2020 (10) TMI 1363 - HC - Income Tax

Power of CIT(Appeals) to enhance the assessment - Power vested in the CIT (A) u/s 251(1)(a) - Tribunal holding that the CIT (Appeals) cannot enhance the assessment on a reference made by the AO especially when the provision of Section 251(1)(a) confers the power to enhance on the CIT(A) and there is no bar in the AO from reporting the shortcoming in the order passed for the purpose of enhancement - Revenue contended that the power of the CIT(A) u/s 251 is of very wide that in disposing of the appeal, his powers are co-equal to that of the Assessing Authority,and is bound to consider the request of the ITO to enhance the assessment and if he failed to do so without any reasonable cause, it is open to the Revenue to file a second appeal before the Tribunal from the order passed by the Commissioner of Income-Tax (Appeals) in appeal - HELD THAT - The Commissioner of Income-tax (Appeals) is exercising a quasi-judicial function. He should have adverted to the request made by the Income-tax Officer in his letter dated February 2, 1983, and disposed of the matter fairly and reasonably. It was his statutory duty to do so. On the other hand, he failed in his duty and disposed of the appeal even without adverting to the said request made by the Income-tax Officer. We are of the view that it is a patent jurisdictional error. CIT (Appeals) has abnegated in discharging the duty Imposed on him by law. Since the Revenue was prejudiced by the failure of the Commissioner of Income-tax (Appeals) to discharge his statutory duty aforesaid, it is open to the Revenue (Income tax Officer) to file an appeal from the order passed by the Commissioner of Income-tax (Appeals) and assail the same. Against the order of the Commissioner of Income-tax (Appeals), the appeal filed by the Revenue under Section 253(2) of the Income-tax Act is competent and maintainable. As observed by us earlier, we do not propose to consider the first substantial question of law framed because the issue has become academic in the assessee s case. Therefore, we leave the first substantial question of law open for consideration. Allowability of contribution made towards superannuation fund - ITAT treated it as business expenditure and is to be allowed u/s 37 - whether Tribunal is proper especially when as per Section 36(1)(iv), the employer's contribution towards recognized provident fund or approved superannuation alone is to be allowed as a deduction subject to the conditions prescribed thereunder which is not the case on hand ? - HELD THAT - Issue decided in favour of assessee as in the assessee s own case 2020 (10) TMI 798 - MADRAS HIGH COURT , by common judgment dated 08.10.2020,

Summary

Issues:
- Appeal filed by Revenue challenging common order dated 22.9.2017 made in ITA.Nos.1557, 1660, 1556, and 1554/Mds/2017.
- Substantial questions of law:
i. Whether CIT(A) can enhance assessment on a reference made by AO under Section 251(1)(a).
ii. Treatment of contribution to superannuation fund as business expenditure under Section 37.
iii. Proper reasoning and finding by Tribunal regarding deduction under Section 36(1)(iv).

Analysis:
1. The appeals were filed by the Revenue under Section 260A of the Income Tax Act, 1961, challenging the common order dated 22.9.2017 made by the Income Tax Appellate Tribunal for different assessment years.
2. The substantial questions of law raised included the authority of CIT(A) to enhance assessment, treatment of superannuation fund contribution as business expenditure, and the correctness of the Tribunal's reasoning under Section 36(1)(iv).
3. The Court found that the necessity to answer the first substantial question did not arise as the assessee had already succeeded before the CIT(A) and the Tribunal in other cases. The power of the CIT(A) to enhance assessment was discussed citing a previous case.
4. Referring to a decision of the Kerala High Court, the Court discussed the power of the Income Tax Officer to request enhancement of disallowance under Section 37(3A) and the role of the CIT(A) in considering such requests.
5. The Court decided not to consider the first substantial question as it was academic in the assessee's case, leaving it open for future consideration. The appeals were dismissed based on the merits of previous cases where the assessee succeeded.
6. Substantial questions of law 2 and 3 were answered in favor of the assessee based on previous judgments, leading to the dismissal of the appeals against the Revenue. No costs were awarded in the judgment.