The Delhi High Court allowed the writ petition in favor of Mitsubishi Corporation and quashed the assessment order as the tribunal failed to consider the plenary powers conferred to it under Section 254 of the Income Tax Act of 1961, and the order was quashed to the extent that they negated consideration of the additional grounds that had been raised by the petitioners.
The assessee, Mitsubishi Corporation, filed its Income Tax Return ( ITR ) on 31-10-2005 declaring an income of INR 4,18,98,800/-. Later on, a revised income was filed, declaring the total income as Rs. 61,05,41,430. The revision was as a result of Rs. 53.82 crore attributed to the activities of its liaison office in India and Rs. 3.06 crore in respect of actual sales to the Delhi Metro Rail Corporation. However, the assessment officer ( AO ) declined to accept the aforementioned assertions when drafting an order of assessment on December 31, 2008, and as a result, decided not to move further with the settlement that had been mentioned.
The assessee, who was aggrieved by the above order, filed an appeal before the Commissioner of Income Tax (Appeals) [ CIT(A) ] and added additional grounds assailing the order taken by the AO. The additional grounds were dismissed by CIT(A) in its order.
The petitioner later on approached the Income Tax Appellate Tribunal (ITAT). The ITAT held that it would be in the interest of justice to remand the case back to the AO to decide afresh after giving the assessee an opportunity to be heard, as the assessee had raised many of the new grounds for the first time before the CITA, and no material was there before the AO at the time of framing the assessment.
The relief claimed by the petitioner in the writ petition would clearly result in the income tax charged falling below the threshold as declared in its ITR. Mayank Nagi and Tarun Singh, appearing for the petitioner, contended that although an assessee is typically bound by a return as submitted and stands restrained from advocating any deviations from it other than by filing a revised return, this restriction does not apply when an assessment is likely to be conducted in accordance with a directive issued by a court or tribunal.
The bench, comprising of Justice Yashwant Varma and Justice Ravinder Dudeja, held that the Tribunal failed to consider the plenary powers that stood conferred upon it under Section 254 of the Income Tax Act. The bench further observed that, as the tribunal had directed the AO to consider the issue afresh, the direction cannot be avoided by a reference to Circular No. 549 dated 31 October 1989. The bench allowed the writ petition and quashed the assessment order dated 30 November 2021 insofar as they negated consideration of the additional grounds that had been raised by the petitioners. The bench also directed the AO to pass fresh orders in accordance with the law.
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