Powers of CIT(A) are co-terminus with that of AO

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Powers of CIT(A) are co-terminus with that of AO

Short Over Oview : Powers of CIT(A) are co-terminus with that of AO and this is amply clear from section 251(1)(a) and (b) Explanation to section 251(2), which requires CIT(A) to apply his mind to all the issues which arise from impugned order before him. Since CIT(A) was not empowered to dismiss the appeal for non-prosecution, the matter was remanded for fresh disposal.

AO made various additions and same were challenged by way of appeal filed by assessee before CIT(A). As assessee did not comply with notices for hearing issued by CIT(A), CIT(A) concluded that assessee was not interested in prosecuting his case and accordingly, dismissed assessee’s appeal and confirmed additions made by AO.

it is held that Powers of CIT(A) are co-terminus with that of AO and this is amply clear from section 251(1)(a) and (b) and Explanation to section 251(2), which requires CIT(A) to apply his mind to all the issues which arise from impugned order before him, Accordingly, CIT(A) was not empowered to dismiss the appeal for non-prosecution. Thus, CIT(A) erred in passing a non-speaking order on each of the points which arose for his consideration and case was remanded back to CIT(A) to pass de novo order as per law.

Decision: Matter remanded.

IN THE ITAT, DELHI BENCH

H.S. SIDHU, J.M. & ANADEE NATH MISSHRA, A.M.

Ashish Dham v. Dy. CIT

ITA No. 1953/Del/2016

4 January, 2019

Assessee by: None

Revenue by: Sridhar Dora, Sr. DR

ORDER

Anadee Nath Misshra, A.M.

This appeal by assessee is filed against the order of the learned Commissioner (Appeals)-16, New Delhi, [“Ld. CIT(A)” for short], dated 15-2-2016, for assessment year 2011-12, on the following grounds :–

“1. Learned Commissioner (Appeals), without appreciating the correct facts of the case and without giving proper opportunity of being heard is not justified in law and facts and circumstances of the case in not deciding the appeal on the merits of the case and as well as on validity/legality of assessment order passed by learned assessing officer without having the jurisdiction over the case.

  1. That learned Commissioner (Appeals) without appreciating the correct facts of the case giving proper opportunity of being heard is not justified in law and facts and circumstances of the case in confirming the addition of Rs. 12,52,000 under section 69 of the Income Tax Act on account of cash deposit in bank account made by learned assessing officer.
  2. That learned Commissioner (Appeals) without appreciating the correct facts of the case and giving proper opportunity of being heard is not justified in law and facts and circumstances of the case in confirming the addition of Rs. 17,64,241 made by learned assessing officer by disallowing the interest on housing loan from income house property.
  3. That learned Commissioner (Appeals) without appreciating the correct facts of the case and giving proper opportunity of being heard and raising any query during the course of hearing is not justified in law and facts and circumstances of the confirming the addition the addition of Rs. 17,00,000 on account of alleged difference in the receipts as per 26AS and return of income.
  4. Assessee has every right to make, add, delete, modify, or alter any grounds of appeal at the time of hearing.”
  5. The assessment order under section 143(3) of the Income Tax Act, 1961 (“I.T. Act” for short) was passed on 31-12-2013, in which the following additions were made by the assessing officer (AO) :–
Rs.
Income as declared by the assessee 44,71,710
Addition under section 69 of the Income Tax Act 12,52,000
Addition on account of wrong claim of deduction under section 24(b) of the Income Tax Act Rs. 17,64,241 17,64,241
Addition on account of difference in the receipts As per 26AS and return of income 17,00,000
TOTAL INCOME 91,87,951
ROUNDED OFF 91,87,950
  1. The assessee filed appeal before the learned Commissioner (Appeals). However, the assessee did not comply with hearing notices issued by the learned Commissioner (Appeals). As the assessee did not appear before the learned Commissioner (Appeals), the learned Commissioner (Appeals) concluded that the assessee was not interested in prosecuting his case and he dismissed the assessee’s appeal with the following observations in his aforesaid impugned order dated 15-2-2016 :–

Findings:

Opportunities granted to appellant:

(i) Case was fixed for 19-10-2015 by issuing notice under section 250. No one attended.

(ii) Another notice under section 250 is issued on 16-11-2015 and hearing fixed on 9-12-2015.

(iii) On 9-12-2015 case was adjourned to 30-12-2015. None attended on 30-12-2015.

(iv) On 12-1-2016 another notice under section 250 issued case fixed for hearing on 4-2-2016.

(v) On 4-2-2016 case was adjourned to 11-2-2016. No one attended on 11-2-2016 or till the passing of this order. From the opportunities given to the assessee and his non-compliant attitude, it is clear that appellant is not interested in prosecuting his case. As there is nothing on record to rebut the conclusion drawn by the assessing officer. The additions made by assessing officer are confirmed.

In the result the appeal of the appellant is dismissed.”

