Commissioner Appeals have no power to remand case back to AO for fresh assessment nor can he direct AO to decide in accordance with his directions-High Court
ABCAUS Case Law Citation:
ABCAUS 2104 (2017) (10) HC
Important Case Laws Cited/relied upon by the parties:
Dhirendra Nath Gorai v. Sudhir Chandra Ghosh,AIR 1964 SC 1300
Brief Facts of the Case:
In the instant case, the respondent assessee was a practicing advocate and had filed his returns of income for only the assessment years 1991-92 to 1994-95. On 4th November 2000 both the Income Tax Department (Revenue/Department)and the CBI conducted simultaneous/ joint search at the assessee’s residence along with one other assessee. On the basis of the material found during the search, such as copies of documents relating to the land transactions, passbooks, diaries, bank locker keys seized by the CBI and evidence gathered subsequently, the Assessing Officer (AO) initiated proceedings and passed order u/s 158 BC of the Income Tax Act, 1961 (the Act).
On appeal, the Appellate Commissioner (“CIT-A”) ruled that the proceedings ought to have been initiated under section 158BD i.e., undisclosed income belonging to some person other than the one regarding whom the search was made.
Acting on the CIT-A direction, the Ao passed fresh orders and determined the total undisclosed income at Rs. 2,02,71,670/-. On appeal, the Appellate Commissioner confirmed the assessment order. Aggrieved, the assessee approached the Appellate Tribunal (ITAT), which reversed the findings and ruled in assessee’s favour.
Contention of the respondent Assessee:
It was submitted that the Appellate Commissioner by the amendment to section 251 had been stripped of the power to remand and remit not to protect an assessee’s interests but to avoid prolonged assessment proceedings, which, in fact, serves a public purpose.
It was contended that the Appellate Commissioner’s direction to the AO to reassess the assessee u/s 158BD amounted to usurpation of his legitimate adjudicatory powers. Therefore, the resultant reassessment had been vitiated.
Opposing the Revenue’s contention that the assessee ought to had challenged the Appellate Commissioner’s findings-remand and direction to reassess under a particular provision, it was submitted that once an authority lacks power, the order renders itself a nullity, and it needs no challenge.
Contentions of the Appellant Department:
It was contended that the Appellate Commissioner passing the order had the power to entertain an appeal, in the first place. If he had passed an order which did not strictly conform with the statutory mandate, he had, at best, exercised his power irregularly—or even illegally. But, by no stretch, he acted without authority; nor has his order become nullity.
Observations made by the High Court:
It was noted that that, more than merits, the jurisdictional, procedural, and technical issues had weighed heavily with the Tribunal. The Court observed that it could not take exception to the Tribunal’s approach for “the life of the law has not been logic; it has been experience.” As in expropriatory proceedings, as with the penal ones, technicalities matter as much as the substantial justice counts.
The Hon’ble High Court observed that before 01.06.2001, section 251(1)(a) provided that CIT-A may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by the Commissioner (Appeals) and after making such further inquiry as may be necessary, the Assessing Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment. However the power of remand was omitted by the Finance Act, 2001 wef 01.06.200
The Hon’ble High Court opined that a waiver is an intentional relinquishment of a known right, but obviously as laid down by the Supreme Court, an objection to jurisdiction, cannot be waived, for consent cannot give a court jurisdiction where there is none.
It was observed that the three-Judge Benchof the Apex Court had held that where the court acts without inherent jurisdiction, a party affected cannot by waiver confer jurisdiction on it, which it has not. Where such jurisdiction is not wanting, a directory provision can obviously be waived. But a mandatory provision can only be waived if it is not conceived in the public interests, but in the interests of the party that waives it.
Thus the Hon’ble High Court held that under the amended section 251 of the Act, the Appellate Commissioner may confirm, reduce, enhance, or annul the assessment. But he cannot refer the case back to the Assessing Officer for making a fresh assessment; nor can he direct the Officer to decide in accordance with his directions.
Apart from that the Hon’ble High Court also dwelled upon the Recording of Satisfaction under Section 158 BD of the Act. The Hon’ble High Court found that the Assessing Officer had recorded no satisfaction that the disclosed income income at the hands of other assessee searched actually belongs to the assessee in appeal. Therefore the Hon’ble High Court opined that the assessment was vitiated on this count too.
Examining from the angle of limitation also, the Hon’ble High Court noted that the search u/s 132 of the Act was conducted on 04.11.2000; the notice under section 158BC was issued on o8.06.2001. The proceedings were concluded on 28.07.2005, when the Assessing Officer passed the order. The notice under section 158BC of the Act, was given way beyond two years ago. Thus the whole proceedings had been barred by limitation.
Decision/Held:
It was held that the Tribunal was right. All the questions of law were answered against the Revenue and in favour of the assessee and the appeal was dismissed.
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