1982 (5) TMI 3 - HC - Income Tax

AAC remands let ITO make fresh assessments under s.143(3) unless AAC limits; Tribunal remand limits scope strictly

HC held that the AAC's remand powers exceed those of the Tribunal: on remand by the AAC the ITO may make a fresh assessment with powers akin to s.143(3), ... Scope of ITO's powers to make a fresh assessment under an order of remand passed by the appellate authority - sales made to his nominees by the company was his stock-in-trade - Distinction Of Powers Of AAC And Tribunal - Validity of notice u/s 148 during pending assessment proceedings - Jurisdiction to embark on any enquiry which was beyond the scope of the directions given by the Tribunal in its remand order - HELD THAT:- The powers of the AAC are wider than those of the Appellate Tribunal. The AAC while hearing an appeal under s. 251 of the Act can examine all matters covered by the assessment order and correct the assessment in respect of all such matters even to the prejudice of the assessee. He may remand the case to the ITO for enquiring into the items which were not the subject-matter of appeal also. If he sets aside an assessment and remands the case to the ITO for making a fresh assessment, the powers of the ITO while making the fresh assessment are the same as if he were making an original assessment under s. 143(3) of the Act. The AAC can, however, limit the powers of the ITO by giving suitable directions in regard to the scope of enquiry by the ITO. In the absence of such direction or restriction on the power of the ITO, while making a fresh assessment, the ITO is not bound by anything that had happened either when he made the original assessment or when the appeal was heard. When the remand is made by the Tribunal the position is different. The powers of the Tribunal are confined to the subject-matter of appeal as constituted by the original grounds of appeal and such additional grounds as may be raised by the leave of the Tribunal. Thus, when the Tribunal allows the appeal and sets aside the assessment and remands the case for making a fresh assessment, the power of the ITO is confined to such subject-matter only. He cannot take up the questions which were not the subject-matter of appeal before the Tribunal. This will be so even though no specific direction has been given by the Tribunal. If a specific direction is given, then there is no scope whatsoever for the ITO to travel beyond those directions or restrictions. Deletion of three additions - In the relevant previous year apart from the two sale deeds, one made in favour of Smt. Kochhar and the other in favour of Smt. Bawa, there was only one more sale deed of Rs. 40,000 in favour of Smt. Sandhu which alone was relevant for consideration in this year. The profit in respect of this transaction could be arrived at by estimating the cost price of the plot and the land sold and therefrom the cost price of the building and the plot retained by the petitioner shall be excluded and further he shall be given the benefit of the development expenditure, if any, incurred by him for developing the land. The subject-matter of inquiry was, therefore, restricted by the Tribunal to this very transaction only and the method in which the profit was to be arrived at was also indicated. That being so, the ITO was not justified in embarking on an enquiry into any other item not covered by these directions. Certainly the various notices issued by him under ss. 143(3) and 142(1) of the Act were not justified. This petition, therefore, is liable to succeed. The present case stands on a much stronger footing because here there is no dispute in regard to the validity of the return originally filed for the year under consideration and further in regard to the pendency of the proceedings in pursuance of that very return. The assessment has not become final and, therefore, initiation of proceedings under s. 147 and issue of notice under s. 148 were not valid. Issues Involved:1. Scope of ITO's powers after remand by the Tribunal.2. Validity of notice u/s 148 during pending assessment proceedings.Summary:Issue 1: Scope of ITO's Powers After Remand by the TribunalThe Tribunal remanded the case to the ITO with specific directions to reassess the profit from the sale of property to Mr. Sandhu. The Tribunal's conclusions were:1. The assessee carried out a business deal in purchasing and selling plots.2. Only the sale to Mr. Sandhu for Rs. 40,000 was relevant for the year under consideration.3. Profits should be calculated by estimating the cost price of the sold plot and excluding the cost price of the building and the plot retained by the assessee, along with considering development expenditure.4. The Tribunal agreed with the AAC regarding the other two additions made by the ITO.The ITO, however, issued notices u/s 143(3) and 142(1) for additional inquiries beyond the Tribunal's directions. The court held that the ITO was not justified in expanding the scope of inquiry beyond the Tribunal's specific directions, emphasizing that the ITO must confine himself to the directions issued by the Tribunal.Issue 2: Validity of Notice u/s 148 During Pending Assessment ProceedingsThe ITO issued a notice u/s 148, claiming that the petitioner's income had escaped assessment. The court noted that income cannot be said to have escaped assessment if the assessment proceedings are still pending and have not yet resulted in a final order. The court referenced the Supreme Court's decision in Ghanshyamdas v. Regional Assistant Commr. of Sales Tax, which established that income has not escaped assessment if there are ongoing proceedings that have not yet culminated in a final assessment. Consequently, the court quashed the notice u/s 148 issued by the ITO.Conclusion:Both petitions were allowed with costs. The ITO was directed to adhere strictly to the Tribunal's directions in reassessing the profit from the sale to Mr. Sandhu, and the notice u/s 148 was quashed.