Shri Hemant Shivaji Sanap, Nashik V. ITO, Ward 2(1), Nashik, Nashik

ITA 1014/PUN/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1803 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Principle of natural justice; Peak credit
• Section: 40A(3); 234B; 147; 263

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO.1014/PN/2012 % % / ASSESSMENT YEAR : 2008-09 SHRI HEMANT SHIVAJI SANAP, 01, JAMEED APARTMENT, BODHALE NAGAR, NASHIK-PUNE ROAD, NASHIK 411006 PAN NO.BKYPS5135D . / APPELLANT V/S ITO, WARD - 2(1), NASHIK . / RESPONDENT / ASSESSEE BY : SHRI M.K. KULKARNI / REVENUE BY : SHRI ANIL CHAWARE / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 20-03-2012 OF THE CIT(A)-II, NASHIK RELATING TO ASS ESSMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM REMUNERATION AND INTEREST FROM THE PA RTNERSHIP FIRM AND SHARE OF PROFIT. HE FILED HIS RETURN OF INCOME ON 31- 03-2010 / DATE OF HEARING :09.05.2016 / DATE OF PRONOUNCEMENT:27.05.2016 2 ITA NO.1014/PN/2012 DECLARING TOTAL INCOME OF RS.88,950/-. IN THIS CASE THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSES SEE HAS MADE CASH DEPOSIT OF RS.21,85,231/- IN HIS SAVINGS ACCOUNT MAINTA INED WITH ICICI BANK AND ALSO HIS ACCOUNT HAS BEEN CREDITED TO T HE TUNE OF RS.10,59,315/- BY WAY OF OTHER DEPOSITS. ON BEING QUESTION ED BY THE AO TO EXPLAIN THE SOURCE OF SUCH DEPOSITS, THE ASSESSEE SUBMITTED THAT THE CASH DEPOSIT OF RS.21,85,231/- IS OUT OF AGRICULTURAL INCO ME OF RS.50,231/- AND ADVANCE AGAINST LAND OF RS.21,35,000/-. SO FAR AS OTHER DEPOSITS ARE CONCERNED THE SAME ARE OUT OF AGRIC ULTURAL INCOME OF RS.1,90,532/- AND HAND LOAN OF RS.6,71,000/-. THE AO, THEREFOR E, ASKED THE ASSESSEE TO FURNISH THE DOCUMENTARY EVIDENCES REGA RDING AGRICULTURAL RECEIPTS SUCH AS 7/12 EXTRACTS OF AGRICULTURA L LAND HELD BY HIM, DETAILS OF EXPENDITURE INCURRED TO EARN SUCH AGRICULTUR AL INCOME, SALE PATTIES/RECEIPTS OF AGRICULTURAL PRODUCE ETC. HE WAS ALSO ASKED TO EXPLAIN THE REASON FOR TAKING ALTERNATIVE STAND, I.E. CASH DEPOSITED OUT OF ADVANCES RECEIVED AGAINST SALE OF LAND WHEREAS DURING THE COURSE OF HEARING IN THE EARLIER OCCASION IT WAS EXPLAINED THAT THE C ASH SO DEPOSITED INTO THE BANK ACCOUNT WAS OUT OF THE MONEY W HICH WERE WITHDRAWN BY HIM FROM THE BANK AS AND WHEN REQUIRED. HE, THEREFORE, AGAIN ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF THE C ASH DEPOSIT IN THE BANK ACCOUNT. 3. THE ASSESSEE FURNISHED 2 COPIES OF AGREEMENTS ONE DA TED 18-01- 2008 FOR PURCHASE OF PROPERTY FROM ONE SHRI RAMCHANDRA UGALE AND THE SECOND ONE ON 22-02-2008 AFTER THE CANCELLATION OF THE FIR ST SATHEKHAT AGREEMENT DATED 18-01-2008. IT WAS SUBMITTED THAT TH E AGRICULTURAL INCOME OF RS.50,231/- AND ADVANCE RECEIVED AGAINST SALE OF LAND RS.21,35,000/- CONTRIBUTED TOWARDS CASH DEPOSITS. AS REG ARDS TO OTHER DEPOSITS ARE CONCERNED IT WAS SUBMITTED THAT THE SAME WERE MADE OUT OF 3 ITA NO.1014/PN/2012 AGRICULTURAL INCOME OF RS.1,90,532/- AND HAND LOAN OF RS. 6,71,0 40/-. THE AO DID NOT FIND FAVOUR WITH THE EXPLANATION GIVEN BY TH E ASSESSEE AND HELD THAT THE COPIES OF AGREEMENTS RELATING TO PURCH ASE OF LAND AND CANCELLATION OF THE SAME WERE NOT GENUINE AS THE ABOVE R EFERRED 2 AGREEMENTS MADE ON STAMP PAPERS OF RS.100/- WERE NOT NOTARIZED. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE AO MADE ADDITION OF RS.21,85,231/- ON ACCOUNT OF ASSESSEES UNEXPLA INED CASH DEPOSITS IN THE BANK ACCOUNTS. 