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TMI Blog2016 (8) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... led return of income for AY 2008-09 on 28.7.2008 declaring a total income of Nil. The same was processed u/s.143(1) of the Income Tax Act, 1961 (Act). Subsequently notice u/s.148 of the Act was issued on 18.3.2010 on the basis of information that income under the head "Consultancy Fees" to the tune of Rs. 35,000/- during the FY 2007-08 had escaped assessment. An order of assessment u/s.147/143(3) of the Act was passed on 9.4.2010 by the Assessing Officer, determining the total income of the Assessee at Rs. 48,620/- after adding to the loss as per profit and loss account of Rs. 6776 a sum of Rs. 20,400 being prelimnary expenses for issue of share capital, which was treated as capital expenditure by the AO and a sum of Rs. 35,000/- which was consultancy fees which was not offered to tax in the original return of income. 3. The address of the Office as per the records of the AO was No.164, M.G.Road, Kolkata-7. On 13th March, 2010, the registered office of the Assessee was changed to No.3, Queens Park, Kolkata-19. The Assessee had filed the requisite forms with the Registrar of Companies on 15.3.2010 regarding change of address. It had also applied for change of address in the PAN det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and enquiries with regard to the identity and creditworthiness of the shareholders. The Assessee was informed by the said letter dated 3.11.2014 that pursuant to the aforesaid directions, the AO took up the Assessment of the Assessee. The AO passed an order dated 31.3.2014 u/s.144/263/147/143(3) of the Act. The said order passed by the AO was an ex-parte order and the service of notice on the Assessee as stated in this order was as follows: ".....Accordingly, the case was refixed for hearing on 21.11.2013 through this office letter dated 7.11.2013 but the said letter came back unserved on 21.11.2013. Subsequently, a notice u/s.142(1) was issued on 10.02.2014 calling for, inter alia, details of shareholders on 20.2.2014. But, the said notice also came back unserved on 17.02.2014. Further, summons u/s.131 were also issued by speed post on 27.02.2014 to the two directors of the company, fixing the hearing on 10.03.2014. But, no compliance was made. Ultimately, the notice u/s.142(1) was served by affixation through the departmental inspector. Since there was no compliance on the part of the Assessee, the identity as well as the creditworthiness of the persons shown as shareholders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty were issued at a wrong address and never served on the Assessee in spite of the AO fully knowing about the change in its address. It was submitted that the Assessing Officer erred in addition of income on the basis of an ex-parte order passed by him. The Assessee did not receive any notice in respect of the hearing. Though there is no finding in the order that there are any inaccurate particulars of the income on the part of the Assessee, all the details and evidences in connection with bonafide claim by the Assessee were disclosed in the course of the original/re-opened assessment proceeding and there was no material whatsoever on the basis of which addition to total income could have been made by the AO and order dated 31.03.2014 is not justified on the facts and circumstances of the case. It was therefore prayed that the order u/s 144/263/147/143(3) dated 31.03.2014 be declared as illegal, ab-initio void and is liable to be cancelled. 8. The CIT(A) formulated the following points for determination by him: "6.1. Upon going through the Grounds of Appeal, the Points for Determination arising are : A. Validity of the fresh assessment made [pursuant to the revision orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an outsourcing service agency. At the same time though, the Act specifically mentions that the notice for assessment 'shall be served on the.assessee' - which has not been the case here. So, impasse!! - which now requires that the episode be considered in entirety." 10. At end of page-16 of his order the CIT(A) agreed that notice in proceedings u/s.263 of the Act as well as in the proceedings relating to the fresh assessment were not served on the Assessee. The following were his findings in this regard: "But I would not like to extend to assume that the notices u/s.263 and for the fresh assessment were serve- else everything will become matter of assumptions only." 11. On the other aspects of the appeal, the CIT(A) reached the following conclusion: 7.21. Now back to our case here, to sum up the facts and features: A. The appellant has not appealed against the revision order u/s 263, and it has stated that it is not contemplating to do so. The show cause notice for the initiation of the revision proceeding was issued at the same address as has been in the show cause notice for the fresh assessment. The mode to service the notices were identical in both proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y translates to opportunity to be heard. I thus would have remitted the matter back to the AO, but the power for CIT(A) to set-aside assessment and direct for fresh assessment is no more there in the statute [section 251(1)(a)] since many years now. Calling for remand report/proceedings by the AO would also not do. This is because at the outset itself - there has, in the strict technical sense, not been service of notice upon the assessee. Having considered all these aspects, I hold that this appeal though it is presented against assessment order, however the issues encompass much deeper and larger matters, and so I hold that this appeal is in the category as envisaged in clause (d) to sub-section (1) to section 251, which is: Section 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers - (a).............................. (aa).............................. (b)................................. (c) in any other case, he may pass such orders in the appeal as he thinks fit. So, having duly considered this impasse, I consider that the solution to both the appellant as also the revenue will be by giving direction u/s 150 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal of the appellant and quashed the order of assessment appealed against. The CIT(A) should have held that the said order of assessment was vitiated on facts and in law and had to be quashed. 