High Court Of Punjab & Haryana
CIT vs. Dr. M.C. Garg
G.S. Singhvi & Ajay Kumar Mittal, JJ.
IT Ref. No. 37 of 1997
11th October, 2004
Rajesh Bindal, for the Revenue : None, for the Assessee
Ajay Kumar Mittal, J. :
At the instance of the Revenue, the Income-tax Appellate Tribunal, Delhi Bench “D”, Delhi (for short “the Tribunal”), has referred the following questions of law under s. 256(1) of the IT Act, 1961 (for short “the Act”), for the opinion of this Court :
“(1) Whether, on the facts and circumstances of the case, the Honâble Tribunal was right in law to modify the direction of the learned CIT(A) by holding that the addition in any case under this head should not exceed Rs. 49,091 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in restricting the power of the CIT(A) for additions/enhancement or issuing such directions to the AO ?”
The brief facts of the case necessary for answering the reference may be noticed. The assessee is an individual and proprietor of M/s Garg Eye and Maternity Hospital, Kaithal. The assesseeâs premises were searched under s. 132 of the Act on 9th Oct., 1987, during which a diary and other records were seized. The diary revealed that certain expenditure which was recorded therein during the period between 1st January to 5th March, 1987, was from undisclosed sources and accordingly, the AO made an addition of Rs. 48,891 (wrongly mentioned as Rs. 49,091 in the original assessment). The assessee contested the said addition before the CIT(A) and the CIT(A) remanded the issue to the file of the AO to decide afresh after giving due opportunity of being heard to the assessee. The CIT(A) vide his order dt. 17th Feb., 1992, directed the AO that in case he came to the conclusion that the sources of expenses remained unexplained, he will also consider similar expenses likely to have incurred by the assessee for the period not covered in the seized diary but covered for the assessment year in question. Aggrieved by the aforesaid directions of the CIT(A), the assessee preferred an appeal to the Tribunal against the impugned order and the learned Tribunal modified the direction of the CIT(A) that the addition in any case on this account should not exceed the addition originally made. It is against the said observation of the learned Tribunal that the reference has been made to this Court at the instance of the Revenue for the opinion of this Court.
We have heard Shri Rajesh Bindal, learned counsel for the Revenue, and with his assistance perused the paper book. Shri Rajesh Bindal submitted that the CIT(A) under s. 251 of the Act while exercising the appellate powers can confirm, reduce, enhance, annul or set aside an assessment and refer back the same to the AO. The said powers are very vast and the restriction imposed by the Tribunal that the AO shall not exceed the additions originally made, i.e., beyond Rs. 48,891 (wrongly mentioned as Rs. 49,091) is not based on legal principles. Learned counsel placed reliance on S.R. Kalani vs. CIT (1979) 120 ITR 163 (MP); CIT vs. Devichand Pan Mal (1986) 52 CTR (Raj) 34 : (1986) 160 ITR 545 (Raj) and Amin Chand & Sons vs. CIT (1980) 18 CTR (P&H) 241 : (1982) 133 ITR 439 (P&H). Sec. 251 of the Act reads as under : “251. (1) In disposing of an appeal, the Dy. CIT(A) or, as the case may be, the CIT(A) shall have the following powersâ (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or he may set aside the assessment and refer the case back to the AO for making a fresh assessment in accordance with the directions given by the Dy. CIT(A) or, as the case may be, the CIT(A) and after making such further inquiry as may be necessary, and the AO shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh 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 Dy. CIT(A) or, as the case may be, the CIT(A) 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.âIn disposing of an appeal, the Dy. CIT(A) or, as the case may be, the CIT(A) 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 Dy. CIT(A) or, as the case may be, the CIT(A) by the appellant.”
6. A careful reading of the aforesaid provision would show that the CIT(A) while adjudicating an appeal under s. 251 has wide powers and he can set aside an assessment and can remand the same for fresh decision by the AO. While interpreting s. 251, the Madhya Pradesh High Court in S.R. Kalaniâs case (supra) held as under : “Sub-cl. (a) of this section provides that in an appeal against an order of assessment, the AAC may either confirm, reduce, enhance or annul the assessment. He may set aside the assessment and refer the case back to the ITO for making a fresh assessment in accordance with the direction given by him. And it is significant that while conferring these powers under s. 251(1)(a) no limitation has been placed on the powers of the AAC subject to the right of appeal conferred on the assessee under s. 246. It, therefore, clearly indicates that the AAC while hearing an appeal is not bound by the limitations which are placed on an assessee while preferring an appeal under s. 246. And in this view of the matter, hearing an appeal in the present case if the AAC has set aside the assessment and directed an inquiry in respect of the status of the assessee and thereafter to proceed for a fresh assessment, it could not be said that the AAC has gone beyond his jurisdiction which he is exercising under s. 251(1)(a) of the Act.”
7. In Devichand Pan Malâs case (supra), the Rajasthan High Court observed as under : “A perusal of s. 251(1) shows that the powers of the AAC are wider than those of the ordinary appellate Court under the Code of Civil Procedure. His competence is not restricted to dealing with the subject-matter of appeal, he may examine all matters covered by the assessment order and correct the assessment in respect of all such matters even to the prejudice of the assessee and may remand the case to the ITO for inquiring into items which were not the subjectmatter of appeal….”
8. This High Court in Amin Chand & Sonsâs case (supra), made similar observations, which are reproduced as under : “It is obvious from the plain language of the aforesaid section that the AAC is not debarred from setting aside an order passed under s. 185(1)(b) and directing the ITO to redecide the matter after taking into consideration some other relevant matters. The powers of the AAC are wider than those of an appellate Court under the Code of Civil Procedure. His competence is not restricted to dealing with the subject-matter of the appeal. He may remand the case to the ITO for enquiring into the items which were not even the subject-matter of an appeal. In our opinion, therefore, the AAC had the power to set aside the order of the ITO under s. 185(1)(b) and restore the case to his file for fresh decision after examining the contention raised by Shri Sohan Lal that the assessee-firm had already stood dissolved w.e.f. 1st Feb., 1967.”
9. In CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), the Supreme Court laid down in very clear terms that the appellate authority has plenary powers while disposing of the appeal and that this power is coterminous with that of the ITO. While commenting on the powers of the AAC under s. 31 of the Act (now s. 251), it was observed by the Supreme Court as under : “…….If an appeal lies, s. 31 of the Act describes the powers of the AAC in such an appeal. Under s. 31(3)(a) in disposing of such an appeal the AAC may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under cl. (b) thereof he may set aside the assessment and direct the ITO to make a fresh assessment. The AAC has, therefore, plenary powers in disposing of an appeal. The scope of his power is conterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do. If the ITO has the option to assess one or other of the entities in the alternative, the AAC can direct him to do what he should have done in the circumstances of a case………”
10. In view of the consistent interpretation of s. 251 by various High Courts and the law laid down by the Supreme Court, we hold that the Tribunal was in error while giving a direction that the AO shall not make an addition exceeding Rs. 48,891 (wrongly mentioned as Rs. 49,091). In the result, the questions of law referred by the Tribunal as reproduced above are answered in favour of the Revenue and against the assessee.
[Citation : 271 ITR 264]