2017 (3) TMI 680 - AT - Income Tax

Revision u/s 263 - whether the Ld. CIT(A) is correct in holding that the appeal filed against the assessment order passed under section 143(3) read with section 153C of the Act is infructuous or not? - Held that - A.O. has interpreted the direction of the Pr. CIT as though it was to examine only the cash payment of ₹ 9,24,100 towards interest instead of making the assessment afresh. Accordingly, the A.O. has passed the consequential order on 30.06.2016. It is clear from the language used by the Pr. CIT i.e., in the absence of such examination by the A.O., the assessment order so framed by the A.O. is not only erroneous but also prejudicial to the interests of the Revenue. Accordingly, the assessment order passed for A.Y. 2008-09 is set aside with a direction to the A.O. to re-do the same afresh, after examining the details of interest payment of ₹ 9,24,100 and after providing an opportunity of being heard to the assessee . From the above directions of the Pr. CIT, it is clear that the direction to A.O was to re-do the assessment afresh after considering the fresh findings of the Pr. CIT. In our considered view, the A.O has misunderstood the direction of the Pr. CIT and passed the consequential order after considering only the cash payment towards interest. A.O should have passed the consequential order afresh. If the intention of Pr. CIT is to re-do the assessment considering only the interest, he would have directed accordingly and not by using the expression afresh . Pr. CIT has already set aside the assessment order passed under section 143(3) read with section 153C. Technically the order under section 143(3) r.w.s. 153C is non-existent. CIT(A) has rightly concluded that it is infructuous and cannot be adjudicated. The assessee has to take an appropriate remedy against the order of the A.O. under section 143(3) r.w.s. 263 but he cannot proceed to file an appeal on the order which is non-existent. In our view, the assessee will be in a better footing if he prefers an appeal against the order of the A.O. passed under section 143(3) r.w.s. 263. - Decided against assessee.

Summary

Issues:
1. Correctness of holding that the appeal against the assessment order under section 143(3) read with section 153C is infructuous.

Analysis:
The case involves an appeal by the assessee against the order of the Ld. CIT(A)-11, Hyderabad pertaining to the A.Y. 2008-09. The primary issue is whether the Ld. CIT(A) was correct in deeming the appeal against the assessment order as infructuous. The assessee, a real estate company, filed its return of income admitting &8377;15,910. Subsequently, a search operation led to the discovery of incriminating material, resulting in a notice under section 153C. The assessment under section 143(3) read with section 153C disallowed amounts under section 40A(3) and as unexplained expenditure.

Another significant development was the Pr. CIT invoking section 263, setting aside the assessment order due to an error regarding cash payment of interest. The CIT(A) concluded that since the original assessment order was set aside for re-assessment, the appeal against it became infructuous and dismissed the appeal. The assessee challenged this decision before the ITAT.

The ITAT analyzed the directions of the Pr. CIT and the subsequent actions of the Assessing Officer (A.O.). It noted that the A.O. misinterpreted the direction to re-do the assessment afresh after considering fresh findings. The ITAT observed that technically, the original order under section 143(3) read with section 153C was non-existent after being set aside by the Pr. CIT. Therefore, the CIT(A) was correct in deeming the appeal as infructuous since the original order no longer stood. The ITAT suggested that the appropriate remedy for the assessee would be to appeal against the A.O.'s order under section 143(3) read with section 263. Consequently, the ITAT dismissed the appeal of the assessee.

In conclusion, the ITAT upheld the CIT(A)'s decision, emphasizing that the original assessment order under section 143(3) read with section 153C was non-existent after being set aside for re-assessment. The ITAT advised the assessee to pursue an appeal against the A.O.'s order under section 143(3) read with section 263 instead of the non-existent original order.