The High Court of Delhi held that the impugned order passed by the ITAT suffers from perversity in so far as it refused to allow the assessee to urge the grounds by way of an oral application under Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963.
The revenue-initiated search action under Section 132 of the Income Tax Act on Kouton Group and during the search proceedings, it seized MOU relating to the transaction of sale and purchase of share capital of M/s S.R. Resorts Private Limited. Consequently, upon the seizure of the document, a notice was issued to the appellant, calling for filing of return of income. Since there was no compliance with the said notice, another notice was issued. In response, the appellant filed the original return of income declaring total income of and submitted that the same be treated as a return in compliance to notice.
The assessment proceedings culminated in the framing of an assessment order whereby the return of income of the appellant stood assessed. In the appeal before CIT(A), besides challenging the additions made by the AO on merits, the assessee also raised legal grounds regarding the validity of the reassessment proceedings undertaken by the revenue under Section 153C of the Act. The jurisdictional challenge to reassessment proceedings was principally premised on two fundamental legal grounds, which were first, the AO failed to record a satisfaction note for initiating proceedings under Section 153C of the Act and, secondly, there was no nexus between the issues in the assessment proceedings and the incriminating material seized during the search.
The CIT(A) rejected the pleas and held that there was no need for recording the satisfaction and that further, the law postulated no requirement for the existence of nexus between the assessment framed and the incriminating material as a precondition for reassessment proceedings. On merits, CIT(A) allowed the appeal in favor of the assessee and deleted all the additions made by the AO. The ITAT overturned the decision of the CIT(A) and allowed the appeal in favor of the Revenue and restored the issues to the file of the AO for deciding afresh with further direction to the Assessee to produce all the necessary documentary evidence in support of its claim.
The Assessee has approached the court aggrieved with the findings of the ITAT pertaining to Rule 27 and a ruling was sought on a question of law that what is the scope of Rule 27 of the Appellate Tribunal Rules, 1964 in the context of Section 253 (4) of the Income Tax Act,1995.
The division bench of Justice Sanjeev Narula and Vipin Sanghi held that assessee had taken the ground of maintainability before Commissioner (Appeals) and, therefore, in the appeal filed by the Revenue, it could rely upon Rule 27 and advance his arguments, even though it had not filed cross-objections against the findings which were against him. The ITAT, therefore, committed a mistake by not permitting the assessee to support the final order of CIT (A), by assailing the findings of the CIT(A) on the issues that had been decided against him.
“We are, therefore, of the considered opinion that the impugned order passed by the ITAT suffers from perversity in so far as it refused to allow the assessee to urge the grounds by way of an oral application under Rule 27,” the court further held.
Subscribe Taxscan Premium to view the Judgment
