2025 (3) TMI 462 - AT - Income Tax

CIT(A) exceeded section 154 jurisdiction by reviving protective addition after Tribunal deleted substantive addition in Orient Craft Limited case

ITAT Delhi held that CIT(A) exceeded jurisdiction under section 154 when reviving protective addition in assessee's hands after substantive addition in ... Rectification of mistake u/s 154 - protective addition in the hands of assessee when substantive addition made in the hands of Orient Craft Limited - HELD THAT:- Rendering of services on job work basis by M/s Orient Craft Limited was held to be genuine and the addition made substantively in the case of M/s Orient Craft Limited has been deleted by the Tribunal. The miscellaneous application filed by the Revenue against the order of the Tribunal in the case of Orient Craft Limited was also dismissed. The protective addition made in the hands of the assessee was originally deleted by the CIT(A) except for the commission on estimate basis of 5% which was sustained by the Ld. CIT(A) and the Revenue did not prefer any appeal. This order of the Ld. CIT(Appeals) was challenged by the Assessee before the Tribunal and the Tribunal allowed the appeals of the assessee deleting even the commission expenses which was sustained by the CIT(Appeals). Meanwhile the Revenue filed miscellaneous application before the Ld. CIT(Appeals) stating that the Tribunal deleted the substantive addition made in the hands of Orient Craft Limited and, therefore, the protective addition made in the hands of the assessee be revised. CIT(Appeals) based on the rectification application filed by the Assessing Officer modified his order reviving the protective addition along with the disallowance of 5% towards commission as was done by the Assessing Officer in the assessment originally. In our view this is beyond the scope of provision of section 154 and also beyond the jurisdiction of Ld. CIT(Appeals). Thus, we quash the orders of the Ld. CIT(Appeals) passed u/s 154 r.w.s. 250(6) of the Act dated 28/03/2024 for the assessment years. Appeals of the assessee are allowed. The issues presented and considered in the legal judgment are as follows:1. Whether the order passed by the Ld. CIT(A) rectifying and reviving the addition made in the hands of the assessee is beyond jurisdiction and scope of provision of section 154 of the Income Tax Act.2. Whether the protective addition made in the hands of the assessee was correctly revised based on the Tribunal's decision regarding the substantive addition made in the hands of Orient Craft Limited.Detailed analysis of the identified issues:- Relevant legal framework and precedents: The legal framework pertains to the provisions of section 154 of the Income Tax Act, 1961. Precedents include the Tribunal's decision in the case of Orient Craft Limited regarding the genuineness of job work charges.- Court's interpretation and reasoning: The Court found that the Ld. CIT(A) exceeded his jurisdiction by reviving the addition made in the assessee's hands through a rectification order under section 154. The Court noted that the Tribunal had already deleted the substantive addition in the case of Orient Craft Limited, and the protective addition in the assessee's case was also deleted by the Tribunal.- Key evidence and findings: The key evidence includes the orders passed by the authorities below, the Tribunal's decision in the case of Orient Craft Limited, and the rectification application filed by the Assessing Officer.- Application of law to facts: The Court applied the provisions of section 154 and analyzed the facts of the case, particularly the Tribunal's decision regarding the genuineness of job work charges and the deletion of additions in the case of Orient Craft Limited.- Treatment of competing arguments: The Ld. Counsel for the assessee argued that the Ld. CIT(A) exceeded his jurisdiction, while the Ld. DR supported the orders of the authorities below.- Conclusions: The Court quashed the orders of the Ld. CIT(A) passed under section 154 for the assessment years 2013-14 to 2015-16, as they were found to be beyond the scope of the provision and jurisdiction of the Ld. CIT(A). The appeals of the assessee were allowed.Significant holdings:The Court held that the Ld. CIT(A) exceeded his jurisdiction by reviving the addition made in the assessee's hands, which was beyond the scope of section 154. The Court also emphasized the Tribunal's decision regarding the genuineness of job work charges and the deletion of additions in the case of Orient Craft Limited.In conclusion, the legal judgment analyzed the jurisdictional limits of the Ld. CIT(A) in rectifying and reviving additions made in the assessee's hands, ultimately quashing the orders and allowing the appeals of the assessee.