2004 (3) TMI 329 - AT - Income Tax

Summary

Issues:
1. Maintainability of the order made under section 154 by the Assessing Officer (AO) and the subsequent order of enhancement by the Commissioner of Income Tax (Appeals) [CIT(A)].
2. Power of the CIT(A) to make enhancement while deciding the appeal arising from the order made under section 154 by the AO.

Issue 1: Maintainability of the order made under section 154 by the AO and the subsequent order of enhancement by the CIT(A):
The appellant challenged the order made under section 154 by the AO, which rectified the assessment order completed under section 143(3) of the Income Tax Act for the assessment year 1994-95. The AO assessed the long-term capital gain differently from the original assessment, leading to an appeal by the appellant. The CIT(A) held that the AO and the appellant erred in computing the capital gain, as the AO failed to assess the capital gains arising from the land transfer to the developer at a single stage. The CIT(A) proposed to enhance the long-term capital gain, ultimately determining it at Rs. 1,16,14,085. The appellant contended that the CIT(A) exceeded his power in making enhancements in an appeal against a rectification order under section 154. The Tribunal found that the mistake pointed out by the AO and the CIT(A) was not a glaring and apparent one, as it involved debatable points of law and facts. As the mistake was not obvious and patent, it could not be rectified under section 154. The Tribunal concluded that the orders determining the long-term capital gains under section 154 were without jurisdiction, cancelling them.

Issue 2: Power of the CIT(A) to make enhancement while deciding the appeal arising from the order made under section 154 by the AO:
The appellant argued that the CIT(A) lacked the power to enhance the assessment in an appeal against a rectification order under section 154. The appellant cited provisions of the Income Tax Act and court rulings to support this contention. The Tribunal observed that the jurisdiction to decide the appeal against the order made under section 154 was limited to the question decided by the AO in rectifying the order. It reiterated that the CIT(A) cannot do what the AO himself cannot do, especially when there is no obvious mistake on record. The Tribunal emphasized that the AO and the CIT(A) had determined the capital gain through a process involving debatable points, making it beyond the scope of rectification under section 154. Consequently, the Tribunal held that the CIT(A) exceeded his jurisdiction in enhancing the long-term capital gain, leading to the cancellation of the orders made by the authorities below.

In conclusion, the Tribunal allowed the appeal filed by the appellant, as the orders passed by the authorities below were deemed to be without jurisdiction. The other grounds of appeal raised by the appellant were considered infructuous and did not require adjudication.