannot be sustained. The CIT(A) having annulled the assessment should have stopped there and ought not to have given the direction to issue notice u/s.148 of the Act. On the aspect whether the order of the CIT(A) can be construed as an order whereby the CIT(A) has annulled the assessment, the learned counsel for the Assessee drew our attention to a decision of the ITAT Lucknow Bench in the case of Smt.Uma Goenka Vs. ACIT (AY 2001-02) order dated 24.8.2012 wherein the CIT(A) found that the notice u/s.148 of the Act deserved to be struck down and consequently the assessment u/s.147 of the Act deserved to be annulled. The CIT(A) however issued a further direction u/s.150 of the Act directing the AO to reinitiate proceedings u/s.148 of the Act by recording proper reasons and after seeking proper approval of the super authorities as per law. The direction to initiate proceedings u/s.148 of the Act, was challenged by the Assessee before the Tribunal. The Lucknow Bench, held as follows: “5. Having given a thoughtful consideration to the rival submissions and from a careful perusal of record, we find that an appeal was filed before the Id. CIT(A) against ITA Nos.975&976/Kol/2015- Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 10 reopening of assessment under section 147 of the Act and the Id. CIT(A) having examined the issue in detail, struck- downed the notice issued under section 148 of the Act and annulled the assessment framed under section 147 read with 143(3) of the Act. After annulling the assessment, the Id. CIT(A) has issued direction to the Assessing Officer under section 150 of the Act to reinitiate proceedings under section 148 of the Act (for the year under reference) by recording proper reasons and after seeking proper approval of the superior authorities as per law. Aggrieved with this direction, the assessee is before the Tribunal. The sole issue raised before the Tribunal is with regard to the powers of the Id. CIT(A) while disposing of the appeal filed before him against the assessment order. The powers of the Id. CIT(A) has been given in section 251 of the Act and according to clause Ca) of sub-section (1) of section 251 of the Act, the Id. CIT(A) may confirm, reduce, enhance or annul the assessment. Nothing has been mentioned in this section with regard to the direction by the Id. CIT(A) to the Assessing Officer to frame an assessment in a particular manner. Prior to the amendment of section 251 of the Act w.e.f. 1.6.2001, the Id. CIT(A) was also empowered to set aside the assessment, but by virtue of amendment through Finance Act, 2001, the power to set aside the assessment order was withdrawn and the Id. CIT(A) was left with the power either to confirm, reduce, enhance or annul the assessment. For the sake of reference, we extract the provisions of section 251 of the Act as under:- "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."
6. Since the Id. CIT(A) is not empowered to issue direction to the Assessing Officer after annulling the assessment to frame the assessment in a particular manner, the direction by the Id. CIT(A) to the Assessing Officer is beyond his jurisdiction. Therefore, the direction so given by the Id. CIT(A) is uncalled for and we accordingly set aside the order of the Id. CIT(A) passed in this regard.”
He also placed reliance on the decision of the ITAT Chennai Bench in the case of Sun Metal Factory (I) Pvt.Ltd. Vs. ACIT 24 ITD 14 (Chennai) wherein the facts were that pursuant to a search u/s.132 of the Act a block assessment for the period from 1- 4-1990 to 3-11-2000 was framed by the AO. The first appellate authority, viz., CIT(A) found that the additions made in the block assessment order was not based on evidence found during search and therefore the said additions could not have been made while framing a block assessment u/s.158BC of the Act. The CIT(A) however gave a direction u/s.150 of the Act, directing the AO to reopen assessment for assessment year 1999-2000 by issuing notice u/s.148 of the Act. On appeal by the Assessee against such direction, the Tribunal held that the CIT(A) does not have powers to give such direction. Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 11
He next pointed out that the CIT(A) in the impugned order has observed as follows: “Thus, as regards the impugned assessment order it hereby stands vacated only qua my direction given u/s.150”. According to him this observation of the AO can only mean that he had annulled the order of assessment. The word ‘annul’ is not a technical word and may be expressed in equivalent words. In Black’s Law Dictionary, Sixth edn., it has been defined to mean : "To reduce to nothing; annihilate; obliterate; to make void or of no effect; to nullify; to abolish; to do away with. To cancel; destroy; abrogate. To annul a judgment or judicial proceeding is to deprive it of all force and operation, either ab initio or prospectively as to future transactions." According to him, the reading of the entire order of the CIT(A) would only show that he had annulled the order of assessment. According to him the CIT(A) having annulled the order of assessment, ought not to have given directions for initiating proceedings u/s.147 of the Act by issuing notice u/s.148 of the Act.
The learned DR placed strong reliance on the order of the CIT(A) and submitted that the non service of notice before concluding the assessment was an irregularity and could be remedied by affording the Assessee opportunity of being heard and passing a fresh assessment order. 17. We have given a very careful consideration to the rival submissions. The CIT(A) has himself admitted in page-20 of his order that he would have remitted matter back to the AO, but the power for CIT(A) to set-aside assessment and direct for fresh assessment was no more there in the statute. He also expressed his unwillingness to call for remand report from the AO because there was no service of notice on the Assessee before conclusion of the assessment proceedings. The CIT(A) having concluded as above, has proceeded to rely on the provisions of Sec.251(1)(d) which confers powers on the CIT(A) to pass such orders in the appeal as he thinks fit. The reason for coming to the above conclusion has been stated thus by the CIT(A): “Having considered all these aspects, I hold that this appeal though it is presented against assessment order, however the issues encompass much deeper and larger matters, and so I hold that this appeal is in the category as envisaged in clause (d) to Sub-section (1) to Sec.251”….
