ITAT explains law of appeal to CIT-A of revisionary order passed u/s 263. When CIT himself enhanced income, appeal would not lie to CIT(A)
ABCAUS Case Law Citation:
ABCAUS 2596 (2018) (10) ITAT
The assessee had filed an appeal against the orders of the CIT(A) in holding that the order appealed was not maintainable before the CIT(A).
The appellant assessee was a charitable institution. It filed return of income declaring NIL income. The cases was selected for scrutiny assessment and assessment orders were passed under section 143(2) of the Income Tax Act, 1961 (the Act).
Later, on perusal of the record, the Commissioner formed an opinion that the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of the Revenue.
Therefore, he took cognizance under section 263 of the Act and issued notice to the assessee inviting its explanation as to why assessment orders in the both years should not be set aside.
After hearing the assessee, the CIT passed orders under section 263. He set aside assessments on the issue picked up by him and directed the AO to enhance the income of the assessee by specified amounts.
Dissatisfied with the assessment order, the assessee carried the matter in appeal before the CIT(A). The Commissioner Appeals however did not entertain appeal. He observed that CIT while exercising power under section 263 did not remit any issue to the file of the AO. Instead CIT himself had directed the AO to enhance the income.
Hence CIT(A) held that giving effect to the order was not maintainable before CIT(A). Accordingly, the First Appellate Authority dismissed the assessee’s appeal.
The Tribunal observed that a bare perusal of section 263 showed that it empower the Commissioner to set aside order passed by the Assessing Officer. Thus, Commissioner on his satisfaction that order is erroneous and prejudicial to the interest of the Revenue, then he can remit the issue to the file of the AO for fresh adjudication.
The Tribunal noted that as per the provisions, he can himself enhance the income by modifying the assessment order or he may remits the issue to the file of the AO for readjudication after cancelling the earlier order, then the issue will be redetermined at the level of the AO.
The Tribunal opined that against that re-determination, appeal would lie to the CIT(A), and the CIT(A) could entertain all possible arguments raised from the side of the assessee. But in the instant case, the Commissioner while exercising power under section 263 did not set aside the issue for adjudication to the AO, rather he himself enhanced the income and gave a direction to the AO for inclusion of these amounts.
The Tribunal said that unless CIT order is being challenged before the Tribunal, and directions are being modified and given effect by the AO in pursuance of the directions, cannot be agitated before the CIT(A).
The Tribunal held that the CIT(A) had rightly drawn the above conclusion.
Accordingly, the appeal was dismissed.