By TIOL News Service

MUMBAI, DEC 30, 2017: THE issue is two-fold - Whether the CIT(A) could ratify the assessment order passed by the AO, without conducting a scrutiny of the facts of the case, and whether subsequently the Tribunal could give the thumbs-up to the order passed by the CIT(A) without thoroughly examining the same? NO is the verdict.

Facts of the case:

The assessee, a cooperative society, filed returns declaring nil income for two successive AYs. On assessment, the AO considered the assessee's submissions, and examined its bye-laws and concluded that the assessee was not a cooperative society. The AO alleged that it was a Primary Cooperative Bank, and thus ineligible for deduction u/s 80P(2)(a)(i) & 80P(2)(c)(ii) of the Act. Thus, the AO determined the total income of the assessee and calculated the tax amount payable. On appeal, the CIT(A) allowed the assessee's contention of not being a bank, and that TDS provisions were inapplicable to it. Thus it set aside the addition made by the AO. Subsequently, the Tribunal referred to the judgment of this court in the case of Quepem Urban Co-Operative Credit Society Ltd Vs. Assistant Commissioner of Income Tax, Circle-I, Margao, and dismissed the Revenue's appeal. Hence the present appeal by the Revenue.

On hearing the matter, the High Court held that,

++ however, the Act provides for an appeal to the CIT(A) u/s 143(3). Further an appeal is provided to the Tribunal u/s 253 of the Act. The appeal before the CIT(A) is an appeal on facts. The CIT(A) has simply referred to the order of the AO and to the decision of this Court in Quepem Urban. There is no scrutiny on facts, which was necessary since the CIT was reversing the decision of the AO denying the benefit to the assessee. When the Revenue filed an appeal to the Tribunal challenging a decision adverse to them, the Tribunal was expected to scrutinize the decision of the CIT(A). Here again, we find that the Tribunal has not done so. In paragraph 4 the Tribunal has simply reproduced the decision of the CIT(A) and thereafter referred to the decision of this Court in case of Quepem Urban and has dismissed the appeal.

++ thus the inquiry into the factual position, which the Counsel for the parties agree is necessary before the legal principle is to be considered, is not done by the CIT(A) as well as the Tribunal. Therefore, before we consider what is the effect of the admission of the Special Leave Petition against the decision of this Court in Quepem Urban and the legal position enumerating from Quepem Urban, the factual foundation must be established as regards the nature of the business of the assessee.

++ thus, the High Court set aside the orders of the Tribunal and of the CIT(A) as well.

(See 2017-TIOL-2666-HC-MUM-IT)