AO has No Jurisdiction to Ignore CIT(A)’s Order even by Relying on Subsequent Supreme Court Decision: Delhi HC [Read Order]

In a recent ruling, the Delhi High Court has ruled that the Assessing Officer ( AO ) has no jurisdiction to ignore the order of the Commissioner of Income Tax (Appeals) [CIT(A)] even by relying on the subsequent supreme court decision.

The petitioner, Goodrich Carbohydrates challenged an order passed by the AO on 29.11.2024 under Section 250/143(3) of the Income Tax Act, 1961, which purported to give effect to the earlier appellate order dated 27.08.2020 passed by the CIT(A).

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The petitioner had filed its return of income for the assessment year 2017-18, declaring an income of ₹2,26,85,350/- which was subjected to scrutiny. Following this, the AO passed an assessment order on 21.12.2019 under Section 143(3) of the Income Tax Act.

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The issue arose from the AO’s addition of ₹5,87,096/- on account of the delay in depositing the Employees’ State Insurance (ESI)/Provident Fund (PF) under Section 36(1)(va) of the Act. In its appeal, the CIT(A) had accepted the petitioner’s arguments and allowed the appeal, removing the disallowance made by the AO.

The court noted that the order of the CIT(A) was unambiguous and clearly favored the petitioner. Following this appellate order, the AO was required to recompute the demand and issue a fresh order in compliance with the CIT(A)’s decision.

However, the AO, instead of adhering to the CIT(A)’s order, passed an impugned order asserting that no changes were required to the assessment, citing the subsequent Supreme Court judgment in M/s Checkmate Services P. Ltd. v. Commissioner of Income Tax-I, dated 12.10.2022.

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The court noted that this approach essentially reflected the AO’s attempt to review and contradict the CIT(A)’s settled decision by invoking a later judgment, which was not within his jurisdiction. The AO’s action was viewed as an overstep of his authority, as his role was only to give effect to the CIT(A)’s order, not to revisit it based on newer judgments.

Justice Vibhu Bakhru and Tejas Karia observed that “It is apparent that the AO had no jurisdiction to disregard the appellate order in the manner as he had done. The jurisdiction of the AO is limited to give effect to the CIT(A) appellate order dated 27.08.2020 passed by the CIT(A). In the event the Revenue finds that the order passed by the CIT(A) is not acceptable, the Revenue is required to avail its remedy of an appeal before the learned Income Tax Appellate Tribunal [ITAT]. It would be debilitating to the Rule of law, if the AO is permitted to sit as an appellate authority over the decision rendered by the appellate authority and review the appellate order passed by the CIT(A) instead of giving effect to it.”

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Mr. Maratha, counsel appearing for the Revenue asserted that the petitioner has a statutory remedy of appeal. However, since the impugned order has been passed without jurisdiction, we are not persuaded to refrain from entertaining the present petition.

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The petition was allowed, and the impugned order was set aside. The AO was directed to immediately issue a fresh order giving effect to the CIT(A)’s order dated 27.08.2020.

The court clarified that its ruling did not address the merit of the addition or disallowance in relation to the delayed deposit of the EPF/PF contributions. The petition was disposed of accordingly, reaffirming the limits of the AO’s authority in such cases. Also read: ITR Forms Notified: Here’s What CAs Can Charge for Filing Returns by Category

To Read the full text of the Order CLICK HERE

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