2009 (8) TMI 1203 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of CIT (A)
2. Enhancement of addition by CIT (A)
3. Justification of enhancement notice and addition
4. Subject matter of assessment and jurisdiction of CIT (A)
5. Binding nature of ITAT order on CIT (A)
6. Finality of ITAT order and indirect action by CIT (A)

Issue-wise Detailed Analysis:

1. Jurisdiction of CIT (A):
The appellant contested that the order of the CIT (A) dated 26.12.08 was unsustainable as it was passed in gross violation of its jurisdiction. The Tribunal noted that the CIT (A) had deviated from the earlier findings of the ITAT and CIT (A) in the assessee's own case without proper justification. The Tribunal emphasized that the CIT (A) should not have deviated from the established principles and previous decisions without substantial reasons.

2. Enhancement of Addition by CIT (A):
The CIT (A) enhanced the addition to Rs. 95,00,347/- based on the belief that the assessee had shown higher profits in the Kala Amb unit to claim higher deductions under Section 80-IC. The Tribunal found that the CIT (A) had made this enhancement on the basis of assumptions and presumptions, without properly appreciating the reasons provided by the assessee for the disparity in net profits between the Faridabad and Kala Amb units. The Tribunal concluded that the enhancement was not justified as it was based on estimates and not on concrete evidence.

3. Justification of Enhancement Notice and Addition:
The appellant argued that the CIT (A) was not justified in issuing an enhancement notice and making an addition based on belief and estimation. The Tribunal observed that the CIT (A) had ignored the detailed explanations provided by the assessee regarding the allocation of expenses and the reasons for the lower net profit in the Faridabad unit. The Tribunal held that the method adopted by the CIT (A) for enhancing the addition was not warranted and was against the principles of judicial propriety.

4. Subject Matter of Assessment and Jurisdiction of CIT (A):
The appellant contended that the CIT (A) exceeded his jurisdiction by going beyond the subject matter of the assessment. The Tribunal agreed, noting that the CIT (A) had deviated from the established method of computation accepted in earlier years without substantial justification. The Tribunal emphasized that the CIT (A) should have adhered to the principles and findings of the higher appellate authority.

5. Binding Nature of ITAT Order on CIT (A):
The appellant argued that the CIT (A) was bound to follow the ITAT order dated 19.10.07, which had decided the issue of profit transfer in the appellant's favor. The Tribunal agreed, stating that the CIT (A) should not have deviated from the findings of the ITAT without substantial reasons. The Tribunal emphasized the importance of consistency and adherence to the principles established by higher appellate authorities.

6. Finality of ITAT Order and Indirect Action by CIT (A):
The appellant contended that the CIT (A) indirectly attempted to shift the profit of the two units on estimation, despite the finality of the ITAT order. The Tribunal noted that the department had not filed an appeal against the ITAT order, rendering it final. The Tribunal held that the CIT (A) should not have deviated from the established findings and should have adhered to the principles of judicial consistency.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, holding that the enhancement made by the CIT (A) was not justified. The Tribunal emphasized the importance of consistency, adherence to established principles, and the binding nature of higher appellate authority decisions. The Tribunal deleted the enhancement made by the CIT (A) and upheld the method of computation followed by the assessee, which had been accepted in earlier years.