2012 (10) TMI 1213 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the correctness of the assessment order u/s. 143(3) for assessment year 1996-97, the additions made in the original assessment, the subsequent de novo assessment, and the challenge raised by the assessee against the actions of the Assessing Officer (AO) in the de novo assessment.

Original Assessment and De Novo Assessment:
The original assessment u/s. 143(3) by DCIT, Circle-3(2), Mumbai resulted in additions for unaccounted purchases, bogus work-in-progress, bogus creditors, and unaccounted cash credit. The subsequent de novo assessment by the AO included additions for undisclosed investment, creditors not payable, and sundry cash credit. The assessee contested that the AO exceeded the directions of the Ld. CIT(A) in the de novo assessment by introducing new heads of additions not present in the original assessment.

Directions of the Ld. CIT(A) and Legal Principles:
The Ld. CIT(A) set aside the original assessment for denovo consideration due to concerns about the heavy additions made without adequate inquiry. Legal principles dictate that the scope of fresh assessment after remand is determined by the terms of the remand order, with the AO having the same powers as in the original assessment unless restricted by the appellate authority. Precedents emphasize that the AO must adhere to the directions given in the remand order and cannot introduce new sources of income or exceed specified limits.

Judicial Interpretation and Decision:
The judgment analyzed the Ld. CIT(A)'s directions for denovo assessment, finding that the AO exceeded these directions by making additional unapproved additions in the de novo assessment. Citing legal precedents and principles, the judgment concluded that the AO's actions were beyond the scope of the remand order, violating natural justice principles. Consequently, the appeal by the assessee was allowed, quashing the assessment order and reversing the findings of the Ld. CIT(A) solely on the point of law without delving into the merits of the case.

This comprehensive summary outlines the issues, original and de novo assessments, directions of the Ld. CIT(A), legal principles governing fresh assessments after remand, judicial interpretation, and the ultimate decision in favor of the assessee based on the AO's deviation from the remand order directions.