Sections 143(3), 147, 254 — In an assessment completed u/s.143(3) r.w.s. 254, the AO should confine himself to the directions issued by the Tribunal. He does not have jurisdiction to go beyond the directions given by the Tribunal.

Sections 143(3), 147, 254 — In an assessment completed u/s.143(3) r.w.s. 254, the AO should confine himself to the directions issued by the Tribunal. He does not have jurisdiction to go beyond the directions given by the Tribunal.

For A.Y. 2001-02, the original assessment of the assessee-firm, engaged in the business as builder and developer, was completed by estimating the income at 8% of the total contract receipts of Rs.94,57,500.

The assessment was subsequently reopened and in an order passed u/s.143(3) r.w.s. 147 of the Act, the total income was determined at Rs.28,11,700. This income was determined by the AO by adopting a profit rate of 20% of the gross profit. Aggrieved by the order passed u/s.147, the assessee preferred an appeal to the CIT(A) who gave a deduction of Rs.20,00,000 towards cost of land. The total income was modified at Rs.16,12,679. The assessee accepted the order of the CIT(A) but the Revenue preferred an appeal to the Tribunal.

The Tribunal found that the issue about cost of land was never raised before the AO and there was no discussion in the order of the AO on this issue. The Tribunal remitted the issue of deducting the cost of land to the AO and directed him to make necessary adjustments in accordance with law. In proceedings initiated u/s.254 and completed u/s.143(3), the AO collected evidences from sellers and accepted the contention of the assessee that it has incurred Rs.20 lakh towards purchase of land. However, he went further and reworked the profit and ultimately determined the income of the assessee at Rs.32,69,228.

Aggrieved by the order passed u/s.143(3) r.w.s. 254, the assessee preferred an appeal to the CIT(A) who held that the AO was justified in estimating the profit at 12%, which was also the rate adopted by the CIT(A) earlier.

Aggrieved the assessee preferred an appeal to the Tribunal.

 Held:

The Tribunal noted that the single issue was remitted back by the Tribunal to the file of the AO. Having examined the issue remitted and having concluded that the assessee’s contention on the issue remitted was to be accepted the AO should have stopped there. The Tribunal observed that the action of the AO in going further and reworking the profit was against law. It held that in an order passed u/s.143(3) r.w.s. 254, the AO should confine himself to the directions issued by the ITAT. He does not have jurisidction to go beyond the direction given by the Tribunal.

Since the AO had gone beyond the direction of the Tribunal and had redetermined the income, the Tribunal held the order passed by the AO to be contrary to law and set aside the same. The order of the CIT(A) was vacated. The Tribunal remitted the matter to the AO to determine the income at Rs.16,12,679 as detemined by the CIT(A) and to close the file. The Tribunal allowed the appeal filed by the assessee.