Explaining the concepts of following topics :-
1) Annulment of Assessment
2) Fresh Assessment/cancel set aside the order/remanding back to the Assessing officer
3) Appeals effect/ Revision Effects
4) Directions of Higher authorities.
Let’s discuss one by one-
1) Annulment of Assessment
To Annul means Simply to declare the Assessment a void.. basically when the Assessment is completed without completed the technical requirements of the Act, then the entire order can be called as ” Annulment of Assessment..
Few illustrative list are..
a) Assessment us 143(3) made on the persons who had not filed the return.
b) Assessment us 143(3) made on the person who filed time barred return. (Possible only in case of manual returns)
c) Assessment us 143(3) made on the basis of notice us 143(2) which is issued after the expiry of 6 months from the end of the financial year in which Returns us 139/142(1) is filled.
d) Regular assessment is made without issuing notice us 143(3)
e) Order Us 143(3) is passed after the time limits prescribed us 153(1)
f) order us 143(3) is passed without preparation of demand notices in case income is enhanced and time limits us 153(1) is also passed. (Refer case of Purshottam Das Patel)
g) Assessment us 147 is made on the basis of notices u/s 148 which is issued after the time limits mentioned in Section 149(1).
(Refer case of kanubhai Patel in order to get clarification on date of effective services of the notices)
h) assessment us 147 is made on the assessee to whom the notices u/s 148 is not given at all.
i) Assessment us 147 is passed after the time limits mentioned u/s 153(2).
j) No authorities whatever they have power may be can’t convert an annulled Assessment into correct one. It means if the order us 147 is passed after the time limits us 153(2), then CIT us 263 can’t invoke his revisionary power and said AO to make fresh Assessment..Hence once the order is Annuled it can’t be corrected later on.
2) Fresh Assessment/cancel set aside the order/remanding back to the Assessing officer
A) This practically refers to a situation in Assessment proceedings where the entire technical requirements of the act had been complied with means notices is issued on time , properly served , order is passed within time, but the Assessment is made in the hasty manner.
Normally this Situation arises in practical life when the Assessment is getting to time barred.
Let’s take an example..
Suppose the case of the assessee us 147 for assessment year 16-17 is opened and notices us 148 was duly served on 31/12/2017.. the reason behind such notice that AO have a reasonable belief that Assessee had shown the valuation of its Land which is sold below market values.
Now as per section 153(2) order should be passed on or before 31/12/2018 (ie 9 months from the end of the financial year in which notice us 148 is served on the assessee). Now suppose Assessing officer refer the matter to the valuation officer us 142A and he is in waiting for his report. Now suppose today is 25/12/2018 and report is yet not Received.
In order to save the Assessment for getting time barred AO passed the order in a hasty manner and give decision in the favour of the assessee.
Now after receiving the reports if is established that assessee had underestimated the valuation. Now CIT have power to set aside the entire order and make a order to the AO to make the Assessment afresh and this is called as “remanding back the case to the AO”. This is dealt in accordance with Section 153(3) and the time limits as prescribed us 153(3) shall applied. While making the fresh assessment the department is not required to issue a fresh notice since the earlier notices is stand valid otherwise entire assessment will be called as invalid/Annulled.
However in this case CIT us 263 can also have power to invoke his revisionary power since the valuation officer report will constitute “records ” and a Assessment order is lying in the department.. since 263 can be move only when there is a Assessment order which is erroneous and prejudicial to the department.
3) Appeals effect/ Revision Effects
These are the Situation when an appeals effect/revision effect is to be given by the AO in his order to make his order in line with the order of the Higher Authorities..
Let’s take an situation
AO while making his order us 143(3) disallowed certain expenditure on account of Personal expenditure and create a bet demand of 40 lacs.
Now against the demand assessee move application us 246A to the CIT(Appeals) and CIT (A) had deleted the demand of Rs 10 lacs and passed the order us 250 after setting the net demand at Rs 30 lacs. This order is to be Recieved by the Commissioner of income tax.
Now, there are two orders prevail in the department one is the order of the AO in which net demand is Rs 40 lacs and other order is of order us 250 of CIT (A) in which demand is Rs 30 lacs..Now a Subordinates authorities have to make his order in line of the order of the CIT (A) and have to amend his order and create a total Demand of Rs 30 lacs..
This is known as giving appeal /revision effect to his order.. the time limits of passing this order shall be governed in accordance with section 153(5) read with section 153(3) after making a small amendments..
The time limits given us 153(3) shall be in line with section 153(5) if AO have to make certain verification from the assessee..
4) Directions of Higher authorities..
These are the Situations where a particular directions is given by the Higher authorities to his subordinates authorities.. this situation is different from the fresh assessment, annulment of the Assessment & appeals /revision effect.
Is the entire assessment order is invalid then this is annulment.
If AO have to make his order in consistent of higher authorities , there is no order of making fresh assessment or direction to include certain incomes or disallowed certain expenditure , then section 153(5) shall apply.
If AO have Recieved the order from higher authorities to make fresh assessment entirely then section 153(3) shall apply.. the power of remanding back is not available with CIT(Appeals) now..
However in direction the scope of the amendment in the earlier order is very limited.. let’s take an example..
ITAT while passing the order us 254 directed that expenditure X will be allowed to the Assessee only when assessee will make the personal presence of his creditors. And other direction is that Assessing officer should freshly calculate the values of land which Is sold by the assessee from a registered valuer.
Now the scope of the AO is limited fir these two items. He can’t go beyond these two items. This is known as Direction’s of higher authorities and the time Limits of passing the order in such a cases is governed by section 153(6).. now suppose Assessing officer during the course of proceedings found some other items of income which is escaped assessment. However in such a case AO is not empowered to make the Assessment on those items which is not mentioned in the order of ITAT us 254.
However what AO can do after passing the order as per the directions of the ITAT , he can make a fresh assessment/reassessment on such other incomes us 147 of the income tax act , 1961.
Disclaimer :-
this article is for the purposes of information and shall not be treated as solicitation in any manner or of for any other purposes whatsoever.
For the benefits of reader a short glimpse of provisions is presented in my personal language as per my capabilities. It shall not to be used for any legal advice /opinion and shall not to be used to rendering any professional opinion. Readers are advised to kindly go through to original government publications and published case laws and judicial pronouncements. Errors may creep in and hence it will be highly appreciable to highlight such errors or providing suggestions for effective improvements.
Happy readings..
Author Bio
Sir please provide citations for the caselaw reffered