4. SO FAR AS THE OTHER DEPOSIT OF RS.8,82,423/- IS CONCERN ED THE AO ACCEPTED THE ASSESSEES CONTENTION REGARDING THE SOUR CE TO THE EXTENT OF RS.5,50,000/- ONLY AND ADDED BACK THE REMAINING AMOUNT O F RS.3,32,423/-. SIMILARLY, THE AO OBSERVED FROM THE LEDGER AC COUNT OF SHRI JAYANT SANAP APPEARING IN THE BOOKS OF THE ASSESSEE THAT THE ASSESSEE HAS RECEIVED A TOTAL LOAN OF RS.5,85,000/- FROM H IM OUT OF WHICH AN AMOUNT OF RS.1,10,000/- HAS BEEN RECEIVED ON 27- 12-2007 BY WAY OF BEARER CHEQUE OF ICICI BANK. APPLYING THE PROV ISIONS OF SECTION 40A(3) THE AO MADE ADDITION OF RS.1,10,000/-. THUS, THE AO DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.27,16,67 4/- AS AGAINST THE RETURNED INCOME OF RS.88,950/-. 5. BEFORE CIT(A) THE ASSESSEE CHALLENGED THE VARIOUS ADDIT IONS MADE BY THE AO AND FILED DETAILED SUBMISSIONS BASED ON WHICH THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. SO FAR AS THE AD DITION OF RS.21,85,231/- IS CONCERNED, THE LD.CIT(A) ALLOWED RELIEF OF RS.10,13,231/- AND SUSTAINED AN AMOUNT OF RS.11,42,000/-. 6. SO FAR AS THE ADDITION OF RS.3,32,423/- MADE BY THE AO IS CONCERNED, THE LD.CIT(A) ENHANCED THE SAME TO RS.4,94,440/ - BY ENHANCING THE ADDITION TO THE EXTENT OF RS.1,62,017/- ON ACCOUNT OF 4 ITA NO.1014/PN/2012 SQUARED OFF ACCOUNTS . SO FAR AS THE AMOUNT OF RS.1,10,000/ - ADDED BY THE AO ON ACCOUNT OF 40A(3) IS CONCERNED THE LD.CIT(A) DELE TED THE SAME ON THE GROUND THAT THE SAME DOES NOT COME UNDER THE PURVIEW OF SEC TION 40A(3) SINCE THE ASSESSEE HAS NOT PAID ANY CASH BUT HAS RECEIVED BY WAY OF BEARER CHEQUE. 7. HOWEVER, THE LD.CIT(A) DURING THE COURSE OF APPEAL PROC EEDINGS NOTED THAT THE ASSESSEE HAD ENTERED INTO A SATHEKHAT AGREEMENT ON 31- 12-2007 FOR PURCHASE OF 43 PLOTS FOR RS.45,11,000/- FROM S HRI NAGESH RAMESH SONAR . HE HAD PAID AN AMOUNT OF RS.3,50,000/- IN CASH ON 31-12-2007 TO MR. SONAR. SUBSEQUENTLY, THE ASSESSEE E NTERED INTO AN AGREEMENT ON 05-10-2008 FOR SALE OF THE SAID 43 PLOTS T O ONE SHRI YOGESH JADHAV CHOUDHARI FOR RS.45,11,000/-. THE CASH PA YMENT OF RS.3,50,000/-TO MR. SONAR IS IN VIOLATION OF SECTION 40A(3) OF T HE ACT FOR WHICH HE DIRECTED THE AO TO DISALLOW THE SAME. 8. SIMILARLY, FROM THE VARIOUS DETAILS FURNISHED BY THE ASSES SEE, HE OBSERVED THAT ASSESSEE HAS PAID RS.11,72,000/- ON VARIOU S DATES IN CASH TO RAMCHANDRA N. UGALE AS ADVANCE FOR PURCHASE OF AGRICULTURAL LAND AT GUT NO.254/A/1 ADMEASURING 2 HECTARE 41R AT PO ST NANDGAON MOUZE ASTGAON. FROM THE PAYMENT DETAILS FURNISHED BY T HE ASSESSEE HE NOTED THAT ASSESSEE HAS PAID AN AMOUNT OF RS.10,24,000/- IN CASH TO THE ABOVE PERSON AND HAS SHOWN GROSS PROFIT OF RS.94,500 /- FROM THE LAND DEALING. AFTER CLAIMING EXPENSES OF RS.45,000/- ON ACCOU NT OF THE SAID LAND DEALING ASSESSEE HAD OFFERED A NET PROFIT OF RS.49,5 00/-. SINCE THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION U/S.4 0A(3) BY MAKING CASH PAYMENT IN EXCESS OF RS.20,000/- EACH AMOUNTING TO RS.10,24,000/- THE CIT(A) HELD THAT THE SAME IS HIT BY PRO VISIONS OF SECTION 40A(3) OF THE I.T. ACT. HE ACCORDINGLY DIRECTED THE AO TO DISALLOW 5 ITA NO.1014/PN/2012 THE SAME. THUS, WHILE DELETING THE DISALLOWANCE OF RS.1,10,000 /- MADE BY THE AO U/S.40A(3) THE CIT(A) DIRECTED THE AO TO MAKE D ISALLOWANCE OF RS.13,74,000/- U/S.40A(3). THUS IN EFFECT HE MADE/SUSTAINED T HE FOLLOWING ADDITIONS : (I) UNEXPLAINED CASH DEPOSITS IN BANK ACCOUNT IN THE NAME OF SAVKAR RS.11,72,000/- (II) SQUARED UP ACCOUNTS RS.4,94,000/- (III) DISALLOWANCE U/S.40A(3) (A) CASH