2015 (6) TMI 21 - AT - Income Tax

Disallowance from work in progress account - CIT(A) directing the Assessing Officer to pass order while giving effect to CIT(A) s order after verifying part details furnished by assessee during assessment proceeding and by calling for further details from assesse - Held that - CIT(A) held that Assessing Officer was not just and proper to deny the benefit of expenses incurred by assessee in the construction of multi storied mall. He further directed the Assessing Officer that while giving effect to the instant appellate order, verify the expenses incurred and claimed by assessee in A.Y. 2006-07 and A.Y.2007-08 as per details submitted by assessee on 26.12.2008 and Assessing Officer was further directed to verify business nexus of such expenses. For this purpose, Assessing Officer was free to call further details from assessee. Accordingly, Assessing Officer was directed to pass a speaking order about the genuineness of expenses incurred and business nexus thereof. According to us, having decided the main issue in favour of assessee by observing that it was not just and proper to deny the benefit of expenses incurred by assessee in the construction of multi storied mall. CIT(A) directed the Assessing Officer to make certain inquiries with regard to genuineness of expenses incurred and business nexus by passing speaking order. It amounts to setting aside the issue to Assessing Officer which is not permitted. Accordingly, we set aside the order of CIT(A) and restore the issue to him with direction to decide the same as per fact and law and in the light of our observation discussed above after providing due opportunity of hearing to the assessee. - Decided in favour of revenue for statistical purposes.

Summary

Issues involved:
1. Disallowance of expenses from work-in-progress account in A.Y. 2006-07 and A.Y. 2007-08.
2. Whether the CIT(A) erred in directing the Assessing Officer to verify expenses incurred by the appellant and the business nexus of such expenses.

Analysis:
1. Issue 1 - Disallowance of expenses from work-in-progress account:
In the case, the Assessing Officer disallowed expenses of Rs. 8,52,34,051/- for A.Y. 2006-07 and Rs. 7,74,27,638/- for A.Y. 2007-08 from the work-in-progress account due to lack of corroborative evidence of genuineness and business nexus. The CIT(A) directed the Assessing Officer to verify these expenses and their business nexus. The Revenue contended that the CIT(A) erred in directing the Assessing Officer to reconsider the decision and should have upheld the disallowance. However, the Tribunal held that the CIT(A) was not justified in setting aside the assessment order and directing further verification. The Tribunal set aside the CIT(A)'s order and restored the issue to be decided by the CIT(A) based on facts and law.

2. Issue 2 - Direction to verify expenses and business nexus:
The CIT(A) directed the Assessing Officer to verify the expenses incurred by the appellant and their business nexus. The CIT(A) found that the expenses were genuine and related to the construction of a multi-storied mall. However, the Tribunal held that the CIT(A) was not permitted to set aside the assessment order and direct further inquiries. The Tribunal set aside the CIT(A)'s order and restored the issue to be decided by the CIT(A) after providing a hearing to the assessee.

In conclusion, the Tribunal allowed the Revenue's appeals for both years for statistical purposes and dismissed the assessee's Cross Objections as not pressed. The judgment emphasized the importance of deciding issues based on facts and law without setting aside assessment orders for further verification.