2. For that the CIT(A) in his order ignored the material facts apparent from the records and as also recorded in the order of the Hon'ble High Court showing that the Income Tax Officer was fully aware of the changed address of the appellant and had even corresponded thereat. The Learned CIT(Al's finding that there was any omission on the part of the appellant as to the communication of the changed address is perverse and illegal. 3. For that the CIT(A) exceeded his jurisdiction and/or authority in giving directions under Section 150 of the Income Tax Act, 1961 (the Act) to reopen the assessment. The said direction is wholly illegal and uncalled for and there were no grounds and/or materials to justify the same. 4. For That further and in any event and without prejudice to ground no.3 the direction under section 150 of the Act for reopening of an assessment, where admittedly six years have already elapsed on 31 st March 2015 from the end of the assessment year 2008-09, is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to either, confirming, reducing, enhancing or annulling the assessment. The impugned order was passed by the AO in an appeal against an order of assessment and therefore was governed by the provisions of Sec.251(1)(a) of the Act and therefore the CIT(A) has power only to confirm, reduce, enhance or annul the assessment. He does not have the power to set aside the assessment and direct the AO to frame an assessment afresh u/s.148 of the Act. According to him therefore the directions of the CIT(A) are illegal and cannot be sustained. The CIT(A) having annulled the assessment should have stopped there and ought not to have given the direction to issue notice u/s.148 of the Act. On the aspect whether the order of the CIT(A) can be construed as an order whereby the CIT(A) has annulled the assessment, the learned counsel for the Assessee drew our attention to a decision of the ITAT Lucknow Bench in the case of Smt.Uma Goenka Vs. ACIT ITA No. 421/LKW/2011 (AY 2001-02) order dated 24.8.2012 wherein the CIT(A) found that the notice u/s.148 of the Act deserved to be struck down and consequently the assessment u/s.147 of the Act deserved to be annulled. The CIT(A) however issued a further dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered to issue direction to the Assessing Officer after annulling the assessment to frame the assessment in a particular manner, the direction by the Id. CIT(A) to the Assessing Officer is beyond his jurisdiction. Therefore, the direction so given by the Id. CIT(A) is uncalled for and we accordingly set aside the order of the Id. CIT(A) passed in this regard." 14. He also placed reliance on the decision of the ITAT Chennai Bench in the case of Sun Metal Factory (I) Pvt.Ltd. Vs. ACIT 24 ITD 14 (Chennai) wherein the facts were that pursuant to a search u/s.132 of the Act a block assessment for the period from 1- 4-1990 to 3-11-2000 was framed by the AO. The first appellate authority, viz., CIT(A) found that the additions made in the block assessment order was not based on evidence found during search and therefore the said additions could not have been made while framing a block assessment u/s.158BC of the Act. The CIT(A) however gave a direction u/s.150 of the Act, directing the AO to reopen assessment for assessment year 1999-2000 by issuing notice u/s.148 of the Act. On appeal by the Assessee against such direction, the Tribunal held that the CIT(A) does not have powers to give su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that the present case would clearly fall within clause (a) of Section 251(1) of the Act and the conclusion to the contrary by the CIT(A) cannot be sustained. Whatever may be "deeper and larger matters", the same cannot take away an appeal against an order of assessment falling within clause (a) of Sec.251(1) of the Act to clause (d) of Sec.251(1) of the Act. The powers of the CIT(A) are co-terminus with that of the AO. What the AO could do and ought to have done, can be done by the CIT(A). In the light of such wide powers of the CIT(A) envisaged by the Act in an appeal against an order of assessment (except the power to set aside and direct an assessment), there is no reason for the CIT(A) to conclude that because of non service of notice on the Assessee before concluding the assessment, he cannot call for remand report/proceedings from the AO and decide the issues himself. The Revenue is not in appeal against the order of the CIT(A) against any part of the order which is against the Revenue. The observations of the CIT(A) in the impugned order that the assessment order stands vacated clearly suggests that he has annulled the order of assessment. Under Section 251(1) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing income which escaped assessment. Besides the above, proceedings under Sec.147 of the Act contemplates "reason to believe on the part of the AO that any income chargeable to tax has escaped assessment for any assessment year". Such satisfaction of the AO cannot be substituted by the CIT(A) in an appellate proceeding arising out of an order of assessment passed pursuant to an order or revision u/s.263 of the Act. In our view the CIT(A) having annulled the order of assessment ought not have given directions to the AO to initiate proceedings u/s.147 of the Act by issue of notice u/s.148 of the Act. We therefore quash that part of the order of the CIT(A) wherein the directions to initiate proceedings u/s.147 of the Act by issue of notice u/s.148 of the Act are contained. The appeal of the Assessee accordingly stands allowed. 19. As far as ITA No.975/Kol/2015 the case of Srijan Vinimay Pvt. Ltd., (earlier known as M/S.Srijan Overseas Pvt.Ltd., is concerned, the facts are pari materia the same, including the dates of the order of assessment u/s.147/143(3) of the Act, the date of the order u/s.263 of the Act, the date of order of assessment passed u/s.147/263/144 of the Act, the ..... 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