2016 (9) TMI 703 - HC - Income Tax

Revision u/s 263 - Whether the ITAT has erred in not considering that no appeal is maintainable before CIT(A) against the order passed by the A.O. under the provisions of Section 143(3) read with Section 263 of the Act when the assessee has not filed the appeal against the order u/s. 263 of the Act? - Held that - It is undoubtedly true that if in the revisional order, the Commissioner has made any conclusive remarks or given directions which would finally decide the rights of the parties, the assessee without challenging such findings, cannot dispute the same when it comes to the Assessing Officer giving effect to such directions. However, if the order of the Commissioner merely remanding the proceedings before the Assessing Officer without specific directions for carrying out assessment in a particular manner, the Assessing Officer would be free to carry out the assessment in accordance with law and may be in a given circumstance, bearing in mind the observations made by the Commissioner in the revisional order. In such a situation, when the Assessing Officer is not merely giving effect to the order of the Commissioner but is re-framing the assessment in accordance with law, his order is always open to challenge by the assessee on merits. The assessee need not question the authority of the Assessing Officer to pass such order. He accepted the revisional order and its directions participated in the fresh assessment proceedings and carried a feeling that it had satisfied the Assessing Officer about the validity of the claims. If the order of assessment belied such feeling of the assessee, it was always open for the assessee to carry the issues in appeal. Nothing prevented the assessee from questioning the directions of the Assessing Officer. The Revenue s stand on this issue is, therefore, not correct.

Issues:
1. Interpretation of questions of law framed by Revenue challenging ITAT's judgment.
2. Validity of appeal by Revenue against deletion of additions made by Assessing Officer.
3. Quantum additions made by Assessing Officer but deleted by Commissioner and Tribunal.

Issue 1: Interpretation of questions of law framed by Revenue
The Revenue challenged the ITAT's judgment on various grounds, including the deletion of additions made by the Assessing Officer. The Commissioner, in a revisional order, directed the Assessing Officer to re-verify specific issues and make a de novo assessment. The Assessing Officer then made additions in the fresh assessment, which the assessee contested before the Commissioner (Appeals). The Commissioner deleted all additions, stating that the Assessing Officer had not properly justified the claims and had acted mechanically based on the revisional order. The Tribunal upheld the Commissioner's decision, leading to the current appeal. The High Court clarified that if the Commissioner's order merely remands proceedings without specific directions for assessment, the Assessing Officer is free to reframe the assessment in accordance with the law. In such cases, the assessee can challenge the Assessing Officer's order on merits, even if the revisional order was accepted.

Issue 2: Validity of appeal by Revenue against deletion of additions
The High Court addressed the Revenue's contention that the assessee, having accepted the revisional order, had no right to appeal against the Assessing Officer's consequential order. The Court explained that if the Commissioner's order conclusively decides the parties' rights, the assessee cannot challenge it later. However, if the order remands proceedings without specific directions, the Assessing Officer can reframe the assessment, subject to challenge by the assessee on merits. The Court emphasized that the assessee's participation in fresh assessment proceedings does not preclude them from questioning the Assessing Officer's directions or decisions. Therefore, the Revenue's argument on this issue was deemed incorrect.

Issue 3: Quantum additions made by Assessing Officer but deleted by Commissioner and Tribunal
The remaining issues involved quantum additions made by the Assessing Officer but deleted by the Commissioner and upheld by the Tribunal. The High Court reviewed the evidence and found that the Commissioner and Tribunal's decisions were based on the evidence on record and were not perverse. Consequently, the Court concluded that no question of law arose in these matters and dismissed the tax appeal.

In conclusion, the High Court dismissed the tax appeal after analyzing the issues raised by the Revenue regarding the ITAT's judgment, the validity of the appeal against deletion of additions, and the quantum additions made by the Assessing Officer but deleted by the Commissioner and Tribunal.

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