1992 (3) TMI 136 - AT - Income Tax

Summary

Issues Involved:
1. Rejection of appellants' claim regarding sub-contractors and assessment of income in appellants' hands.
2. Validity of reassessment under Section 147.
3. Genuineness of sub-contractor firms.
4. Authority of CIT(A) to set aside assessments and direct further investigation.
5. Binding nature of Tribunal's decisions on lower authorities.

Detailed Analysis:

1. Rejection of Appellants' Claim Regarding Sub-Contractors and Assessment of Income in Appellants' Hands:
The main contention of the appellants was the rejection of their claim that they had given the works at Boggulavagu and Yeleswaram to sub-contractors on royalty of 1% of the gross bills. The AO assessed the income of the sub-contractors in the hands of the appellants, treating the sub-contractors as benamidars of the appellants. The AO's conclusion was based on seized books of account and documents from Sri A. Suryanarayana, which indicated that these books, though maintained in the name of sub-contractors, actually belonged to the appellants.

2. Validity of Reassessment Under Section 147:
In the case of M/s Prasad & Co., the reassessment for asst. yr. 1982-83 was made under Section 147, following the original assessment under Section 143(1). Similarly, for M/s Prasad Construction & Co., the AO issued a notice under Section 148 for asst. yr. 1983-84 and reopened the assessment as a consequence of a search and seizure operation. For subsequent years, the AO followed the reassessment order for asst. yr. 1983-84. These reassessments were set aside by the CIT(A).

3. Genuineness of Sub-Contractor Firms:
The CIT(A) questioned the genuineness of the sub-contractor firms and directed the AO to re-examine the issue afresh. The Tribunal had previously held that the sub-contractor firms were genuine and independent, with no connection to the appellant-firms. The Tribunal's decision was based on the evidence on record, including statements from Sri A. Suryanarayana and other GPA-holders, the constitution of the sub-contractor firms, and their books of account.

4. Authority of CIT(A) to Set Aside Assessments and Direct Further Investigation:
The CIT(A) set aside the assessments and directed the AO to conduct further investigations, despite the Tribunal's earlier decision on identical facts. The CIT(A) believed that the Department should fill up the gaps omitted by the AO. However, the Tribunal emphasized that judicial propriety demands that lower authorities follow the Tribunal's decisions, and setting aside assessments to fill gaps is not permitted by law.

5. Binding Nature of Tribunal's Decisions on Lower Authorities:
The Tribunal reiterated that its decisions are binding on lower authorities. The CIT(A) should have followed the Tribunal's decision and not set aside the assessment orders with directions for further investigation. The Tribunal cited the Supreme Court's decision in Union of India vs. Kamalakshi Finance Corpn. Ltd., emphasizing that lower authorities must adhere to the orders of higher appellate authorities to maintain judicial discipline and avoid unnecessary harassment to taxpayers.

Conclusion:
The Tribunal concluded that the CIT(A) erred in setting aside the assessments and directing further investigation. The Tribunal's previous decision, which found the sub-contractor firms to be genuine and independent, was binding on the CIT(A) and the AO. The Tribunal vacated the orders of the CIT(A), and the additions made by the AO were deleted. The appeals were allowed.