PAYMENTS TO UGALE RS.10,24,000/- (B) CASH PAYMENT TO SONAR RS.3,50,000/- RS.13,74,000/- --------------------- RS.30,40,000/- --------------------- 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A)-II, NASHIK WAS NOT JUSTIFIED IN ENHANCING THE ASSESSED INCOME WITHOUT FOLLOWING DUE PROCESS OF LAW, LAID DOWN IN S. 251(1)( A) OF THE ACT AND ALSO V I OLATING THE FUNDAMENTAL PRINCIPLES OF NATURAL JUSTICE . THE ENHANCEMENT BE QUASHED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 11 ,71,000/- OUT OF TOTA L ADDITION OF RS. 21,85,231/- MADE BY THE A . O. THE ADDITION CONFIRMED BEING NOT IN CONSONANCE WITH THE PROVISIONS OF LAW BE QUASHED . 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD . CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE A. O. OF RS.3,32,423/ - AND FURTHER ENHANCING THE SAME BY RS. 1,62,107/- ON A CCOUN T OF GENUNITY OF SQUARED UP ACCOUNTS. THE ENHANCEMENT M ADE WITHOUT FOLLOWING DUE PROCESS OF LAW AND ALSO VIOLATING THE FU NDAMENTAL PRINCIPLES OF NATURAL JUSTICE THE CONFIRMED ADDITION OF RS. 3,32 ,423/- AND ENHANCEMENT THEREOF OF RS. 1,62,107/- BE QUASHED. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE PAYMENT OF RS. 10, 24,000/- MADE IN CASH FOR PURCHASE OF AGRICULTURAL LAND ON VARIOUS DATES HOL DING THEM TO BE H I T BY S. 40A(3) OF THE ACT . THE DISALLOWANCE IS NOT PROPER AND ACCORDING TO LAW. THE PROVISIONS OF S. 40A(3) ARE NOT APPLICABLE. THE D ISALLOWANCE BE QUASHED. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT(A) WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF RS. 3,50,00 0/- AND SUBJECT I NG THE SAME TO TAX ON ACCOUNT OF CASH PAYMENT TO SHRI SO NAR FOR PURCHASE OF LAND HOLDING IT WAS HIT BY S. 40A(3) OF THE ACT. IT IS SUBMI T TED THE PROVISIONS OF S. 40A(3) ARE NOT APPLICABLE IN THE CIRCUMSTANCES. THE DISALLOWANCE BE QUASHED. 6 ITA NO.1014/PN/2012 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT(A) WAS ALSO NOT JUSTIFIED IN DIRECTING THE A. O. TO TAKE APPROPRIATE ACTION IN CASE OF CASH RECEIPT OF RS. 10 LAC BY THE APPELLANT AS BEIN G HIT BY S. 40A(3 ) OF THE ACT. THE DIRECTION BEING NOT ACCORDING TO LAW THE SA ME BE VACATED. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LEVY OF INTEREST U/S 234A AND 2348 IS NOT JUSTIFIED AND IN THE CIRCUMSTANCES I T BE DELETED. 8. THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL . 10. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THE GROUN DS OF APPEAL RELATE TO ENHANCEMENT OF THE ASSESSED INCOME BY THE CI T(A) TO THE EXTENT OF RS.13,74,000/-. 11. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE WAS MADE BY THE AO U/S.40A(3) ON ACCOUNT OF CASH PAYMEN TS TO SHRI RAMCHANDRA UGALE AMOUNTING TO RS.10,24,000/- AND CASH P AYMENT TO MR. SONAR AMOUNTING TO RS.3,50,000/-. HE SUBMITTED THAT T HE POWERS OF CIT(A) ARE WIDE ENOUGH AND CO-TERMINUS WITH THAT OF TH E AO FOR ANNULLING/ENHANCEMENT OF ASSESSMENT BUT POWER OF ENHAN CEMENT CANNOT BE EXERCISED IN RESPECT OF THE AMOUNTS NOT EXAM INED BY THE AO FROM THE POINT OF VIEW OF TAXABILITY. THE MATTERS FALLING WITHI N THE SCOPE OF SECTION 147 AND 263 WILL BE OUTSIDE THE SCOPE OF ENHANC EMENT. HE SUBMITTED THAT IN AN APPEAL FILED BY THE ASSESSEE THE CIT (A) HAS NO POWER TO ENHANCE THE ASSESSMENT BY DISCOVERING A NEW SOURCE OF INC OME NOT CONSIDERED BY THE AO IN THE ASSESSMENT ORDER. FOR THE ABOVE PROPOSITION THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE M/S. NATIONAL A UTO WORLD VS. ITO VIDE ITA NO.376/PN/2012 AND BATCH OF OTHER APP EALS OF THE BINDRA GROUP OF CASES VIDE CONSOLIDATED ORDER DATED 29-11-2013. 