AO Can't Disregard ITAT's Direction To Re-examine Issue By Referring To CBDT Circular: Delhi High Court
The Delhi High Court has held that the assessing officer (AO) cannot disregard the direction of the Income Tax Appellate Tribunal (ITAT) to re-examine the issue by referring to the circular issued by the Central Board of Direct Taxes (CBDT).The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that since the additional grounds had come to be accepted by the Tribunal...
The Delhi High Court has held that the assessing officer (AO) cannot disregard the direction of the Income Tax Appellate Tribunal (ITAT) to re-examine the issue by referring to the circular issued by the Central Board of Direct Taxes (CBDT).
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that since the additional grounds had come to be accepted by the Tribunal and peremptory directions framed for the issue being re-examined, the AO was unjustified in taking the view that those aspects could not be considered.
The petitioner/assessee is an incorporated company and is a tax resident of Japan. For Assessment Year 2005-06, it filed its Return of Income, declaring an income. A revised return came to be submitted, enhancing the declared income. The revision, according to the petitioner, was on the basis of a sum of INR 53.82 crores being attributable to activities of its liaison office in India and INR 3.06 crores in respect of actual sales made to the Delhi Metro Rail Corporation.
The revisions, according to the writ petitioners, were necessitated in light of the settlement that had been arrived at with the respondents in earlier years. However, the AO, while framing an order of assessment, refused to accept the aforesaid declarations and thus chose not to proceed in accordance with the settlement that had been alluded to.
The assessee was aggrieved by the action of the department, and which, according to the assessee, constituted a departure from the stand as taken for AYs' 1998-99 to 2004-05, the petitioner, in its appeal preferred before the Commissioner of Income Tax (Appeals), added additional grounds assailing the view as taken by the AO. The CIT(A), however, dismissed the additional grounds.
The assessee approached the Income Tax Appellate Tribunal (ITAT) against the order passed by the CIT(A). The ITAT observed that since the assessee has set up a new case by raising additional grounds by departing from the rule of consistency, all the grounds were required to be decided by the CIT (A) on merits. At the same time, since the assessee has raised many of the new grounds first time before the CIT (A) which no material was there before the AO at the time of framing assessment, it would be in the interest of justice to remand the case back to AO to decide afresh after giving an opportunity of being heard to the assessee.
The petitioner appears to have reagitated that issue before the AO. The AO stated that the grant of relief as claimed by the petitioner would clearly result in the income chargeable to tax falling below the threshold as declared in its Return of Income. The AO had sought to rest its decision on CBDT Circular of 31 October 1989.
The assessee contended that since the additional grounds had come to be accepted by the Tribunal and peremptory directions framed for the issue being re-examined, the AO was clearly unjustified in taking the view that those aspects could not be considered. While ordinarily an assessee may be bound by a return as submitted and stand restrained from advocating any deviations therefrom, except by way of filing a revised return, that restriction would have no application when an assessment is liable to be undertaken pursuant to a direction framed by a court or a tribunal.
The court held that while ordinarily an assessee may be bound by the Return of Income as furnished, in case the Tribunal were to admit a question and proceed to accord relief, it cannot be denied or be made subject to a Return of Income being revised. The insistence of the assessee on a revision of the return being a precondition clearly fails to take into consideration the plenary powers which stand conferred upon the Tribunal by virtue of Section 254 of the Income Tax Act.
The court allowed the writ petition and quashed the final assessment orders as they negate consideration of the additional grounds which had been urged by the writ petitioners.
The court directed the AO to consider the additional grounds and pass fresh orders in accordance with law.
Counsel For Petitioner: Mayank Nagi, Tarun Singh
Counsel For Respondent: Sanjay Kumar, Easha Kadian
Case Title: Mitsubishi Corporation Versus ACIT
Citation: 2024 LiveLaw (Del) 867
Case No.: W.P.(C) 12911/2021 & CM APPL. 40691/2021