2011 (4) TMI 1163 - HC - Income Tax

Powers of AO - Whether AO empowered to travel beyond the two specific issues contained in the order of remand passed by the CIT (Appeals) in the proceedings u/s 115J to cover the tax liability of the assessee? Held that - Processing a new source of income which was on the record before the AO but is not forming part of the subject-matter of appeal before the appellate authority can be undertaken by the appellate authority only in the course of enhancement of the assessment and therefore any set aside which does not involve a proposal for enhancement cannot be used for the purpose of expanding the scope of the powers available to the AO while making fresh assessment pursuant to a set aside. Therefore A.O. could not have traveled beyond the two specific issues contained in the order of remand passed by the CIT (Appeals). Tribunal was right in law and on facts. See Saheli Synthetics P. Ltd. (2008 (2) TMI 182 - GUJARAT HIGH COURT - Decided against the Revenue

Summary

Issues:
Appeal under section 260A of the Income-tax Act challenging the order of the Income-tax Appellate Tribunal regarding assessment year 1988-89. Interpretation of the Assessing Officer's powers to travel beyond specific issues in the order of remand passed by the Commissioner of Income-tax (Appeals) under section 115J of the Income-tax Act, 1961.

Analysis:
The appellant-Revenue challenged the order of the Income-tax Appellate Tribunal regarding the assessment year 1988-89, where the Assessing Officer treated the consumer contributions as revenue and disallowed investment allowance. The Commissioner (Appeals) set aside the assessment order, directing the Assessing Officer to reframe the assessment after giving the assessee a reasonable opportunity to be heard. However, the Assessing Officer, in a subsequent assessment, went beyond the issues considered by the Commissioner (Appeals) and invoked section 115J of the Act. The Tribunal held it was a case of partial set aside justified by the facts concerning the two specific issues raised before the Commissioner (Appeals). The Revenue appealed, arguing against the Tribunal's decision.

The High Court referred to a previous decision and emphasized that the Assessing Officer must make a fresh assessment in accordance with the directions given by the Commissioner (Appeals) and cannot exceed the scope of those directions. The court highlighted that the powers of the appellate authority are limited to the subject-matter of the appeal, which is the assessment of income based on the return filed by the assessee. Therefore, the Assessing Officer was not empowered to go beyond the specific issues outlined in the order of remand by the Commissioner (Appeals). The High Court upheld the Tribunal's decision, citing consistency with the previous judgment and dismissed the appeal.

In conclusion, the High Court affirmed that the Assessing Officer cannot exceed the specific issues outlined in the order of remand by the Commissioner (Appeals) and must conduct a fresh assessment in accordance with those directions. The court's decision was based on the limited powers of the appellate authority within the subject-matter of the appeal, focusing on the assessment of income as per the return filed by the assessee. Therefore, the Tribunal's ruling was upheld, and the appeal was dismissed with no order as to costs.