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Judgment
PER MAHAVIR SINGH, VP: This appeal by the assessee is emanating from the order of the Ld. Commissioner of Income Tax (Appeals-26), New Delhi dated 29.1.2026. Assessment was framed by the National e-Assessment Centre, Delhi vide order dated 20.9.2022 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as “Act”) relevant to assessment year 2018-19.
The first issue in this appeal of the assessee is as regards to the order of the CIT(A) in not considering that the Assessing Officer while giving appeal effect to the directions of the Hon’ble High Court has exceeded his jurisdiction by initiating the proceedings and making additions on the items which were never subject matter in the original assessment. For this assessee has raised ground no. 2 & 3 which read as under:-
2.That on the facts and circumstances of the case, the CIT(A) has erred in law for not considering that the FAO has legally erred in addition of the income in the appellant’s assessment as the FAO has exceeded his jurisdiction by initiated the proceedings de novo in contravention to jurisdiction set by the Hon’ble Delhi High Court in its judgement dated 8.9.2021. Therefore, the Assessment order passed is grossly incorrect and ex facie wrong in nature.
3.That on the facts and circumstances of the case, the CIT(A) has erred in law for not considering that, the FAO has legally erred in issuing fresh SCN proposing new additions in contravention to directions made by Hon’ble Delhi High Court to provide only fresh hearing through video conferencing to the assessee against SCN dated 6.4.2021 and pass a reasoned order in accordance with law.
We have heard the rival contentions and gone through the facts and circumstances of the case. Ld. Counsel for the assessee before us first of all took us through the original assessment order passed by the Assessing Officer of NeAC for the A.Y. 2018-19 u/s. 143(3) read with section 143(3A) and 143(3B) of the Act vide order dated 15.4.2021. Ld. Counsel for the assessee stated that in this assessment order, the Assessing Officer vide his computation has added two items i.e. credit notes received by the assessee company from developer amounting of Rs. 7,98,32,462/- and interest on debentures amounting to Rs. 5,32,00,000/-. Ld. Counsel for the assessee stated that this assessment order was challenged before the Hon’ble Delhi High Court in WP (C) 4989/2021 dated 8/9/2021 wherein, the Hon’ble Court has directed the Department to allow an opportunity to the assessee by way of Video Conferencing and matter was remanded back to the AO by observing as under:-
8.Keeping in view the aforesaid facts and mandate of law, the impugned assessment order dated 15th April, 2021 passed by the Respondents under Section 143(3) read with Sections 143(3A) & 143(3B) of the Ac for the Assessment Year 2018-19 is set aside and the matter is remanded back to the Assessing Officer, who shall grant an opportunity of hearing o the petitioner by way of Video Conferencing and thereafter pass a reasoned order in accordance with law.
9.With the aforesaid direction, the present writ petition alongwith the pending applications disposed of.
Ld. Counsel for the assessee stated that originally the AO has made these additions as noted above in para 3 of this order, but in the assessment in lieu of directions by the Hon’ble Delhi High Court, these additions were never made and made another addition i.e.(i) Variation in respect of disallowance expenditure u/s. 36(1)(vii) of the Act amounting to Rs. 45,00,000/- and (ii) variation in respect of disallowance u/s. 36(i)(iii) of the Act amounting to Rs. 69,61,497/-.
Ld. Counsel for the assessee stated that assessee before the Ld. CIT(A) challenged these additions and contended that CIT(A) failed to understand the directions of the Hon’ble High Court and these directions of Hon’ble High Court do not tantamount to start of any denovo proceedings and he has not properly adjudicated the issue and the AO exceeded his jurisdiction by violating the terms of judgement/directions of Hon’ble Delhi High Court. He stated that the issue before the Hon’ble High Court and specific directions of the Hon’ble High Court to the AO was to provide the hearing on the show cause notice dated 6.4.2021 through Video Conferencing. Ld. Counsel for the assessee for this proposition relied on the decision of the Hon’ble Delhi High Court in the case of CIT vs. Bhan Textile (P) Ltd. (2008) 300 ITR 176 (Delhi) wherein, the Hon’ble Delhi High Court has considered this issue and adjudicated as under:-
10.The operative words in Section 153(2A) of the Act are 'an order' ……….'setting aside or cancelling an assessment'. We have reproduced the operative portion of the order passed by the CIT (A) and although that portion does not specifically say that the order of the Assessing Officer has been set aside or cancelled, but since ground No. 2 of the appeal filed by the assessed was allowed, by necessary implication, the assessment order was set aside to that extent.
11.The CIT (A) had made it clear in his order that the Assessing Officer 'should have granted one more opportunity to the Appellant on proposed additions' and in view thereof, it was held that it would be in the interest of justice to restore the matter to the file of the Assessing Officer so that one more opportunity could be given to the assessed to file its evidence and state its case in respect of the show cause notice issued to it. The CIT (A) also directed the Assessing Officer to pass an order under Section 144 of the Act after taking the explanation of the assessed into account. This, in our opinion, clearly means that the assessment order to the extent that it did not give an opportunity to the assessed to place its evidence on record was set aside or cancelled by the CIT (A) although these specific words were not used in the appellate order.
12.This being the position, in our opinion, Section 153(2A) of the Act is clearly applicable.
