Azhimala Beach Resorts (P) Ltd. vs Commissioner of Income Tax

C.N. Ramachandran Nair, J.—This appeal is filed by the assessee against the order of the Tribunal allowing the departments appeal ex parte by reversing the order of the Commissioner (Appeals), which was decided substantially in favour of the assessee for the assessment year 2004-05.

We have heard the counsel appearing for the appellant and the senior Counsel appearing for the respondent.

The original assessment completed was directed to be revised by the CIT through orders issued u/s 263 of the Income Tax Act, 1961 (for short the Income Tax Act) vide Annex. B order of the CIT. When the revised order was issued by the assessing officer pursuant to the above order of the CIT, the assessee challenged the same before the first appellate authority who allowed the appeal substantially against which the department filed appeal. It is seen from the copy of the departments appeal produced as Annex. F, that the department has not questioned the jurisdiction of the first appellate authority in considering the assessment on merit. However, the Tribunal volunteered to consider the maintainability of the appeal before the first appellate authority and following the judgment of the Madhya Pradesh High Court in Commissioner of Income Tax Vs. D and H Secheron Electrodes Ltd., , set aside the order of the Commissioner (Appeals) as one issued without jurisdiction. The finding of the Tribunal is that when assessment is revised in terms of, the order issued u/s 263 of the Act, appeal before the first appellate authority is not maintainable.

Counsel for the appellant/assessee pointed out that the order issued by the CIT u/s 263 is an open remand and he has made certain observations and doubted the correctness of the finding made by the assessing authority. After making certain observations about the finding of the assessing officer in the original assessment, he remanded the case for assessment to the assessing officer for deciding the matter afresh after reconsidering the issues with reference to the observations made by the CIT and after giving an opportunity to the assessee. An appeal will not lie against the revised assessment u/s 263 only in respect of so much of the additions made in the assessment based on the findings of the CIT in the order issued u/s 263. In this case, it is seen that the CIT has not independently decided on any addition or disallowance. On the other hand, he expressed doubt about the correctness of the findings in the original assessment and ordered detailed re-examination of the issues. When an open remand is made by the CIT u/s 263, it is for the assessing officer to conduct a detailed enquiry after giving an opportunity to the assessee and he is free to restore the original assessment partly or in full even after the order issued u/s 263. Such an order issued by the assessing officer after a remand order issued u/s 263 is again liable to be revised u/s 263, if the revised order is again prejudicial to the revenue. If assessee has any grievance, it is open to the assessee to maintain an appeal against revised assessment order before the first appellate authority. Since we find from the order of the CIT issued u/s 263 that it is an open remand order, the Tribunal went wrong in holding that the appeal before the first appellate authority was not maintainable. In fact, since the department has contested the finding of the appellate authority on merit, it was the duty of the Tribunal to consider the order of the Commissioner (Appeals) on merit and decide the appeal on every ground raised. We, therefore, allow the appeal by setting aside the order of the Tribunal and remand the case back to the Tribunal for deciding the appeal on merit. Since the assessee failed to appear before the Tribunal, we direct the assessee to enter appearance before the Tribunal, if the assessee wants to be heard in the appeal. The Tribunal is directed to issue notice to the assessee as well as the department and dispose of the appeal within a period of four months from the date of receipt of a copy of this judgment.

The IT Appeal is disposed of with the above direction.