2017 (4) TMI 968 - AT - Income Tax

FAA direction to AO to take action u/s. 147/148 and to assess the income of the assessee for the AY. 2008-09 and not for the year under consideration - Held that - FAA had no power to give directions about another AY. especially no appeal was filed before him for that year. Therefore we hold that the order passed by him was invalid. See Lilasons Industries Ltd case 2016 (6) TMI 1193 - ITAT INDORE and Murlidhar Bhagwan Das 1964 (1) TMI 5 - SUPREME Court - Decided in favour of assessee

Summary

Issues Involved:
1. Jurisdictional issue raised by the assessee regarding the assessment of income in a different assessment year.
2. Validity of the directions given by the First Appellate Authority (FAA) to assess the income in another assessment year.
3. Applicability of legal precedents and judgments in determining the jurisdiction of the FAA.

Issue 1: Jurisdictional Issue Regarding Assessment of Income in a Different Assessment Year:
The assessee, engaged in supplying plastic raw material, filed its return of income at NIL, but the Assessing Officer (AO) determined its income at ?18.42 lakhs. The AO observed that the assessee received commission and interest from BASF Styrenics Private Ltd., which were not offered in the return of income. The AO made additions to the income of the assessee based on this observation. The First Appellate Authority (FAA) held that the commission income was relevant to the assessment year 2008-09 and not the year under appeal. The FAA directed the AO to assess the income in the AY 2008-09, deleting the additions made by the AO for the year under consideration. The assessee contended during the hearing that the FAA lacked jurisdiction to direct the assessment in another assessment year, citing legal cases to support this argument.

Issue 2: Validity of Directions Given by the FAA Regarding Assessment in Another Assessment Year:
The Tribunal analyzed similar cases where the FAA directed remedial action for different assessment years. The Tribunal observed that the FAA's jurisdiction is limited to the subject matter of the assessment year under appeal. Citing various legal precedents, the Tribunal held that the FAA cannot give findings or directions for assessment years not before them. The Tribunal emphasized that the FAA's powers are confined to the assessment year under appeal and cannot extend to other assessment years. Therefore, the Tribunal concluded that the FAA's directions to assess income in another assessment year were invalid as no appeal was filed before him for that year.

Issue 3: Applicability of Legal Precedents in Determining FAA's Jurisdiction:
The Tribunal extensively discussed legal cases and judgments to establish the limits of the FAA's jurisdiction. Referring to cases such as CIT vs. Kanpur Coal Syndicate and ITO vs. Murlidhar Bhagwan Das, the Tribunal highlighted that the FAA's powers are restricted to the assessment year under appeal. The Tribunal reiterated that the FAA cannot give directions or findings for assessment years not pending before them. By applying legal precedents, the Tribunal concluded that the FAA's directions for another assessment year were unwarranted and ordered the directions to be expunged.

In conclusion, the Tribunal found in favor of the assessee, holding that the FAA's directions for assessment in another assessment year were invalid due to lack of jurisdiction. The appeal filed by the assessee was allowed, and the order was pronounced in open court on 19th April 2017.