CIT.A – DIRECTION FOR REOPENING ASSESSMENT FOR OTHER YEARS IS NOT VALID – Discussion in view of provisions and Tribunal order.

[CA DEV KUMAR KOTHARI]

Cases under study are Reported at 2019 (6) TMI 351 - ITAT INDORE  dt. Dated: - 04 June 2019 in which lead case on the issue under discussion is as follows: –

ITANo.699/Ind/2016

Suresh Kumar Upadhya

22.03.2016

Appeal of Assessee

Scope of this article:

Scope of this article is limited to issue about authority of CIT(A) – whether he can direct AO to re-open assessment of other years.

On plain reading of the provisions obvious answer is No. Tribunal has also held so, without any aid of any precedence.

Head notes / Editorial note on the issue reads as follows with highlights added by author:

Power of CIT(A) - exceeding of Jurisdiction - direction to the Ld. A.O to reopen the cases for A.Y. 2010-11- appeal relates to A.Y. 2009-10 - HELD THAT:- CIT(A) has the powers to decide the appeal against the assessee of a particular assessment which he/she may confirm/reduce or enhance or annulled. The order of the assessment relates to particular assessment year or assessment years. Ld. CIT(A) is bound to adjudicate the issues emanating out of the appeal for the respective assessment year. Giving directions to the A.O to consider for re-assessment for other assessment years for which no appeal is pending before CIT, in our view seems to be out of his/her jurisdiction. In the instant case it seems that Ld. CIT(A) has exceeded her jurisdiction of giving direction for reopening of cases for Assessment Year 2010-11 because the appeals of the assessee(s) were pertaining to Assessment Year 2009-10 only. We therefore allow this common issue raised by the respective assessee’s.

Relevant portion of the order of Tribunal reads as follows (highlights added by author):

81. Now we take up the bunch of 14 appeals of the following assessees in which protective addition for unaccounted investments in purchase of land as well as disallowance of expenses have been made. Details of the assessee’s with appeal Nos along with total income disclosed, additions made and income assessee is detailed below:

82. Following grounds of appeal have been raised by the above stated 14 assessee’s;

ITA No.699/Ind/2016  

9.That the Ld. CIT(A) has exceeded her jurisdiction in giving directions to the AO to reopen the case for AY 2010-11 and giving directions for examining the opening capitol which are not within the scope of the assessment year under consideration and which were not even the Subject matter of assessment.

(Unquote:Note by author: similar ground was taken in other appeals by other assessees.)

Quote:

83. From perusal of the above grounds following four common issues needs to be adjudicated:-

(iv) Direction by Ld. CIT(A) for reopening of case for Assessment Year 2010-11.

91. Now we come to the fourth common issue through which the respective assessee’s are aggrieved with the findings of Ld. CIT(A) to have exceeded her jurisdiction in giving direction to the Ld. A.O to reopen the cases for assessment year 2010-11 giving direction for examining the correctness of opening capital, which is not within the scope of Ld. CIT(A).

92. We observe that Ld. CIT(A) in her common appellate order for the 14 assessee’s have directed the Ld. A.O to consider the reopening of the cases for Assessment Year 2010-11. We find that the power of the Commissioner (Appeals) are provided in Section 251 of the Act reads as follows:-

“251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers –

(a) In an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment

[(aa)in an appeal against the order of assessment in respect of which the proceedings before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the enquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;]

(b)in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c)in any other case, he may pass such orders in the appeal as he thinks fit.

2.The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

Explanation.- In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.

93. From going through the above provision we understand that the Commissioner (Appeals) has the powers to decide the appeal against the assessee of a particular assessment which he/she may confirm/reduce or enhance or annulled. The order of the assessment relates to particular assessment year or assessment years. Ld. CIT(A) is bound to adjudicate the issues emanating out of the appeal for the respective assessment year. Giving directions to the A.O to consider for re-assessment for other assessment years for which no appeal is pending before CIT, in our view seems to be out of his/her jurisdiction. In the instant case it seems that Ld. CIT(A) has exceeded her jurisdiction of giving direction for reopening of cases for Assessment Year 2010-11 because the appeals of the assessee(s) were pertaining to Assessment Year 2009-10 only. We therefore allow this common issue raised by the respective assessee’s.

Unquote:

Provisions of S. 251, as considered by Tribunal are still same and there seems  no change in S. 251 or any other related provision so as to modify or increase power of CIT(A). In related provision of  “S.250. Procedure in appeal” also there is no material change. Even in the procedures also there is no provision for authorising or empowering the CIT(A) to make enquiry or cause to make enquiry for any other year other than the year for which appeal is before him and which he is deciding.

It appears that many CIT(A) acting  enthusiastically are exercising powers unreasonably and illegally in making enhancement or directing the AO to make enquiry  on subjects not related to assessment and also not relating to the year or order in appeal. Circular of Board for incentives to CIT(A) on enhancements is a wrong precedence. If such incentives are given to any authority to make assessments or orders against public and in favour of revenue/ government, then there will be unjust and illegal orders . For this reason on this issue there should not be amendment in law also to maintain legality and reasonableness  of provisions relating to powers of appellate authorities.

The order of Tribunal is on plain reading of the provisions which are clear and there is no ambiguity. Let us hope that revenue will accept the order of Tribunal and will not challenge it before High Court merely because revenue impact is higher.

Directions otherwise than through order on appeal is also not desirable

There are different provisions to deal with different situations like provisions for assessment, appeal, rectification, re-assessment, revision, survey, search etc.

 Concerned authority and his powers of enquiry, investigation  and scope of  orders are well defined in related provisions relating to different proceedings.

Therefore, it is not desirable that CIT(A) while considering and deciding appeal or after deciding any appeal should write to CIT or AO to make  enquiry. If he does so, it will not be within his power and will not be justifiable. CIT(A) must act within his authority, and should not exceed his authority by referring mater to other authority. Let concerned authorities discharge their functions and responsibilities. If CIT(A) act to initiate other proceedings of re-assessment, rectification or revision then it will not be proper for good well defined administrative policies and procedures etc.