I.P. Bansal, Judicial Member -
(1.) THIS is an appeal by the assessee. It is directed against the order of the CIT (A) dated 29th September, 2006 for assessment year 2004-05. Grounds of appeal read as under:
Inspite of SC judgements that no Directions which are not necessary for deciding of the appeal in passing of the order should be given; Ld. CIT (A) has erred on facts as well as in law in not deleting the directions which are not necessary nor essentials for deciding of the appeals.
That Id CIT (A) has misdirected himself by ignoring and not deliberating the above issue by stating "that" directions given by appellate authority was required to be given or not is a matter of opinions" forgetting that in light of the SC judgments, whether the direction is necessary for deciding of the appeal, is a matter of fact and not matter of opinion.
That the Ld. CIT (A) has also erred on facts as well as in law in not discussing all the contentions raised in this regard in written arguments in three letters. It is therefore prayed that the direction shown on page 2 of the impugned order be deleted from order dated 23.03.2006.
(2.) The assessment was framed by the Assessing Officer vide order Under Section 143(1) on 9th February, 2005 in respect of nil income shown by the assessee after claiming set off of brought forward losses from earlier year for a sum of Rs. 11,45,844/- against the net profit shown in the Profit & Loss Account of a sum of Rs. 11,45,844/-. After framing assessment Under Section 143(1), the Assessing Officer issued notice Under Section 154 observing therein that the assessee had received rental income of Rs. 10,80,000/- during the year under consideration which was to be assessed under the head "income from house property." In reply, vide letter dated 5th December, 2005, it was submitted by the assessee that the said receipt of Rs. 10,80,000/- is not rent, but it is commission called as hire charges on account of collection with golden dragon for running restaurant under which the assessee was to provide building, furniture and all paraphernalia, kitchenware, etc. and also to supervise the working of the restaurant. The receipt is in relation to turnover and such receipt cannot be treated as rent. It was pointed out that in TDS certificate the said receipt was shown as rent because of definition of rent given in Section 194-I of IT Act, 1961 is comprehensive and which include all receipts for using of building and this does not mean that head of income for the purpose of assessment will be "income from house property." However, the Assessing Officer did not accept such explanation of the assessee and he recomputed the income of the assessee by applying the provisions of Section 154 of the Act. He took the net profit of the assessee at a sum of Rs. 22,25,844/- by including the said sum of Rs. 10,80,00/- into the net profit of Rs. 11,45,844/- declared in the Profit & Loss Account. He also provided the set off of brought forward business losses of Rs. 15,52,442/- and determined the net assessable income at a sum of Rs. 6,73,402/-. Such adjustment made by the Assessing Officer was challenged in an appeal filed before the CIT (A) who initially decided this issue by an order dated 23rd March, 2006 for assessment year 2004-05. Before CIT (A) it was contended that such addition could not be made by the Assessing Officer as in any case such view was a debatable view upon which Section 154 could not be applied. Considering this submission of the assessee, the Ld. CIT (A) concluded that said addition could not be made as it was outside the purview of Section 154. However, the CIT (A) has observed that since there is an escapement of income, therefore, the Assessing Officer is directed to reopen the case Under Section 147 or Under Section 143(3) (if time is there). For the sake of convenience said observations of the CIT (A) are reproduced below:
Considering the reply of the appellant, it seems that the A.O's action Under Section 154 in adding back this amount of income as income from house property was not correct because if income had escaped assessment the A.O. should have taken recourse to provisions of Section 147. In this case since there is an escapement of income, the A.O. is directed to reopen the case Under Section 147, or Under Section 143(3) (if the time is there) of the Income-tax Act and re-examine the whole issue on an income under the head income from house property, whether it should be added back by the A.O. However, the appellant was correct in stating that this was not a fit case Under Section 154. Hence the order Under Section 154 stands cancelled. The A.O. is directed to take issue notice Under Section 147 or Under Section 143(3).
The assessee did not challenge the above mentioned order of CIT (A) in appeal before ITAT. Instead of filing any appeal before ITAT the assessee preferred to file Writ Petition against the abovementioned directions of CIT (A). Simultaneously, the assessee has also filed a rectification application before the CIT (A). The Writ Petition of the assessee was decided by their Lordships of Delhi High Court vide their order dated 4th September, 2006 and the writ petition was disposed of by their Lordships with the directions to CIT (A) to decide the rectification application of the assessee within four weeks from the date of order. In pursuance of the said order of the Hon'ble Delhi High Court, the CIT (A) has decided the rectification application of the assessee by impugned order. Vide impugned order, the CIT (A) has held that there is no mistake in the earlier order of the CIT (A) and, therefore, the same cannot be rectified under the provisions of Section 154 as the scope of rectification under that Section is very limited and only an arithmetical error or an error on which no inquiry or debate is called for can be rectified. It is against such observations of the CIT (A) the assessee is aggrieved, hence in appeal.
(3.) AFTER narrating the facts, Ld. AR vehemently contended that though the issue was decided by the CIT (A) in favour of the assessee, but adverse directions were given to Assessing Officer to issue notice Under Section 147 or Under Section 143(3). The Ld. AR contended that according to the principles of law laid down by Hon'ble Supreme Court, the power of first appellate authority is restricted to give such findings which are necessary for the disposal of the particular case and the findings which are not necessary for the disposal of the particular case cannot be given. He contended that the directions given by CIT (A) are, therefore, clearly against the proposition of law laid down by the Hon'ble Supreme Court in the following decisions:
i) ITO v. Murlidhar Bhagwan Das 52 ITR 335 (SC)
ii) Rajinder Nath v. Commissioner of Income Tax 120 ITR 14 (SC).;