TaxTMI 
TaxTMI 
2016 (8) TMI 1228
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Assessee is a company. The Assessee filed 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was directed to make the required investigation 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 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Act as well as the order of Assessment and orders of 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 : ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be fully taken that the appellant had duly intimated as required under the Act. The PAN Services per se is not the Department - it is only 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and has intimated that it is not contemplating to appeal. So, what is the grievance left? Thus the only grievance left is for opportunity to be heard at the assessment. Ultimately the harping on 'service' only 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)...................
X X X X Extracts X X X X
X X X X Extracts X X X X
....s per directions above." 12. Aggrieved by the order of the CIT(A), the Assessee has preferred ITA No.976/Kol/2015 before the Tribunal. The grounds of appeal raised by the Assessee read thus: "1. For that the Learned Commissioner of Income Tax (Appeals) (CIT(A)) should have allowed the 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 groun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gainst was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant." It was pointed out by him that in an appeal against an order of assessment, prior to the amendment to Sec.251 of the Act by the Finance Act, 2001 w.e.f. 1.6.2001, the CIT(A) had the power to set aside an assessment. But after 1.6.2001, his powers are limited only 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 le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessment. For the sake of reference, we extract the provisions of section 251 of the Act as under:- "Powers of the Commissioner (Appeals). 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment." 6. Since the Id. CIT(A) is not empowered 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T(A) to pass such orders in the appeal as he thinks fit. The reason for coming to the above conclusion has been stated thus by the CIT(A): "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 Sec.251".... We are of 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 noti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rthiness of the shareholders. The scope of the proceedings before the AO was therefore limited. The proceedings commenced pursuant to an order of revision which was not based on belief regarding escapement of income but a case where the proceedings began as the order of the AO was found to be "erroneous and prejudicial to the interest of the revenue". The CIT(A) in an appeal against such order cannot convert the proceedings to proceeding for 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....