2013 (10) TMI 464 - AT - Income Tax

Applicability of section 150 - Provision for cases where assessment is in pursuance of an order on appeal, etc. Held that - Reliance has been placed upon the judgment in the case of Pennar Electronics P. Ltd. 2007 (12) TMI 248 - ITAT HYDERABAD-B - Resort to sub-section (1) of section 150 of the Act can be taken only in cases where it becomes necessary to make assessment or reassessment or recomputation and such direction must relate to the assessee in question and not any direction or assessment made in appeal, reference or revision or any other assessee or any proceedings in which the assessee in question is not a party In the facts and circumstances of the instant case, the direction given by the first Appellate Authority under section 150(1) is not in accordance with law Decided in favor of Assessee.

Summary

Issues:
1. Addition of Rs. 16,51,000 under section 69A of the Income Tax Act in the hands of the assessee.
2. Direction by the CIT(A) to assess unaccounted payments in the hands of the assessee's wife invoking section 150(1) of the Income Tax Act.

Issue 1:
The appeal challenged the addition of Rs. 16,51,000 under section 69A of the Income Tax Act in the hands of the assessee. The AO assumed the payment was made from the unaccounted money of the assessee's husband, as the wife acquired a property, and added the amount to the husband's income. However, the CIT(A) observed that if any addition from undisclosed sources was needed, it should have been in the wife's hands as she acquired the property. The CIT(A) highlighted that the wife had filed returns, showing income and purchasing the property, suggesting any addition should have been in her hands. The addition made in the husband's hands was deleted as there was no evidence he made the payment for tenancy rights.

Issue 2:
The CIT(A) directed to assess unaccounted payments in the hands of the assessee's wife invoking section 150(1) of the Income Tax Act. The appeal contended that section 150(1) should not be used to revive a barred assessment without giving an opportunity to be heard. The Appellate Tribunal noted that the CIT(A) cannot issue directions affecting a third party without notice. The Tribunal emphasized that the CIT(A) cannot direct reopening assessments without giving the affected person an opportunity to be heard. The Tribunal cited legal precedents to support the position that such directions should be relevant to the subject matter of dispute and not affect third parties without proper notice. Consequently, the direction by the CIT(A) under section 150(1) was deemed not in accordance with the law, and the appeal was allowed.

This judgment dealt with the addition of unaccounted payments in the hands of the assessee and the direction to assess these payments in the hands of the assessee's wife. The Tribunal emphasized the importance of proper procedure and legal principles in making such additions and directions, highlighting the necessity of giving affected parties an opportunity to be heard and ensuring that directions are relevant to the subject matter of dispute.