7 ITA NO.1014/PN/2012 12. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A) IN ENHANCING THE INCOME O F THE ASSESSEE ON ACCOUNT OF VIOLATION OF PROVISIONS OF SECTION 40A(3). 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH TH E SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE DECI SION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL AU TO WORLD (SUPRA) RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. WE FIND THE AO IN THE BODY OF THE ASSESSMENT ORDER HAS MADE ADDITION OF R S.1,10,000/- ON ACCOUNT OF RECEIPT OF RS.1,10,000/- ON 27-12-2007 BY W AY OF BEARER CHEQUE OF ICICI BANK FROM SHRI JAYANT SANAP. HOWEVER, N O DISALLOWANCE WAS MADE BY THE AO IN THE BODY OF THE ASSES SMENT ORDER ON ACCOUNT OF ANY CASH PAYMENT MADE BY THE ASSESSEE TO ANY OTHER PERSON. IN APPEAL THE LD.CIT(A) HELD THAT THE RECEIPT OF AMOUNT THROUG H A BEARER CHEQUE BY THE ASSESSEE IS NOT COMING UNDER T HE PURVIEW OF SECTION 40A(3) FOR WHICH HE DELETED THE ADDITION. HOWEVER, O N PERUSAL OF THE DETAILS OF PAYMENTS MADE BY THE ASSESSEE TO SHRI RAMCHANDRA UGALE HE NOTED THAT THE ASSESSEE HAS MADE PAYMENT TO RS.10,24,000/- ON VARIOUS DATES IN CASH EXCEEDING RS.20,000/- IN EACH CA SE. THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS.94,500/- ON ACCOUN T OF THE LAND DEALING WITH SHRI RAMCHANDRA UGALE. HE THEREFORE HELD THAT THE CASH PAYMENT OF RS.10,24,000/- IS HIT BY PROVISIONS OF SECTION 40 A(3). SIMILARLY, OUT OF THE PAYMENTS MADE TO SHRI NAGESH SONAR HE NOTED THAT AN AMOUNT OF RS.3,50,000/- HAS BEEN PAID TO MR. SO NAR IN VIOLATION OF SECTION 40A(3). HE THEREFORE DIRECTED THE AO TO DISALLOW AN AMOUNT OF RS.13,74,000/- UNDER PROVISIONS OF SECTION 40A(3 ) (I.E. CASH PAYMENT TO SHRI RAMCHANDRA UGALE RS.10,24,000/- AND CASH PAYMENT TO MR. SONAR RS.3,50,000/-). IT IS AN ADMITTED FACT THAT NO SUCH 8 ITA NO.1014/PN/2012 DISALLOWANCE WAS MADE BY THE AO U/S.40A(3) ON ACCOUNT OF P AYMENT OF CASH IN EXCESS OF RS.20,000/- TO ANY OF THE PARTIES. TH EREFORE, THE QUESTION THAT ARISE IS AS TO WHETHER THE CIT(A) CAN ENH ANCE THE INCOME OF THE ASSESSEE BY DISCOVERING A NEW SOURCE OF INCOME NOT CONSIDERED BY THE AO IN THE ASSESSMENT ORDER. 14. WE FIND A SOMEWHAT SIMILAR ISSUE HAD COME UP BEFORE TH E COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. NATIO NAL AUTO WORLD (SUPRA) WHEREIN THE TRIBUNAL HELD AS UNDER : 31. IN THE ABOVE CONTEXT, NOW, THE MOOT QUESTION IS AS TO WHETHER IN VIEW OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN TH E CASE OF NIRBHERAM DALURAM (SUPRA), THE VIEWS EXPRESSED BY THE HONBLE APE X COURT IN SHAPOORJI PALLONJI MISTRY (SUPRA) AND RAI BAHADUR HA RDUTORY MOTILAL CHAMARIA (SUPRA) TO THE EFFECT THAT THE ENHANCEMENT POWER OF THE CIT(A) U/S 251 OF THE ACT DOES NOT INCLUDE A POWER TO DISCOVE R A NEW SOURCE OF INCOME, WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING OF FICER CONTINUES TO HOLD THE FIELD OR NOT? ON THIS PRECISE ASPECT, THE JU DGMENTS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. UNION TYRES (1 999) 240 ITR 556 (DEL) AND CIT VS. SARDARI LAL & CO. (2001) 251 ITR 864 (DE L) (FB) HAVE BEEN RELIED UPON BY THE ASSESSEE BEFORE US. THE HONBLE DELHI HIGH COURT IN THE CASE OF UNION TYRES (SUPRA) OBSERVED THAT THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NIRBHERAM DALURAM (SUPRA) LAID DOWN THAT THE POWERS CONFERRED ON THE COMMISSIONER (APPEALS) U/S 251 COULD N OT BE CONFINED TO THE MATTER WHICH HAS BEEN CONSIDERED BY THE ASSESSING OFF ICER AS THE CIT(A) IS VESTED WITH ALL PLENARY POWERS WHICH THE ASSESSING OFFI CER MAY HAVE WHILE MAKING THE ASSESSMENT, BUT AS PER THE HONBLE DELH I HIGH COURT THE HONBLE SUPREME COURT DID NOT COMMENT UPON THE ISSUE WHETHER THESE WIDE POWERS ALSO INCLUDE THE POWER TO DISCOVER A NEW SOURCE OF INCOME. THEREFORE, ACCORDING TO THE HONBLE DELHI HIGH COUR T, THE PRINCIPLE OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN SHAPOORJI PALLONJI MISTRY (SUPRA) AND RAI BAHADUR HARDUTORY MOTILAL CHARMARIA (SUPRA) STILL HOLDS THE FIELD. THE FOLLOWING OBSERVATIONS OF THE HONBLE DELHI HIGH COURT ARE WORTHY OF NOTICE: - THUS, THE PRINCIPLE EMERGING FROM THE AFORENOTED P RONOUNCEMENTS OF THE SUPREME COURT IS, THAT THE FIRST APPELLATE AUTH ORITY IS INVESTED WITH VERY WIDE POWERS UNDER S. 251(1)(A) OF THE ACT AND ONCE AN ASSESSMENT ORDER IS BROUGHT BEFORE THE AUTHORITY, HIS COMPETEN CE IS NOT RESTRICTED TO EXAMINING ONLY THOSE ASPECTS OF THE ASSESSMENT A BOUT WHICH THE ASSESSEE MAKES A GRIEVANCE AND RANGES OVER THE WHOL E ASSESSMENT TO CORRECT THE AO NOT ONLY WITH REGARD TO A MATTER RAI SED BY THE ASSESSEE IN APPEAL BUT ALSO WITH REGARD TO ANY OTHER MATTER WHICH HAS BEEN CONSIDERED BY THE AO AND DETERMINED IN THE COURSE O F ASSESSMENT. HOWEVER, THERE IS A SOLITARY BUT SIGNIFICANT LIMITA TION TO THE POWER OF REVISIONS, VIZ. THAT IT IS NOT OPEN TO THE AAC TO I NTRODUCE IN THE ASSESSMENT A NEW SOURCE OF INCOME AND THE ASSESSMEN T HAS TO BE 9 ITA NO.1014/PN/2012 CONFINED TO THOSE ITEMS OF INCOME WHICH WERE THE SU BJECT- MATTER OF ORIGINAL ASSESSMENT. [UNDERLINED FOR EMPHASIS BY US] 32. ACCORDINGLY, THE HONBLE DELHI HIGH COURT REITE RATED THAT THERE WAS A SIGNIFICANT LIMITATION TO THE POWER OF ENHANCEMENT R EFERRED TO IN SECTION 251 OF THE ACT WHEREBY IT IS NOT OPEN TO AN APPELLAT E AUTHORITY TO INTRODUCE IN THE ASSESSMENT A NEW SOURCE OF INCOME; AND, THAT THE ASSESSMENT HAS TO BE CONFINED TO THOSE ITEMS OF INCOME WHICH WERE THE SU BJECT-MATTER OF ORIGINAL ASSESSMENT. SIMILARLY, THE FULL BENCH OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SARDARI LAL & CO. (SUPRA) ALSO CO NSIDERED A SIMILAR ARGUMENT THAT IS CANVASSED BEFORE US BY THE LEARNED CIT (DR) ON BEHALF OF THE REVENUE, BASED ON THE JUDGMENT OF THE HONBLE SU PREME COURT IN THE CASE OF NIRBHERAM DALURAM (SUPRA). THE HONBLE DELHI HIGH COURT AFTER CONSIDERING THE JUDGMENTS OF THE HONBLE SUPREME COUR T IN THE CASE OF JUTE CORPORATION OF INDIA LIMITED VS. CIT, 187 ITR 688, S HAPOORJI PALLONJI MISTRY (SUPRA) AND RAI BAHADUR HARDUTORY MOTILAL CHARMARIA (SUPRA) HELD THAT THE VIEWS EXPRESSED THEREIN CONTINUE TO HOLD THE FIELD AND WERE NOT OBLITERATED AFTER THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NIRBHERAM DALURAM (SUPRA). EXPLAINING THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF NIRBHERAM DALURAM (SUPRA) IT HAS BEEN SAID AS UNDER : - IN DALURAMS CASE [1997] 224 ITR 610 (SC), THE DEC ISIONS OF KANPUR COALS CASE [1964] 53 ITR 225 (SC) AND JUTE CORPORA TIONS CASE [1991] 187 ITR 688 (SC) WERE ALSO CONSIDERED AND IT WAS OB SERVED BY THE APEX COURT THAT THE APPELLATE POWERS CONFERRED ON THE FI RST APPELLATE AUTHORITY UNDER SECTION 251 OF THE ACT WERE NOT CON FINED TO THE MATTER, WHICH HAD BEEN CONSIDERED BY THE INCOME-TAX OFFICER , AS THE FIRST APPELLATE AUTHORITY IS VESTED WITH ALL THE WIDE POW ERS OF THE ASSESSING OFFICER MAY HAVE WHILE MAKING THE ASSESSMENT, BUT T HE ISSUE WHETHER THESE WIDE POWERS ALSO INCLUDE THE POWER TO DISCOVE R A NEW SOURCE OF INCOME WAS NOT COMMENTED UPON. CONSEQUENTLY, THE VI EW EXPRESSED IN SHAPOORJIS CASE [1962] 44 ITR 891 (SC) AND CHAMARI AS CASE [1967] 66 ITR 443 (SC) STILL HOLDS THE FIELD. 