AO can not enhance assessment on an order of remand by ITAT. The Tribunal has no power to enhance assessment in appeal-High Court
ABCAUS Case Law Citation:
ABCAUS 2291 (2018) (04) HC
The appellant assessee had filed the instant appeal was filed u/s 260A of the Income Tax Act, 1961 (the Act) was directed against the order of the Income Tax Appellate Tribunal (ITAT).
The appeal had been admitted substantial questions of law:
1.Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessing officer’s computation of setting off of unabsorbed depreciation first against the profits is principally correct without appreciating that the provisions of Section 205 of the Companies Act is not required to be applied to Section 115JA?
2.Whether on the facts and in the circumstances of the case the tribunal was right in directing the assessing officer to determine the depreciation or business loss of each year and to carry forward the lower of two for adjustment which will result in enhancement of assessment for which the Tribunal has no power?
3.Whether on the facts and in the circumstances of the case the Tribunal was right in upholding the adjustments of unabsorbed depreciation alone against book profits while such adjustments are not contemplated under the provisions of Section 115JA of the Act?
The Hon’ble High Court observed that the Tribunal had remanded the matter to the Assessing Officer (AO) to consider the calculation aspect afresh.
The assessee had no serious objection for the AO to redo the calculation, but it was contended that the assessment cannot be worse than what it was in the hands of the AO pursuant to an order of remand passed by the Tribunal.
The Hon’ble High Court noted the legal position as to whether the Tribunal has power to enhance the assessment and take back the benefit granted to the Assessee by the Assessing Officer.
The Hon’ble High Court observed that this question is no longer res integra and has been answered by the Hon’ble Supreme Court by holding that Tribunal was not authorized to take back the benefit granted to the Assessee by the AO and the Tribunal had no power to enhance the assessment. The decision was followed by the High Court of Gujarat wherein it was held that the Tribunal has no power under the Income Tax Act to enhance the assessment in appeal in view of the statutory provisions. Further it was held that the benefit, which was sought to be taken away by the Department, was not permissible in law and this was the infirmity in the judgment of the Tribunal as the Tribunal has no power to enhance the assessment in appeal.
The Hon’ble High Court observed that there was no error in the order passed by the Tribunal in remanding the matter for fresh consideration to the Assessing Officer. But, however, the Tribunal has no power under the Income Tax Act to enhance the assessment in an appeal. Equally, it cannot be done on an order of remand being passed by the Tribunal to the Assessing Officer.
Therefore, the Hon’ble High Court opined that the Assessing Officer, while reconsidering the matter on remand, should bear the above legal principle in mind and the assessee cannot be denied whatever benefit he has granted in the Assessment Order.
The Substantial Questions of Law was answered in favour of the Assessee in the light of the law laid down by the Hon’ble Supreme Court and Substantial Questions of Law Nos. 1 and 3 were left open for consideration by the AO bearing in mind the decisions of the Supreme Court while considering the matter on remand.
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