CIT(A)’s Direction to take Appropriate action on Tax Perquisites u/s. 17 of Income Tax Act exceeds exceeds Jurisdiction confer by S.251: ITAT [Read Order]

The Delhi bench of Income Tax Appellate Tribunal (ITAT) held that the direction by Commissioner of Income Tax (Appeals) [CIT(A)] to take appropriate action on tax perquisites under Section 17 of the Income Tax Act, 1961 exceeds the jurisdiction conferred by section 251 of Income Tax Act.

The appeal was filed by the assessee, Adaab Hotels Ltd. against the order of CIT(A)  in which the issue placed was, the CIT(A) acted without jurisdiction by directing the Assessing Officer to take appropriate action for not deducting Tax Deduction at Source (TDS) from the perquisites in respect of interest free loans given to the directors. 

Gautam Jain, the counsel for the assessee submitted that while giving the directions by CIT(A) to take appropriate action on tax perquisites under Section 17 of Income Tax Act, the CIT(A) exceeded the powers vested upon him for disposing of any appeal before him. Hence, CIT(A) has decided something which was not in the grounds of appeal raised before him.

Kanv Bali, the counsel for the revenue submitted that the directions of the CIT(A) are well within the explanation appended to provision of Section 251 of the Income Tax Act.

The tribunal during the appeal proceedings observed that the CIT(A) has the following powers for disposing an appeal, that is,

               (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the 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 reduce the penalty;

               (c) in any other case, he may pass such orders in the appeal as he thinks fit.

Further, the Commissioner of Income Tax (Appeals) should 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.

After considering the facts, the ITAT bench observed that the CIT(A) directed the AO to take appropriate action for not deducting TDS from the perquisite in respect of interest free loans given to directors and to take appropriate action to tax the perquisites under Section 17 of the Income Tax Act, 1961.

Thus, the Two-member bench of N. K. Billaiya (Accountant Member) and C.N. Prasad (Judicial Member) held that the direction of CIT(A) exceeds the jurisdiction conferred by Section 251 of the Income Tax Act,1961.

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