ITA Nos.975&976/Kol/2015- Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 12 We are of the view that the present case would clearly fall within clause (a) of Section 251(1) of the Act and the conclusion to the contrary by the CIT(A) cannot be sustained. Whatever may be “deeper and larger matters”, the same cannot take away an appeal against an order of assessment falling within clause (a) of Sec.251(1) of the Act to clause (d) of Sec.251(1) of the Act. The powers of the CIT(A) are co-terminus with that of the AO. What the AO could do and ought to have done, can be done by the CIT(A). In the light of such wide powers of the CIT(A) envisaged by the Act in an appeal against an order of assessment (except the power to set aside and direct an assessment), there is no reason for the CIT(A) to conclude that because of non service of notice on the Assessee before concluding the assessment, he cannot call for remand report/proceedings from the AO and decide the issues himself. The Revenue is not in appeal against the order of the CIT(A) against any part of the order which is against the Revenue. The observations of the CIT(A) in the impugned order that the assessment order stands vacated clearly suggests that he has annulled the order of assessment. Under Section 251(1) the CIT(A) has power to do either one of the following “confirm or reduce or enhance or annul” the assessment. Since the CIT(A) has neither confirmed or reduced or enhanced the assessment, his observations in the impugned order has to be taken only as an order annulling the assessment. As rightly contended by the learned AR the word ‘annul’ is not a technical word and may be expressed in equivalent words. In the facts and circumstances of the present case the observation of the CIT(A) that the assessment order stands vacated only means that he has annulled the order of assessment.
In the given circumstances, can it be said that the directions given by the CIT(A) to initiate proceedings u/s.147 of the Act by issue of notice u/s.148 of the Act, are valid. In our view the directions given by the CIT(A) are unsustainable. Having annulled/vacated the order of assessment, the CIT(A) has exhausted his power u/s.251(1) of the Act. He had no power or authority to direct the AO to initiate proceedings u/s.147 of the Act by issue of a notice u/s.148 of the Act. The decision of the Lucknow Bench of the Tribunal in the case of Smt.Uma Goenka, clearly supports the plea of the learned AR before us. Further it should not be forgotten that the order Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 13 of assessment which was challenged by the Assessee before the CIT(A) is an offshoot of an order u/s.263 of the Act. The order of assessment dated 9.4.2010 was revised by the CIT in exercise of his powers u/s.263 of the Act vide order dated 22.3.2013 on the ground that the Assessee had received Share capital to the tune of Rs.2,05,28,201/- and that the AO did not make proper enquiries with regard to the identity and creditworthiness of the shareholders and therefore the order of the AO was erroneous and prejudicial to the interest of the revenue. The AO was directed by the said order u/s.263 of the Act to make enquiries with regard to proper enquiries with regard to the identity and creditworthiness of the shareholders. The scope of the proceedings before the AO was therefore limited. The proceedings commenced pursuant to an order of revision which was not based on belief regarding escapement of income but a case where the proceedings began as the order of the AO was found to be “erroneous and prejudicial to the interest of the revenue”. The CIT(A) in an appeal against such order cannot convert the proceedings to proceeding for assessing income which escaped assessment. Besides the above, proceedings under Sec.147 of the Act contemplates “reason to believe on the part of the AO that any income chargeable to tax has escaped assessment for any assessment year”. Such satisfaction of the AO cannot be substituted by the CIT(A) in an appellate proceeding arising out of an order of assessment passed pursuant to an order or revision u/s.263 of the Act. In our view the CIT(A) having annulled the order of assessment ought not have given directions to the AO to initiate proceedings u/s.147 of the Act by issue of notice u/s.148 of the Act. We therefore quash that part of the order of the CIT(A) wherein the directions to initiate proceedings u/s.147 of the Act by issue of notice u/s.148 of the Act are contained. The appeal of the Assessee accordingly stands allowed.
As far as the case of Srijan Vinimay Pvt. Ltd., (earlier known as M/S.Srijan Overseas Pvt.Ltd., is concerned, the facts are pari materia the same, including the dates of the order of assessment u/s.147/143(3) of the Act, the date of the order u/s.263 of the Act, the date of order of assessment passed u/s.147/263/144 of the Act, the fact that the proceedings u/s.263 of the Act and the assessment u/s.147/263/144 of the Act were completed ex-parte, the dates of hearing ITA Nos.975&976/Kol/2015- Srijan Vinimay Pvt. Ltd.&M/s.Srijan Nirman P.Ltd. A.Y.2008-09 14 and the order sheet entry of AO, the manner in which the Assessee came to know about those ex-parte order etc. The CIT(A) has given identical directions as was given in in the case of Srijan Nirman Pvt.Ltd. All the findings given in the said decision will hold good for the Assessee in ITA No.975/Kol/2015 also. For the reasons given while deciding ITA No.976/Kol/2015, we quash that part of the order of the CIT(A) wherein the directions to initiate proceedings u/s.147 of the Act by issue of notice u/s.148 of the Act are contained. The appeal of the Assessee accordingly stands allowed.
In the result, both the appeals of the Assessee are allowed.
Order pronounced in the Court on 26.08.2016.