First Appellate Authority has No Power to Set Aside or Remit order appealed Against: ITAT

The assessee is a group company of Samir Thukral Group. A search and seizure operation under section 132 of the I.T. Act, 1961 was carried out in the business premises of the assessee group of companies and residential premises of the Directors of the company. Consequent to the search, the Assessing Officer issued a notice under section 142(1) of the I.T. Act, 1961 and in response to which, the assessee submitted that the return of income declaring income of Rs. 26,56,590. Thereafter, the case was taken-up for scrutiny, and assessment was framed under section 143(3) and the total income of the assessee was determined at Rs. 84,05,44 and additions were imposed of Rs. 44,50,000 on account of unaccounted cash and the addition of Rs. 26,080 on account of deferred revenue expenditure. On these disallowances/additions made, A.O. imposed a penalty of Rs. 14,86,842 under section 271(1)(c) of the I.T. Act, 1961.

Appeal before CIT(A): Aggrieved by the order of the A.O. assessee carried the matter in appeal before the Ld. CIT(A) in Appeal No.82/16-17 granted partial relief to the assessee.

Appeal before ITAT: Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. We find identical issues in the case of CIT vs. Eminent Enterprises, where it was held that it is not open to the First Appellate Authority i.e., Ld. CIT(A) to set aside the order of the A.O. and order a remand or to give any directions.

It was observed that the powers conferred to the appellate under section 251(1)(a) regarding appeals against orders imposing penalties, the power of the first appellate authority is circumscribed or confined within limits. He can only confirm or cancel such an order or vary it either enhancing it or reducing it. As per the language of section 251(1)(b) the first appellate authority has no power to set aside the order appealed against and order a remit with directions. The tribunal had no power to set aside an order levying a penalty with a direction to pass fresh orders.

The tribunal considered the facts and circumstances of the case and relying on the decision of Eminent Enterprises, the tribunal held that the Ld. CIT(A) was not justified in giving direction to the A.O. to levy penalty under section 271AAA of the I.T. Act, 1961. The tribunal set aside the order of the Ld. CIT(A). Hence, the appeal was allowed.