13.In so far as the applicability of Section 153(3)(ii) of the Act is concerned, that relates to giving effect to a finding or direction, inter alia, by the CIT (A). What this means is that the Assessing Officer must comply with the finding or direction given by the appellate authority without necessarily disturbing the assessment order. In so far as the present case is concerned, that is not the position because the Assessing Officer was directed by the CIT (A) to pass a fresh order under Section 144 of the Act meaning thereby that the assessment order to the extent that it is covered by ground No. 2 of the appeal filed by the assessed was set aside or cancelled. There was no independent finding or direction which the Assessing Officer was required to comply with on the basis that the core of the assessment order has been sustained by the CIT (A).
Ld. Counsel for the assessee also relied on the decision of the Hon’ble Allahabad High Court in the case of S.P. Kochar vs. ITO [1984] 145 ITR 255 wherein, the Hon’ble Court has examined the issue and came to the conclusion that on remand on a case by Tribunal, it can go beyond the directions given in the remand order and look into matters which were not subject matter of appeal before Tribunal. The Hon’ble Court decided the issue vide para no. 15 & 16 as under:-
15.What thus comes out is that the powers of the AAC are wider than those of the Appellate Tribunal. The AAC while hearing an appeal under Section 251 of the Act can examine all matters covered by the assessment order and correct the assessment in respect of all such matters even to the prejudice of the assessee. He may remand the case to the ITO for enquiring into the items which were not the subject-matter of appeal also. If he sets aside an assessment and remands the case to the ITO for making a fresh assessment, the powers of the ITO while making the fresh assessment are the same as if he were making an original assessment under Section 143(3) of the Act. The AAC can, however, limit the powers of the ITO by giving suitable directions in regard to the scope of enquiry by the ITO. In the absence of such direction or restriction on the power of the ITO, while making a fresh assessment, the ITO is not bound by anything that had happened either when he made the original assessment or when the appeal was heard. When the remand is made by the Tribunal the position is different. The powers of the Tribunal are confined to the subject-matter of appeal as constituted by the original grounds of appeal and such additional grounds as may be raised by the leave of the Tribunal. Thus, when the Tribunal allows the appeal and sets aside the assessment and remands the case for making a fresh assessment, the power of the ITO is confined to such subject-matter only. He cannot take up the questions which were not the subject-matter of appeal before the Tribunal. This will be so even though no specific direction has been given by the Tribunal. If a specific direction is given, then there is no scope whatsoever for the ITO to travel beyond those directions or restrictions.
16.In the instant case the matter had come up before the Tribunal in the appeal filed by the Revenue. The Revenue had challenged the deletion of three additions, viz., Rs. 85,625 profit on sale of land--Rs. 3,420, profit on sale of land to Smt. Bawa and Rs. 2,268--profit on plot sold to Smt. Krishna Kochhar. In regard to the latter two additions the Tribunal agreed with the AAC and held that in respect of sale of land to Smt. Krishna Kochhar there was no extraneous consideration involved and no question of earning any profit. As regards sale of plot to Smt. Bawa, it was held to be a distress sale made to purchase peace and that also did not yield any profit. As regards the profit of Rs. 85,625, the view taken by the Tribunal was that in so far as the sales which had been made prior to the relevant previous year were concerned, they could not be considered for arriving at any such profit in respect of the year under consideration, that is, 1970-71. In the relevant previous year apart from the two sale deeds, one made in favour of Smt. Kochhar and the other in favour of Smt. Bawa, there was only one more sale deed of Rs. 40,000 in favour of Smt. Sandhu which alone was relevant for consideration in this year. The profit in respect of this transaction could be arrived at by estimating the cost price of the plot and the land sold and therefrom the cost price of the building and the plot retained by the petitioner shall be excluded and further he shall be given the benefit of the development expenditure, if any, incurred by him for developing the land. The subject-matter of inquiry was, therefore, restricted by the Tribunal to this very transaction only and the method in which the profit was to be arrived at was also indicated. That being so, the ITO was not justified in embarking on an enquiry into any other item not covered by these directions. Certainly the various notices issued by him under Sections 143(3) and 142(1) of the Act were not justified. This petition, therefore, is liable to succeed.”
We have gone through the facts of the present case and also precedents cited above of the Hon’ble Delhi High Court in the case of CIT vs. Bhan Textile (Supra) and Hon’ble Allahabad High Court in the case of S.P. Kochar vs. ITO (Supra) and noted that the directions of the Court before the AO was that AO has to give hearing through Video Conferencing to substantiate its case on the issue which was remanded by the Hon’ble High Court whereas the AO has not made any addition qua these issues to raise new items. In our view when the remand is made by the Hon’ble Delhi High Court and gave specific directions the position is different. The power of the AO in remand proceedings are confined to the subject matter of writ before Hon’ble High Court whatever was the original additions, such additions can only be looked into by the AO while allowing the hearing to the assessee through Video Conferencing. The AO is confined to such subject matters of additions only which were subject matter originally before him. This will be so even say that no specific direction given by the Hon’ble High Court. In such circumstances, we are of the view of the view that AO has clearly exceeded his jurisdiction in making addition other than which were subject matter of addition originally. Hence, we delete these additions and allow the grounds raised by the assessee.
In the result, the appeal of the assessee is allowed in the aforesaid terms.
Order pronounced in the Open Court on 10.09.2026.