3.1 The assessee filed appeal in Income Tax Appellate Tribunal (ITAT), against the impugned order dated 15-2-2016 of the learned Commissioner (Appeals). We find from the perusal of record, that the following grounds of appeal were raised by the assessee before the learned Commissioner (Appeals) —

“1. That order passed by learned assessing officer is without jurisdiction and bad in law and should be quashed ab-initio.

  1. That without prejudice to ground of appeal no. 1, order passed by learned assessing officer is barred by limitation and bad in law and should be annulled.
  2. That without prejudice to ground of appeal no. 1 and 2 learned assessing officer without appreciating the correct facts of the case and giving proper opportunity of being heard is not justified in law and facts and circumstances of the case in making the addition of Rs. 12,52,000 under section 69 of the Income Tax Act on account of cash deposit in bank account.
  3. That learned assessing officer without appreciating the correct facts of the case and giving proper opportunity of being heard is not justified in law and facts ;and circumstances of the case in making the addition of Rs. 17,64,241 by disallowing the interest on housing loan from income from house property.
  4. That learned assessing officer without appreciating the correct facts of the case and giving proper opportunity of being heard and raising any query during the course of hearing is not justified in law and facts and circumstances of the case in making the addition of Rs. 17,00,000 on account of alleged difference in the receipts as per 26AS and return of income.
  5. Assessee has every right to make, add, delete, modify or alter any grounds of appeal at the time of hearing.”

3.2 However, the learned Commissioner (Appeals) in his aforesaid impugned order dated 15-2-2016, has not disposed off various grounds of appeal through a speaking order on merits. Instead, the learned Commissioner (Appeals) has dismissed assessee’s appeal on merits, in a summary manner through a non-speaking order, on merits.

  1. The relevant provisions under Income Tax Act regarding procedure in appeal, and powers of the Commissioner (Appeals) are contained in sections 250 and 251 of Income Tax Act, which are reproduced below for ready reference :–

250. (1) The Commissioner (Appeals) shall fix a day and place for the hearing of the appeal, and shall give notice of the same to the appellant and to the assessing officer against whose order the appeal is preferred.

(2) The following shall have the right to be heard at the hearing of the appeal —

(a) the appellant either in person or by an authorized representative;

(b) the assessing officer, either in person or by a representative.

(3) The Commissioner (Appeals) shall have the power to adjourn the hearing of the appeal from time to time.

(4) The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the assessing officer to make further inquiry and report the result of the same to the Commissioner (Appeals).

(5) The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the Commissioner (Appeals) is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable.

(6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.

[(6A) In every appeal, the Commissioner (Appeals), where it is possible, may hear and decide such appeal within a period of one year from the end of the financial year in which such appeal is filed before him under sub-section (1) of section 246A.]

(7) On the disposal of the appeal, the Commissioner (Appeals) shall communicate the order passed by him to the assessee and to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

  1. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers —

(a) In appeal against an order of assessment, may confirm, reduce, enhance or annual the assessment;

(aa) In appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;

(b) In an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c) In any other case, he may pass such orders in the appeal as he thinks fit.

(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

Explanation.–In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.”

