2010 (7) TMI 564 - HC - Income Tax

Addition - DVO s valuation - Unexplained house property - The order passed by the Tribunal under section 254(1) is the effective order so far as the appeal is concerned and any order passed under section 254(2) either allowing amendment or refusing to amend merged with the original order passed That finding was based on records produced by the Revenue in justification of the assessment order passed by the Assessing Officer and therefore, now it cannot be contended that it is vitiated on account of error on the face of the record - Exercise of power under section 254(2) of the Act by the Tribunal in recalling the entire order amounted to passing a fresh order in appeal which is not permissible - Liberty is granted to the Revenue to challenge the order of the Tribunal passed in appeal before the appropriate forum, if so advised - Even if there is some delay, the same may be condoned

Summary

Issues:
Challenge to the order of the Income-tax Appellate Tribunal under section 254(2) of the Income-tax Act, 1961 regarding the deletion of a sum of Rs. 17,17,205 based on the DVO's valuation.

Analysis:
The petitioner challenged the order passed by the Income-tax Appellate Tribunal, Cuttack Bench, Cuttack, under section 254(2) of the Income-tax Act, 1961, which partly allowed the appeal by directing the Assessing Officer to delete the addition of Rs. 17,17,205 related to unexplained house property. The Revenue filed a Miscellaneous Petition seeking a review of the Tribunal's finding, which was accepted, setting aside the order and directing a fresh hearing. The petitioner contended that the Tribunal exceeded its jurisdiction in exercising review power under section 254(2) contrary to a decision of a Division Bench of the court. The court noted that an order under section 254(2) does not exist independently of the original order under section 254(1).

The court examined the correctness of the Tribunal's order recalling the original order and directing readjudication of the issue of deletion of Rs. 17,17,205. It was found that the Tribunal's exercise of power under section 254(2) amounted to passing a fresh order in appeal, which is impermissible. The Tribunal's decision was based on factual and legal aspects raised in the appeal, particularly on the lack of material evidence supporting the addition based on the DVO's report. The court held that the Tribunal's action was beyond its scope and quashed the order setting aside the deletion of Rs. 17,17,205. However, a correction in the figures was maintained, and the Revenue was granted liberty to challenge the Tribunal's order before the appropriate forum, with any delays condoned.