2019 (8) TMI 568 - HC - Income Tax

Power of AO to determine income in remand case - ITAT directed AO for granting one more opportunity to the assessee for explanation of the source of cash deposit and in any case the addition if any it should not be more than the peak credit in the bank account. - AO determine the tax and penalty amount sans computing peak credit in the bank account - HELD THAT - It is trite law that the AO has a legal obligation to implement the order of the ITAT strictly and such failure would result in the failure of justice. A writ of mandamus would be issued in such circumstances to the respondent AO to carry out the directions given to him by the ITAT. This view is fortified by the judgment of the Hon ble Apex Court in the case of Bhopal Sugar Industries Ltd., vs. ITO 1960 (9) TMI 11 - SUPREME COURT . It is ex-facie apparent that no peak credit of the bank account has been worked out by the AO to conclude the assessments on remand by the ITAT. Hence, the order impugned being perverse and illegal stands quashed. The proceedings are restored to the file of the respondent - AO to redo the assessment in the light of the observations made by the ITAT inasmuch as any addition if to be made to the tax declared, it should not be more than the peak credit in the bank account of the petitioner.

Summary

Issues:
1. Challenge to order of Assessing Officer under Section 143(3) of the Income Tax Act, 1961.
2. Implementation of orders of the Income Tax Appellate Tribunal by Assessing Officer.
3. Failure to compute peak credit in the bank account as per ITAT directions.

Analysis:
The petitioner challenged an order passed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961, seeking direction to implement the orders of the Income Tax Appellate Tribunal (ITAT) dated 09.11.2016. The ITAT had remanded the matter to the Assessing Officer with specific directions regarding the explanation of the source of cash deposit and the computation of peak credit in the bank account. The petitioner contended that the Assessing Officer failed to comply with the ITAT's order, specifically regarding the determination of peak credit in the bank account.

The petitioner's senior counsel argued that the Assessing Officer is obligated to strictly implement the ITAT's order, failing which would result in a failure of justice. Citing the judgment of the Hon'ble Apex Court in the case of Bhopal Sugar Industries Ltd. vs. Income Tax Officer, the court reiterated that the Assessing Officer must adhere to the directions given by the ITAT. The court noted that the Assessing Officer did not work out the peak credit of the bank account as required by the ITAT, leading to a flawed assessment.

Consequently, the court quashed the impugned order dated 26.12.2017, deeming it perverse and illegal. The proceedings were restored to the file of the Assessing Officer for reassessment in accordance with the ITAT's observations. The court directed the Assessing Officer to ensure that any addition to the declared tax should not exceed the peak credit in the petitioner's bank account. The Assessing Officer was instructed to comply with the order promptly, preferably within four weeks from receiving a certified copy of the judgment, thereby disposing of the writ petition accordingly.