2018 (7) TMI 1471 - AT - Income Tax

Reopening of assessment - Addition u/s 2(22)(e) - jurisdiction of the ld. CIT(A) u/s 251 - Held that - The subject matter of appeal before the CIT(A) was in respect of the appellant and was confined to the additions made u/s 2(22)(e) of the Act in the hands of the appellant. Once the CIT(A) was convinced that the additions made by the AO are not justified in the hands of the assessee and once he has deleted the additions from the hands of the assessee, the matter should have ended there. But, ironically, the CIT(A) proceeded further in directing the AO to make the additions in the hands of some other persons and such directions are beyond the powers vested upon the CIT(A) u/s 251 of the Act. Such directions are uncalled for and deserve to be expunged from the findings of the CIT(A). Drawing support from the ratio laid down by the Hon ble Supreme Court in the case of ITO Vs. Murlidhar Bhagwan Das 1964 (1) TMI 5 - SUPREME COURT we direct the AO to read the order of the first appellate authority without direction to take action u/s 147/148 of the Act. DR reliance upon the provisions of section 150(1) is misplaced in as much as section 150(1) of the Act contains the provisions for cases where assessment is in pursuance of an order of appeal etc. This section does not permit the first appellate authority to pass orders on issues which were never the subject matter of appeal before him. - Decided in favour of assessee

Summary

Issues Involved:
1. Interpretation of Section 2(22)(e) of the Income Tax Act, 1961.
2. Jurisdiction of the Commissioner of Income Tax (Appeals) in disposing of appeals.
3. Scope of directions that can be given by the Commissioner of Income Tax (Appeals) beyond the subject matter of appeal.
4. Applicability of Section 150(1) of the Income Tax Act.

Detailed Analysis:

Issue 1: Interpretation of Section 2(22)(e) of the Income Tax Act, 1961
The case involved a loan raised by the assessee company from a sister concern, triggering the provisions of section 2(22)(e) of the Act. The Assessing Officer treated the loan amount as deemed dividend in the hands of the assessee company due to common shareholding patterns. The first appellate authority directed the deemed dividend to be taxed in the hands of individual shareholders based on their shareholding ratio.

Issue 2: Jurisdiction of the Commissioner of Income Tax (Appeals)
The Commissioner of Income Tax (Appeals) has the power to confirm, reduce, enhance, or annul the assessment under section 251 of the Act. The jurisdiction of the CIT(A) is limited to the assessment order for the particular year under appeal, similar to the Assessing Officer's jurisdiction. The CIT(A) cannot pass orders beyond the subject matter of the appeal.

Issue 3: Scope of directions by the Commissioner of Income Tax (Appeals)
The bone of contention was the CIT(A) giving directions beyond the subject matter of the appeal. The Appellate Tribunal held that once the CIT(A) deleted the additions from the hands of the assessee, the matter should have concluded there. The directions to make additions in the hands of other individuals were deemed beyond the powers vested in the CIT(A) under section 251 of the Act.

Issue 4: Applicability of Section 150(1) of the Income Tax Act
The reliance on Section 150(1) of the Act by the Revenue was deemed misplaced as it pertains to cases where assessments are in pursuance of an order of appeal. This section does not authorize the CIT(A) to pass orders on issues not part of the appeal before him.

In conclusion, the Appellate Tribunal allowed the appeal of the assessee, emphasizing the limited jurisdiction of the CIT(A) in disposing of appeals and the necessity to confine directions within the subject matter of the appeal. The judgment highlighted the importance of adhering to statutory provisions and case law in interpreting and applying tax laws effectively.