33. THE HONBLE DELHI HIGH COURT CONCLUDED THAT WHE NEVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER IS CONCERNED, THE JUR ISDICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEALT WITH U NDER SECTIONS 147/148 OF THE ACT AND SECTION 263 OF THE ACT, IF TH E REQUISITE CONDITIONS ARE FULFILLED. ACCORDING TO THE HONBLE HIGH COURT, IN THE PRESENCE OF SUCH SPECIFIC PROVISIONS, A SIMILAR POWER COULD NOT BE SAID T O BE AVAILABLE TO THE FIRST APPELLATE AUTHORITY. ACCORDINGLY, IT WAS HELD THAT THE VIEW EXPRESSED BY THE HONBLE SUPREME COURT IN SHAPOORJI PALLONJI MIST RY (SUPRA) AND RAI BAHADUR HARDUTORY MOTILAL CHARMARIA (SUPRA) TO THE E FFECT THAT IN AN APPEAL FILED BY THE ASSESSEE, THE CIT(A) HAS NO POWER TO ENHANC E THE ASSESSMENT BY DISCOVERING A NEW SOURCE OF INCOME NOT CONSIDERED BY T HE ASSESSING OFFICER IN THE ASSESSMENT ORDER, CONTINUES TO HOLD THE FIELD. 34. THEREFORE, IN VIEW OF THE AFORESAID JUDGMENTS OF THE HONBLE DELHI HIGH COURT EXPLAINING THE IMPORT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NIRBHERAM DALURAM (SUPRA) WE FIND NO REASONS TO UPHOLD THE PLEA OF THE LEARNED CIT(DR). 10 ITA NO.1014/PN/2012 35. APART FROM THE AFORESAID REASON, WE MAY ALSO POINT OUT AS TO HOW THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE O F NIRBHERAM DALURAM (SUPRA) DOES NOT REQUIRE CONSIDERATION IN THE PRESENT C ASE. AS WE HAVE NOTED EARLIER WHILE CONSIDERING THE FACTUAL ASPECTS IN THE CASE OF NIRBHERAM DALURAM (SUPRA), THE ASSESSING OFFICER CONSIDERED CERTA IN HUNDI LOAN ENTRIES AS UNEXPLAINED AND ASSESSED PEAK CREDIT OF RS.2,45,000/ - AS AN UNDISCLOSED INCOME. THE APPELLANT ASSISTANT COMMISSIONER (I.E. AAC) IN APPEAL ON SCRUTINY OF CASH BOOK DISCOVERED 10 MORE BOGUS ENTRIES T OTALING TO RS.2,30,000/- AND ADDED THE SAME AS INCOME FROM UNDISCL OSED SOURCES. FACTUALLY SPEAKING, INCOME SOUGHT TO BE TAXED BY THE ASSESSING OFFICER AS WELL AS THE ACC WAS FROM THE SAME SOURCE, I.E. UNDISCLO SED INCOME FROM UNEXPLAINED HUNDI LOAN ENTRIES, AND THEREFORE, THE AAC COULD NOT BE CONSIDERED TO HAVE DISCOVERED A NEW SOURCE OF INCOME. WHEREAS, IN THE PRESENT CASE IT IS FACTUALLY EVIDENT THAT THE CIT(A) HAS DISCOVERED A NEW SOURCE OF INCOME, I.E. MONEY-LENDING ACTIVITY, WHICH WAS NOT EXISTING ON RECORD I.E. NEITHER IN THE ASSESSMENT ORDER AND NOR IN THE RETURNS OF INCOME FILED BY THE ASSESSEE. THEREFORE, FACTUALLY SPEAKING AL SO, WE FIND NO REASON TO IMPORT THE PROPOSITION LAID DOWN IN THE CASE OF NI RBHERAM DALURAM (SUPRA) TO THE PRESENT CASE. 15. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BEN CH OF THE TRIBUNAL CITED (SUPRA) WE HOLD THAT THE CIT(A) HAS NO POWER TO ENHANCE THE ASSESSMENT BY DISCOVERING A NEW SOURCE OF INCOME NO T CONSIDERED BY THE AO IN THE ASSESSMENT ORDER. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION OF RS.13,74,000/-. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE . 16. THE SECOND ISSUE RAISED BY THE ASSESSEE IN THE GRO UNDS OF APPEAL RELATE TO THE ORDER OF THE CIT(A) IN SUSTAINING ADDITION OF RS.4,94,450/-. 