In a recent ruling the Bombay High Court quashed the action of the Principal Commissioner of Income Tax ( PCIT ) as the remand back of the matter to the Assessing Officer (AO) was to calculate disputed tax and not fresh adjudication.
The Return of income was filed by the petitioner, Agarwal Industrial Corporations Limitedand subsequently, the assessment was completed under section 143(3) of the Income Tax Act, 1961. The Reassessment proceedings were initiated against the petitioner and the income was reassessed after making an addition of 100% of alleged bogus purchases under section 68 of the Income Tax Act.
An appeal was preferred before the Commissioner of Income Tax (Appeals) [‘CIT(A)], who restricted the addition to 25% of the amount of purchases made.This order, however, was challenged by both the petitioner as also the revenue before the Income Tax Appellate Tribunal, Pune.
The Tribunal partly allowed the appeal of the petitioner and remanded the matter to the to the file of the Assessing Officer. The petitioner filed declaration in Form-I under Direct Tax Vivad se Vishwas Act with Rules, 2020 framed thereunder in respect of 25% addition of alleged bogus purchase.
The PCIT, Respondent 4, issued certificate in Form- 3 under the Act, wherein the demand on account of disputed tax was reflected as against the amount payable indicated by the petitioner in Form-I at Rectification Application was filed by the petitioner claiming that the demand raised in Form No.3 was erroneous and unjustified and that the orders of the ITAT had been ignored for purposes of calculating the tax liability.
The Coram consisting of Justice Abhay Ahuja and Justice Dhiraj Singh Thakur, observed that “Designated authority had only to calculate the disputed tax by giving effect to the orders of the FAQ No.7 would, in our opinion, be applicable if it was a case of remand by an appellate authority to the Assessing Officer, where a reasonable opportunity of being heard was not given by the Assessing Officer to the assessee or the Appellate Authority wanted the Assessing Officer to carry out a fresh examination of the issue with a specific direction.”
“The action of the respondent No.4 in issuing Form No.3 based upon FAQ No.7 issued by the CBDT is unsustainable and accordingly set aside” the Court said.
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