An assessing officer can not restart fresh assessement on set aside order of tribunal

Jaya Prakash v. ITO
M.P No.91/Bang/2021
(In ITA No.1374/Bang/2018)
Assessment year: 2014-15 [2021]

ITAT defines the meaning of ‘set aside’ and directs that AO can’t do fresh assessment if assessment order was set aside by ITAT.

BRIEF FACTS

1. The assessee herein came in appeal before the Tribunal and raised the issue with regard to taxability M.P No.91/Bang/2021 of Rs.4,88,75,000/- on the basis of From No.26AS. On this issue Tribunal observed as follows:-

"7. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. Admittedly in this case, the CIT(A) determined the sale consideration on the basis of Form 26AS without seeing the actual sale deed entered by the assessee with concerned parties.

2. In our opinion, sale consideration cannot be determined only on the basis of Form 26AS.

3. The provisions of Section 2(47)(v) can be applied only if there is a written contract coupled with the transfer of possession in terms of Section 53A of the Transfer of Property Act. In English law, the contract to which the doctrine of part-performance applies may be oral. However, s. 53A of the Transfer of Property Act expressly requires that the contract must be in writing by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. Thus Section 53A does not recognise an oral contract. The writing is an essential sine qua non for the applicability of the doctrine of part-performance. The lower authorities must have considered the relevant sale deed so as to compute the correct value of sale consideration and during the year of assessment. Being so, the assessment framed on the basis of Form 26AS is set aside.

4. However, we make it clear that if the revenue finds that there is material evidence in support of the transfer of land by assessee to M/s. Nambiars Pvt. Ltd. who had deducted TDS in anticipation of transfer of land in this A.Y. under consideration that to be brought to tax. In other words, if the revenue finds that there was a transferable land by the assessee in favour of the deductor of TDS i.e. Nambiars Pvt. Ltd. in the A.Y. by executing a proper sale deed towards transfer of the impugned property, the same may be examined in accordance with law. At this stage, we refrain from committing anything on status of the assessee in whose name capital gain to be taxed as we have set aside the assessment. It is kept open".

5. Now the contention of Appellant Representative is that the AO misunderstood the order of the Tribunal dated 16.4.2021. The ld.AO was of the opinion that the disputed issue was remitted back to him to do fresh assessment. As such the M.P No.91/Bang/2021 Ld.AR seeks clarification on the above findings of the Tribunal.

6. The Department Representative submitted that there is no mistake apparent from the record which requires any clarification on the issue raised by the assessee before the Tribunal.

7. We have heard both the parties and perused the records. Admittedly, the Tribunal on earlier occasion categorically held that the assessment framed by AO on the basis of Form 26AS was set aside. Now, the contention of the AR is that the AO is not understood the above order of the Tribunal and passed fresh order though there was no such direction by the Tribunal. In this case, Tribunal set aside the earlier order of the AO which is passed on the basis of Form 26AS.

8. Now we will clarify the meaning of the word 'set aside'.

THE TRIBUNAL HAS DEFINED SOME TERMS

1. The Tribunal held that it is essential to clarify the meaning of the word ‘set aside’. As per Black’s Law Dictionary, Sixth Edition at page 1372, the words “set aside” means:

‘To reverse, vacate, cancel, annul or revoke a judgment, order, etc.’

2. Further, the meaning of the word ‘annul’ on page 90 of the Black’s Law Dictionary has given as under:

“To reduce to nothing; annihilate; obliterate; to make void or of no effect; to nullify; to abolish; to do away with. To cancel; destroy; abrogate. To annul a judgment or judicial proceeding is to deprive it of all force and operation, either ab initio or prospectively as to future transaction.”

3. Furthermore, the meaning of the word ‘annulment’ is given on page 91 as under:

“To nullify, to abolish, to make void by the competent authority. An “annulment” defers from a divorce in that a divorce terminates a legal status, whereas an annulment establishes that a marital status never existed. Whealton v. Whealton, 67 Cal. 2 d 656, 63 Cal Rptr. 291, 294, 432 P. 2 d 979. Grounds and procedures for annulment of marriage are governed by State Statutes.”

Thus, the word ‘set aside’ means that the earlier assessment order has been quashed, and there was no direction by the Tribunal to do any fresh assessment on the same issue. When there is no direction to do the fresh assessment and the earlier assessment year has been set aside, the AO cannot take advantage of passing remark/observation on the Tribunal order to frame fresh asst. on the same issue.