17. AFTER HEARING BOTH THE SIDES, WE FIND DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSE E HAS DEPOSITED AN AMOUNT OF RS.8,82,423/- IN HIS BANK ACCOUNT. ON BEING Q UESTIONED BY THE AO THE ASSESSEE COULD EXPLAIN SOURCE OF RS.5,50,000 /- BEING RECEIVED FROM SHRI JAYANT SANAP- RS.4,25,000/- AND RS.1,25,0 00/- FROM SHRI SHIVAJI SANAP. THE AO, THEREFORE, ACCEPTED THE SOURCE TO THE EXTENT OF RS.5,50,000/-. SINCE THE ASSESSEE COULD NOT EXP LAIN THE SOURCE OF THE REMAINING AMOUNT OF RS.3,32,423/- DESPITE O PPORTUNITIES GIVEN BY HIM HE MADE ADDITION OF RS.3,32,423/-. 11 ITA NO.1014/PN/2012 18. BEFORE CIT(A) IT WAS SUBMITTED THAT THE ASSESSEE HAS RECEIVED RS.1,44,236/- FROM SHRI PARVEZ KHAN AND RS.1,09,440/- FROM SHRI VAISYA YESHWANT AND RS.11,600/- FROM SHRI NITIN KARLE. THE A SSESSEE HAS ALSO INCLUDED CERTAIN CONFIRMATION LETTERS OF SQUARED UP AMOUNTS, THE DETAILS OF WHICH ARE AS UNDER : A. PARVE KHAN - RS.1,50,000/- B. M.L. PHADAKE - RS.1,40,000/- C. VAISYA YASHWANT - RS.1,09,440/- D. ANIL LAXMAN - RS.95,000/- 19. HOWEVER, THE ASSESSEE COULD NOT FURNISH THE CONFIRMAT ION STATEMENT OF ACCOUNTS OF THESE SQUARED UP AMOUNTS. T HE LD.CIT(A) NOTED THAT BESIDES RECEIVING CHEQUE OF RS.46,496/- THE AS SESSEE HAS ALSO RECEIVED CASH OF RS.93,704/- FROM SHRI M.K. PHADKE. SIN CE THE ASSESSEE FAILED TO FURNISH DETAILS IN REGARD TO THE SQUARED UP AMOUNTS AS PER THE EXPLANATION OF THE ASSESSEE WITH REGARD TO GENUINENESS OF THE CREDITORS, THEIR CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION CANNOT BE ACCEPTED AS TRUE. IN VIEW OF THE ABOVE THE L D.CIT(A) MADE AN ADDITION OF RS.4,94,440/- U/S.68 OF THE I.T. ACT BY ENHANCING THE INCOME BY RS.1,62,017/-. 20. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ADMITTEDLY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS UNABLE TO EXPLAIN THE SOURCE TO THE EXTENT OF RS.3,3 2,423/- FOR WHICH THE AO HAD MADE THE ADDITION. BEFORE THE CIT(A) ALSO THE ASSESSEE WHILE EXPLAINING THE SOURCE COULD NOT FURNISH THE CONFIRMATIONS/STATEMENT OF ACCOUNTS OF THE SQUARED UP AM OUNTS. EVEN DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE EXPRESSED HIS INABILITY TO FURNISH THE DETAILS OF CONFIRMATIONS /STATEMENT OF ACCOUNTS OF THE SQUARED UP AMOUNTS. WE, THEREFORE, DO NOT FIND ANY 12 ITA NO.1014/PN/2012 INFIRMITY IN THE ORDER OF THE CIT(A) IN ENHANCING THE ADDITION BY RS.1,62,017/- U/S.68 OF THE I.T. ACT. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY DISMISSED. 21. THE THIRD ISSUE RAISED BY THE ASSESSEE IN THE GROUN DS OF APPEAL IS REGARDING THE ACTION OF THE CIT(A) IN SUSTAINING THE AMOUN T OF RS.11,72,000/- OUT OF THE ADDITION OF RS.21,85,231/- MADE BY THE AO. 22. AFTER HEARING BOTH THE SIDES WE FIND THE AO MADE ADD ITION OF RS.21,85,231/- ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE MAINTAINED WITH ICICI BANK, NASH IK BRANCH. BEFORE THE CIT(A) THE ASSESSEE MADE ELABORATE SUBMISSIONS BASED ON WHICH THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. HE ALSO ASKED THE AO TO VERIFY THE CREDIT WORTHINESS OF SHRI SAV KAR AND THE GENUINENESS OF THE TRANSACTIONS SINCE THE ASSESSEE WAS REPEATEDLY STATING BEFORE THE AO AS WELL AS THE CIT(A) THAT HE HAS R ECEIVED CASH ADVANCE FROM SHRI SAVKAR FROM TIME TO TIME FOR SALE OF LAND AT GUT NO.254/A/1 MEASURING 2HECTARES 42 R. THE AO RECORDED THE STATEMENT OF SHRI SAVKAR U/S.131 OF THE ACT ON 10-01-20 12. IN HIS REMAND REPORT DATED 19-01-2012 THE AO SUBMITTED THAT SHRI SAVKAR HAS MADE CASH PAYMENTS TO THE ASSESSEE OUT OF THE FOLLOWING SOURCES : 1. PERSONAL SAVINGS RS.2,77,000/- (BY CASH) 2. FROM AGRICULTURAL