4.1. A perusal of the above provisions of law shows that under section 250(6) of Income Tax Act the learned Commissioner (Appeals) was obliged to dispose of the appeal in writing after stating the points for determination and to then pass an order on each of the points which arose for consideration; and the learned Commissioner (Appeals) was further obliged to state the reasons for his decision on each such points which arose for determination. Thus, the learned Commissioner (Appeals) was duty bound to dispose of the appeal on merits. Moreover, the perusal of section 251(1)(a) and (b) of Income Tax Act and the further perusal of Explanation of section 251(2) of Income Tax Act shows that the learned Commissioner (Appeals) was required to apply his mind to all the issues which arose from the impugned order before him, whether or not these issues had been raised by the assessee before him. Also, section 251(1)(a) of Income Tax Act provides that while disposing of an appeal against assessment order, Commissioner (Appeals) shall have the power to confirm, reduce, enhance or annul the assessment. Similarly, the section 251(1)(b) provides that in disposing of an appeal against an order imposing a penalty, Commissioner (Appeals) may confirm or cancel such orders or vary it so as to either to enhance or to reduce the penalty. On cumulative consideration the provisions under section 250(6) read with sections 250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation of section 251(2) of Income Tax Act, we come to the conclusion that the learned Commissioner (Appeals) is not empowered to dismiss the appeal for non-prosecution of appeal and is obliged to dispose of the appeal on merits. Once the assessee files an appeal under section 246A of Income Tax Act, the assessee sets in motion the machinery designed for disposal of the appeal under sections 250 and 251 of Income Tax Act. If the appeal filed by the assessee fulfils the requirements of maintainability and admissibility prescribed under sections 246, 246A, 248 and 249 of Income Tax Act; neither the assessee can stop the further working of that machinery as a matter of right by withdrawing the appeal, or by not pressing the appeal, or by non-prosecution of the appeal; nor the first appellate authority, Commissioner (Appeals) in this case, can halt this machinery by ignoring either the procedure in appeal prescribed under section 250 of Income Tax Act or powers of Commissioner (Appeals) prescribed under section 251 of Income Tax Act. Commissioner (Appeals), the first appellate authority, cannot dismiss assessee’s appeal in limine for non- prosecution without deciding the appeal on merits through an order in writing, stating the points of determination in the appeal, the decision thereon and the reason for the decision. It is well-settled that powers of learned Commissioner (Appeals) are co-terminus with powers of the assessing officer. Useful reference may be made to order of Apex Court decision in CIT v. Kanpur Coal Syndicate  (1964) 53 ITR 225 (SC) : 1964 TaxPub(DT) 0339 (SC) in which it was held that AAC has plenary powers in disposing off an appeal; that the scope of his power is co-terminus with that of the ITO, that he can do what the ITO can do and also direct him to do what he failed to do. In this context, useful reference may also be made to Apex Court’s decisions in the cases of CIT v. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) : 1967 TaxPub(DT) 0347 (SC) and CIT v. B.N. Bhattachargee (1979) 118 ITR 461 (SC) : 1979 TaxPub(DT) 1026 (SC) for the proposition that an assessee having once filed an appeal, cannot withdraw it and even if the assessee refuses to appear at the hearing, the first appellate authority can proceed with the enquiry and if he finds that there has been an under-assessment, he can enhance the assessment. Just as, once the assessment proceedings are set in motion, it is not open to the assessing officer to not complete the Assessment Proceedings by allowing the assessee to withdraw Return of Income; it is similarly, by analogy, not open for learned Commissioner (Appeals) to not pass order on merits on account of non-prosecution of appeal by the assessee or if the assessee seeks to withdraw the appeal or if the assessee does not press the appeal. When the Commissioner (Appeals) dismisses the appeal of assessee for non-prosecution of appeal by the assessee; in effect, indirectly it leads to same results as withdrawal of appeal by assessee. When the assessee is not permitted to withdraw the appeal filed before the first appellate authority, the first appellate authority is duty bound to not allow a situation to arise, through dismissal of appeal for non-prosecution of appeal before the first appellate authority; in which, in effect, indirectly the same results are obtained as arise from withdrawal of appeal by the assessee. What cannot be permitted in law to be done directly, cannot be permitted to be done indirectly either, as is well settled. In view of the foregoing discussion; and on careful perusal of section 250(6) read with section 250(4), 250(5), 251(1)(a), 251(1)(b) and Explanation to section 251(2) of Income Tax Act; it is amply clear that learned Commissioner (Appeals) has no power to dismiss appeal in limine for non-prosecution of appeal by the assessee. We draw support from order of Hon’ble Bombay High Court in the case of CIT v. Premkumar Arjundas Luthra (HUF) (2016) 240 Taxman 133 (Bom-HC) : 2016 TaxPub(DT) 3496 (Bom-HC) for the propositions that learned Commissioner (Appeals) is required to apply his mind to all issues which arise from impugned order before him whether or not same had been raised by appellant before him; and that Commissioner (Appeals) is obliged to dispose of the appeal on merits. In this case, it was held as under :–

“8. ………it is very clear once an appeal is preferred before the Commissioner (Appeals), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the assessing officer to make further inquiry and report the result of the same to him as found in section 250(4) of the Act. Further section 250(6) of the Act obliges the Commissioner (Appeals) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the Commissioner (Appeals) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of section 251 of the Act also makes it clear that while considering the appeal, the Commissioner (Appeals) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the Commissioner (Appeals). Thus once an assessee files an appeal under section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the Commissioner (Appeals) is obliged to dispose of the appeal on merits. In fact with effect from 1-6-2001 the power of the Commissioner (Appeals) to set aside the order of the assessing officer and restore it to the assessing officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the Commissioner (Appeals) is co-terminus with that of the assessing officer, i.e., he can do all that assessing officer could do. Therefore just as it is not open to the assessing officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the Commissioner (Appeals) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the section 251(1)(a) and (b) and Explanation to section 251(2) of the Act which requires the Commissioner (Appeals) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the Commissioner (Appeals) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.”

  1. In view of the foregoing paragraphs, we are of the view that the learned Commissioner (Appeals) erred in dismissing assessee’s appeal on merits in a summary manner, without giving detailed reasons for his order, on various grounds of appeal before him. We further hold that the learned Commissioner (Appeals) erred in passing a non-speaking order on each of the points which arose for his consideration and he failed in discharging the statutory obligation to state the reasons for his decision on each such points, which arose for determination in assessee’s appeal before the learned Commissioner (Appeals). Therefore, we set aside the impugned order dated 15-2-2016 of learned Commissioner (Appeals); and we direct the learned Commissioner (Appeals) to passde novo order as per law, in accordance with sections 250 and 251 of Income Tax Act, for fresh disposal of appeal filed by the assessee before the learned Commissioner (Appeals) against the aforesaid assessment order dated 31-12-2013.
  2. In the result, assessee’s appeal is treated as partly allowed for statistical purposes.

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