9. In the case of Kalyan Kumar Roy Trust, 75 ITD 36 (Cal), the Hon'ble Tribunal has held that :

"7. We have no hesitation in accepting Mr. Raya's contentions. There is a difference between "annulment" of an assessment and "set aside" of the same only in the sense that in the former, the proceedings cannot be generally revived, whereas in the latter, they can be revived if there are clear directions to that effect; they are similar in the sense that "both wipe out the original orders" see the judgment in the case of Seghu Buchiah Setty's case (supra) at page 544 (SC). Section 251(1)(a) of the Income-tax Act, 1961 which is in pari materia with section 31(3)(a) and 31(3)(b) of the Income- tax Act, 1922 confers upon the first appellate authority the power to annul the assessment as well as the power to set aside the assessment.

10. Now in the present case [M.P No.91/Bang/2021], However, the power to set aside the assessment is circumscribed by the condition that in such a case he should refer the case back to the ITO for making a fresh assessment in accordance with his directions. The reason for the difference is clear. An assessment is annulled when there is a lack of pecuniary jurisdiction or territorial jurisdiction or jurisdiction over the subject-matter of the proceeding. In such a case after the assessment is annulled, there is no scope for passing a fresh assessment. However, if the assessment is set aside it is generally done only if there is a procedural irregularity which can be cured or if the assessment is made without property enquiry, etc. In such cases, the assessment will have to be set aside but since there is no lack of jurisdiction, the appellate authority would be bound in law to direct the assessing authority to make a fresh assessment after curing the irregularity. There are any number of authorities laying down the principles as to when an assessment is to be annulled and when it is to be only set aside for being redone afresh. But that is not the point that arises in the present appeals and, therefore, there is no need to refer to them.

11. The position made clear by section 251(1)(a) is that that it would be the duty of the appellate authority to give clear directions for making a fresh assessment in case he decides to set aside the assessment. It follows therefrom that if there are no such directions, the ITO would not have the power to reframe the assessment since a mere set aside of the assessment as held by the Supreme Court in the judgment cited supra, would also wipe out or destroy the M.P No.91/Bang/2021 assessment order just as in the case of annulment."

12. In view of the above discussion, we are of the opinion that Tribunal has set aside the assessment means that it has annulled the assessment, since it has not given any direction to re-do the assessment. This view of ours is supported by the judgment of the Hon'ble Calcutta High Court in the case of Fu Sheen Tannery, 264 ITR 456, wherein it was held that :

"it was clear that the appellate authority was conscious of the admission of the assessing authority that if the matter was remanded for fresh assessment it would require considerable time to explore, investigate, enquire to ascertain the actual position and, thus, decided to set aside the order of assessment without giving any direction for a fresh assessment. The order amounted to annulment of the assessment in toto. The order of fresh assessment was not valid."

13. The word 'set aside' means that the earlier assessment order has been quashed and there was no direction by the Tribunal to do any fresh assessment on the same issue. When there is no direction to do the fresh assessment and order for earlier assessment year has been set aside, the AO cannot take advantage of passing remark/observation on the Tribunal order so as to frame fresh assessment on the same issue.

14. Our view has been fortified by the order of the Chennai Bench of the Tribunal in the case of DCIT Vs. M.P No.91/Bang/2021 Jaya Publication 123 ITD 53, wherein it is held that when the CIT(A) set aside assessment which means he actually quashed the assessment ,since he has not given any direction to redo assessment . As such, the AO has no jurisdiction to pass any further order and he has to be duty bound to follow the direction of the CIT(A) and therefore cannot sit over the order of CIT(A), which is the statutory authority. The remedy lies with the department elsewhere and he has to file appeal against the order of the CIT(A) if he has any grievances.

15. This view is also been supported by Hon'ble Supreme Court in the case of Seghu Buchhaiah Shetty 52 ITR 532. The same view has been taken in this case also.

16. Accordingly in our opinion, on earlier occasion, the Tribunal had quashed the asst. order passed by the AO which is on the basis of 26AS and there is no direction to do any fresh assessment.

17. In the result, the Misc. Petition filed by the assessee is allowed.

CONCLUSION

From above decision it is clear that the AO has no power to start fresh assessment in a case ,in which Hon’ble Tribunal has set aside order of AO, unless specific directions has been given in the order setting aside by appellate authority. The AO in cases where his/her assessment order has been set aside by the first appellate authorities has only remedy to appeal against such set aside orders before second appellate authorities and has no power to restart fresh assessment proceedings on its own on the basis of orders of first appellate authorities.

DISCLAIMER: The case law produced above is only for sharing information to the readers. The views expressed here are the personal views of the author. In case of necessity do consult with tax consultants for more clarity and understanding on subject matter.