INCOME RS.1,70,000/- (BY CASH) 3. FROM FATHER-IN-LAW RS.4,00,000/- (BY CASH) 4. FROM MOTHER (OUT OF SALE OF HER GOLD ORNAMENTS RS.2,35,000/- (BY CASH) 5. FROM BROTHER RS.35,000/- (BY CASH) 6. FROM FATHER RS.55,000/- (BY CASH 23. THE AO FURTHER REPORTED THAT SHRI SAVKAR WAS DRIVIN G RICKSHAW ON A PART TIME BASIS ON A SALARY OF RS.4,500/- TO RS.5,000 /- PER MONTH. HE WAS ALSO WORKING WITH THE ASSESSEE ON A SALARY OF RS. 3,000/- PER 13 ITA NO.1014/PN/2012 MONTH. HE COULD NOT PRODUCE HIS BANK PASS BOOK TO SUB STANTIATE HIS SAVINGS OR THE RELEVANT DOCUMENTARY EVIDENCE FOR SALE OF AGRICULTURAL PRODUCE OF ONION/AGRICULTURAL INCOME. IN VIEW OF THE ABOVE FACTUAL FINDINGS THE LD.CIT(A) UPHELD THE ADDITION OF RS.11,72,000/-. 24. AFTER CONSIDERING THE RIVAL ARGUMENTS OF BOTH SIDES, W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) SUSTAINING THE ADDITION OF RS.11,72,000/- CLAIMED TO HAVE BEEN RECEIVED FROM SHRI KISH ORE R. SAVKAR. THE AO IN THE REMAND PROCEEDINGS HAS GIVEN A FINDING THAT SHR I SAVKAR WAS DRIVING A RICKSHAW ON A PART TIME BASIS AND H E WAS ALSO WORKING WITH THE ASSESSEE ON A SALARY OF RS.3,000/- PER MONTH. NEITHER HE COULD PRODUCE HIS BANK PASSBOOK NOR HE COULD SUBSTA NTIATE WITH EVIDENCE THAT HE HAD KEPT CASH WITH HIS RELATIVES. NO DO CUMENTARY EVIDENCE IN SUPPORT OF SALE OF GOLD ORNAMENTS WAS FILED. THE FATHER AND BROTHER OF MR. SAVKAR ARE WORKING IN PRIVATE COMPANIES ON A VERY MODERATE SALARY. EVEN HIS FATHER IN LAW FROM WHOM HE HAS SHOWN TO HAVE RECEIVED RS.4 LAKHS IN CASH OWNS AGRICULTURAL LAND IN JO INT OWNERSHIP WITH HIS BROTHERS. THE LD.CIT(A) AFTER CONSIDERIN G THE FAMILY HISTORY AND CONDUCT OF THE ASSESSEE HAS GIVEN A FINDING T HAT THE CASH DEPOSIT OF RS.11,72,000/- STATED TO HAVE BEEN MADE OUT OF CASH ADVANCE FROM SHRI SAVKAR ARE ASSESSEES OWN UNEXPLAINED CASH DE POSIT. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT FURNISH ANY OTHER EVID ENCE SO AS TO TAKE A CONTRARY VIEW THAN THE VIEW TAKEN BY THE LD.CIT (A). SINCE THE ASSESSEE WAS UNABLE TO EXPLAIN THE CREDIT WORTHINESS OF S HRI KISHORE R. SAVKAR REGARDING THE ALLEGED PAYMENT OF RS.11,72,000/- TO THE ASSESSEE FROM TIME TO TIME, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF THE CIT(A) ON THIS ISSUE. THE GROUND RAISED BY THE ASSE SSEE ON THIS ISSUE ACCORDINGLY DISMISSED. 14 ITA NO.1014/PN/2012 25. SO FAR AS THE ISSUE RELATING TO THE ORDER OF THE CIT (A) IN DIRECTING THE AO TO TAKE APPROPRIATE ACTION IN THE CASE OF SHRI YO GESH JADHAV CHOUDHARI FOR GIVING CASH TO THE ASSESSEE AMOUNTING TO R S.10 LAKHS IN VIOLATION OF SECTION 40A(3) IS CONCERNED, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. THE ASSESSEE SHOU LD NOT BE AGGRIEVED FOR THE DIRECTION OF THE CIT(A) TO THE AO TO TAK E APPROPRIATE ACTION IN CASE OF SOME OTHER PERSON FOR VIOLATION OF PROVIS IONS OF SECTION 40A(3). ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 26. SO FAR AS GROUND RELATING TO LEVY OF INTEREST U/S.23 4A AND 234B IS CONCERNED, THE SAME IS MANDATORY AND CONSEQUENTIAL IN NA TURE. ACCORDINGLY, THE SAME IS DISMISSED. 27. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27-05-2016. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED :27 TH MAY , 2016. LRH'K ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT(A)-II, NASHIK 4. % S / THE CIT-II, NASHIK 5. ( ++, , , , IQ.KS / DR, ITAT, A PUNE; 6. 0 / GUARD FILE. / BY ORDER , // ( + //TRUE COPY// 23 + , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE