Case Law Details
Sateesh Kumar Vs ITO (Delhi High Court)
Introduction: In a recent judgment, the Delhi High Court addressed a crucial aspect of the Income Tax Act, emphasizing the powers of the Commissioner of Income Tax (Appeals) [CIT(A)] in relation to assessment orders. The case of Sateesh Kumar vs. ITO revolved around the question of whether the CIT(A) possesses the authority to annul an assessment order. This article provides an in-depth analysis of the court’s ruling and its implications.
Detailed Analysis:
1. Background: The case under consideration involves an assessment order passed by the Assessing Officer (AO) under Section 147, read with Section 144 of the Income Tax Act, 1961. This assessment order pertains to Assessment Year (AY) 2016-17 and involves an alleged escaped income of Rs. 30,85,500/-. The petitioner had moved from Quetta in West Pakistan to India and brought cash and jewelry with him, which became the subject of the escaped income assessment.
2. Petitioner’s Claim: The petitioner contested the assessment order, arguing that he had deposited the cash in a bank in India and valued the jewelry as of April 1, 2015. The Assessing Officer added the value of the jewelry to the cash amount, resulting in the alleged escaped income.
3. Power of CIT(A): The central issue in this case was whether the CIT(A) possessed the authority to annul the assessment order. The court noted that the CIT(A) has the power to annul an assessment order, which includes the power to set it aside, effectively canceling the order. This interpretation was based on the broad scope of the term “annul.”
4. Maintainability of the Appeal: The petitioner contended that the appeal to the CIT(A) would not lead to setting aside the assessment order. However, the court disagreed with this interpretation, finding that Section 251 of the Income Tax Act conferred the power of annulment on the appellate authority, which included the authority to set aside the assessment order.
5. Closure of the Writ Petition: The Delhi High Court closed the writ petition, granting the petitioner the liberty to pursue an appropriate statutory remedy. If the petitioner filed an appeal within the next three weeks, the CIT(A) would hear the case on its merits, including addressing the issue of limitation raised by the petitioner’s counsel.
Conclusion: In the case of Sateesh Kumar vs. ITO, the Delhi High Court clarified the authority of the Commissioner of Income Tax (Appeals) to annul an assessment order under the Income Tax Act. The court emphasized that the term “annul” encompasses the power to set aside the order, effectively canceling it. This ruling highlights the broad powers vested in the CIT(A) in dealing with assessment orders.
While the writ petition was closed, the petitioner was granted the liberty to pursue the appropriate statutory remedy. If an appeal is filed, the CIT(A) will have the opportunity to assess the case on its merits, including addressing any issues related to limitation.
This judgment serves as an important reminder of the CIT(A)’s authority in income tax matters and underscores the significance of statutory remedies available to taxpayers.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. We heard Mr. Shafiq Khan, the counsel who appears on behalf of the petitioner, for some time on the previous date, i.e., 25.07.2023, whereupon we had set out the broad contours obtaining in the matter.
2. For the sake of convenience, the relevant parts of the order dated 25.07.2023 are set forth hereafter:
“2. The record shows that the order under Section 148A(d) of the Income Tax Act, 1961 [in short, “Act”] was passed by the Assessing Officer (AO) as far back as on 28.07.2022, which was followed by an assessment order dated 31.05.2023.
3. The assessment order has been passed under Section 147, read with Section 144 of the Act.
4. This assessment order concerns Assessment Year (AY) 2016-17.
5. The AO appears to have formed the view that income amounting to Rs.30,85,500/-, which is otherwise chargeable to tax, has escaped assessment.
6. It is the petitioner‘s case that he has moved from Quetta in West Pakistan. While moving to India, he brought with him cash amounting to approximately Rs.27,50,000/-, and jewellery weighing 150 grams.
6.1. So far as the cash is concerned, Rs. 27,50,000 was deposited by the petitioner in Bank of India, Khanpur Branch, Delhi.
7. It is the cash and the value of the jewellery, as arrived at on 01.04.2015, that forms the income, which is said to have escaped assessment. The AO has valued the jewellery at Rs.3,85,500/-, which has been added to Rs. 27,00,000/-, i.e., cash brought by the petitioner from Pakistan. Consequently, the escaped income was pegged, as noticed above, at Rs. 30,85,500/-.
8. Since an assessment order has been passed, we have indicated to Mr Shafiq Khan, learned counsel for the petitioner, that the petitioner could take recourse to a statutory appellate remedy.
8.1. Mr Khan says that under Section 251 of the Act, the appellate authority will not be able to set aside the impugned assessment order dated 31.05.2023.
9. According to us, prima facie, this is a misreading of the provision.
10. The provision, inter alia, confers power of annulment on the appellate authority. The expression „annul‘ is wider in scope than the power to set aside.
11. Furthermore, we have queried Mr Khan as to how the petitioner got Indian currency into the country, and deposited the same in the aforementioned bank.
11.1 Mr Khan says that he will obtain instructions in that regard.
12. At the request of Mr Khan, list the matter on 11.09.2023.”
3. After hearing the learned counsels for the parties, we had expressed a prime facie view that the appeal was not maintainable. We had also indicated that the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”] had wide powers, whereby, if he was convinced of the case set up by the assessee, he could annul the assessment order, which would include the power to set it aside. Annulment of the assessment order would lead to its cancellation. In other words, the assessment order would cease to exist, relegating parties to the position obtaining before the order was passed.
4. Although Mr Khan contends to the contrary, we are not able to accept his submission that the CIT(A) cannot nullify and/or set aside the assessment order.
5. The writ petition is, accordingly, closed.
6. Liberty, however, is given to the petitioner to take recourse to an appropriate statutory remedy.
7. In case an appeal is filed by the petitioner within the next three (3) weeks, the same will be heard by the CIT(A) on merits, including the aspect concerning limitation raised by the counsel for the petitioner.
