The Jammu & Kashmir And Ladakh High Court has held that the power conferred upon the Assessing Authority under Section 143(2) of the Income Tax Act is statutory in character and cannot be tinkered with or taken away by any order or instruction issued by the Central Board of Direct Taxes (CBDT) in the exercise of the power conferred upon it under Section 119 of the Income Tax Act for issuance of order or direction would be tantamount to requiring the Assessing Officer to make or dispose of a particular case in a particular manner not prescribed by statute.
The bench of Justice Sanjeev Kumar and Justice Rajesh Sekhri has observed that Section 119 of the Income Tax Act confers upon CBDT power to issue such orders, instructions and directions to income tax authorities for proper administration of the Act providing that all persons employed in the execution of the Income Tax Act shall observe and follow orders, instructions and directions of the Board. CBDT’s instructions or directions cannot interfere with the power of the income tax authorities conferred upon it under the Income Tax Act.
The appellant/assessee is a partnership firm against whom an assessment for the assessment year 2005-06 was framed by the Assessing Officer as against the income of Rs.2,21,148. The order of assessment of the appellant was framed by the Assessing Officer after selecting the case for scrutiny as per the guidelines laid down in the action plan for the year 2006-07 as contained in Clause 2(q).
The Assessing Officer made an aggregate addition as unexplained income on the ground that plant and machinery shown in the balance sheet whereas the same was shown as on 1st April, 2004 by a figure which exceeded by Rs.13,29,206. The Assessing Officer made an addition on account of plant and machinery added by the assessee during the year under appeal. The Assessing Officer, thus, made a total addition of Rs.20,28,855.
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Feeling dissatisfied and aggrieved by the assessment made by the Assessing Officer, the appellant filed an appeal before the Commissioner of Income Tax (Appeals), Jammu (CIT(A)) raising a plea that the assessment order was framed in violation of the CBDT guidelines and, therefore, null and void.
The CIT(A) confirmed the assessment order and additions made by the Assessing Officer.
The appellant took the matter before ITAT, Amritsar by way of an appeal. The ITAT has dismissed the appeal and upheld the order of CIT(A), Jammu.
The assessee contended that the CIT(A) as well as ITAT failed to appreciate that assumption of jurisdiction by the Income Tax Assessing Officer for framing an assessment order under Section 144 of the Income Tax Act did not have the sanction of law, in that, the case of the appellant was selected for scrutiny by issuing notice in gross violation of CBDT guidelines. In terms of Clause 2(q) of the CBDT guidelines, the case for scrutiny is selected only when there is addition to the capital. Similarly, under Clause 2(o) of CBDT guidelines, the case of an assessee for scrutiny can be selected and assessment could be framed under Section 144 only in cases of the contractors whose gross contractual receipts exceed rupees one crore and if total profit declared was less than 5% of gross contractual receipts.
The assessee argued that the profit of the appellant for the accounting year in question was only Rs.7,92,508, which, in any case, was more than 5% and, therefore, Clause 2(o) of CBDT guidelines was not attracted. Simply because the assessee participated in the proceedings before the Assessing Officer without raising such objection cannot validate otherwise invalid jurisdiction. It is, thus, submitted that there could be no estoppel against law. The additions made on account of fixed assets to the tune of Rs.13,29,206 and Rs.6,99,679, aggregating to Rs.20,28,885, was not tenable as these amounts were part of the books of accounts and balance sheet and, therefore, could not have been termed as addition to the assets.
The department contended that the Assessing Officer as well as both the appellate authorities have taken note of all aspects of the matter and have rightly concluded that there were unexplained additions made to the fixed assets for which the assessee was bound in law to account for.
The court, while dismissing the appeal, held that the Assessing Officer, having noticed that certain income had escaped assessment, was well within its power to issue notice under Section 143(2) of the Act and proceed to frame assessment under Section 144 of the Act. The order of assessment framed under Section 144 of the Income Tax Act by the Assessing Officer in the case of the appellant, therefore, cannot be found fault with.
Case Title: M/s Reshi Construction Company Versus Commissioner of Income Tax
Case No.: ITA No.15/2009
Date: 31/08/2024
Counsel For Appellant: Adv. Aditya Gupta
Counsel For Respondent: Adv. Suraj Singh Wazir
