2018 (3) TMI 727 - AT - Income Tax

Appeal Validity: Section 143(3) vs. 153A Assessment

The Tribunal clarified the validity of filing an appeal against the original order under section 143(3) of the Income Tax Act after a subsequent ... Assessment u/s 153(A) - Disallowance of expenditure u/s 14A - Held that:- We are of the view that the appeal against the order dated 20.06.2012 and passed u/s 143(3) of the Act does not become infructuous, consequent to the search action u/s 132 in the case of the assessee on 11.10.2012 as per the second proviso to section 153A the assessment completed prior to the search action will not abate. Therefore the CIT(A) should be directed to decide the appeal of the assessee filed against the order dated 20.06.2012 passed u/s 143(3) on merits. The order of CIT(A) is accordingly set aside and the CIT(A) is directed to consider the appeal of the assessee on merits after affording opportunity of being heard to the assessee. Appeal of the assessee as allowed for statistical purpose. Issues:1. Disallowance of expenditure under section 14A of the Income Tax Act, 1961.2. Power of appellate authority to allow withdrawal of appeal.3. Validity of appeal filed against the order u/s 143(3) of the Act after subsequent assessment u/s 153A of the Act.Issue 1: Disallowance of expenditure under section 14A of the Income Tax Act, 1961:The Assessee, a company engaged in finance and investment, filed an appeal against the order of the Assessing Officer (AO) disallowing expenditure under section 14A of the Act. The appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] challenged this disallowance. Subsequently, a search and seizure operation was conducted, leading to an assessment u/s 153A of the Act for various assessment years, including A.Y. 2010-11. The Assessee requested the CIT(A) to consider the impact of the new assessment order u/s 153A on the appeal filed against the original order u/s 143(3) of the Act. The CIT(A) dismissed the appeal for non-prosecution, citing that the issues in the two orders were different.Issue 2: Power of appellate authority to allow withdrawal of appeal:The CIT(A) held that once an appeal is filed, the appellate authority lacks the power to permit its withdrawal, even if the Assessee desires to do so. The CIT(A) referred to judicial findings and established precedents to support this stance. The Assessee's argument based on the impact of the subsequent assessment u/s 153A on the original appeal was not accepted by the CIT(A), who dismissed the appeal for non-prosecution.Issue 3: Validity of appeal filed against the order u/s 143(3) of the Act after subsequent assessment u/s 153A of the Act:The Assessee, aggrieved by the CIT(A)'s order, appealed to the Tribunal. The Assessee contended that since the CIT(A) did not decide the appeal on merits, the order should be set aside, and the appeal should be adjudicated on its merits. The Tribunal, after considering the submissions, held that the appeal against the original order u/s 143(3) did not become infructuous due to the subsequent assessment u/s 153A. The Tribunal directed the CIT(A) to decide the appeal on its merits, emphasizing that the assessment completed before the search action would not abate. Consequently, the Tribunal allowed the Assessee's appeal for statistical purposes.In conclusion, the Tribunal's decision clarified the validity of the appeal filed against the original order u/s 143(3) after the subsequent assessment u/s 153A. The Tribunal directed the CIT(A) to decide the appeal on its merits, emphasizing that the assessment completed before the search action would not abate. The Assessee's appeal was treated as allowed for statistical purposes.