3) Manisha R. Chheda v. ITO
Mukesh P. Chheda v. ITO
ITAT ‘B’ Bench, Mumbai
Before J. Sudhakar Reddy (AM) and
P. Madhavi Devi (JM)
ITA No. 5961 and 5962/Mum./2004
A.Y. : 2001-02. Decided on : 17-8-2007
Counsel for assessee/revenue : Pradeep Kapasi/
Chet Ram
S. 263 of the Income-tax Act, 1961 — Power to revise AO’s order — AO making certain additions to the income returned — Whether the Commissioner has power to revise AO’s order in order to sustain the addition but on different reasons — Held, No.
Per J. Sudhakar Reddy :
Facts :
In their return of income filed, both the assessees had returned besides other income, income from agriculture. According to the AO, the assessees had not proved with evidence that they were engaged in agricultural activities. Therefore, the income so declared was treated by the AO as income from other sources.
According to the CIT, the reasons for additions given by the AO were grossly inappropriate and inadequate for sustaining the additions. In order to strengthen the case of the Revenue, he held both the orders passed by the AO as erroneous and prejudicial to the interest of the Revenue. Accordingly, he directed the AO to make fresh assessment. The assessees challenged the orders passed by the CIT before the Tribunal.
Held :
According to the Tribunal, the CIT wanted to indicate the same thing what the AO had indicated, but for different reasons. It further observed that an order u/s.263 cannot be passed for giving additional reasons or substituting reasons by a higher authority to support the same cause. According to it, when the AO had in fact rejected the claim of the assessee, it cannot be said that any prejudice was caused to the Revenue. Merely because the CIT was not happy with the reasons given by the AO, the same did not give jurisdiction to invoke the powers conferred on him u/s.263. The Tribunal further observed that once an addition was made, the issue if appealed against, travelled to the First Appellate Authority whose powers were co-terminus with that of the Assessing Officer. The first appellate authority, according to the Tribunal, can always, if he feels that the reasoning given by the Assessing Officer was not sufficient, strengthen the order by giving his own reasons, if the situation so permitted. If the assessees did not carry the matter in appeal, the assessment orders attain finality. Thus, it was noted that, in either case, the scheme of the Act does not permit the supervisory Commissioner to give additional reasons for supporting the same additions that had been made by the AO.
For the reasons stated as above, the Tribunal quashed both the orders passed by the CIT u/s.263 and allowed the appeals filed by the assessee.