A. Rami Reddy, Hyd., Hyderabad V. ITO,Ward-11(3), Hyd, Hyderabad

ITA 1061/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2684 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-08-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 28-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L R AMJI RAO
• Keywords: Unexplained investment; Principle of natural justice; Additional evidence; Cost of acquisition; Assessment record
• Section: 143(3); 133A; 147; 131; 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A. NOS. 1060 & 1061/HYD/2016 ASSESSMENT YEARS: 2006-07 & 2007-08 A. RAMI REDDY, HYDERABAD [PAN: AHQPA6162Q] VS INCOME TAX OFFICER, WARD-11(3), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS, AR FOR REVENUE : SHRI L. RAMJI RAO, DR DATE OF HEARING : 01-08-2017 DATE OF PRONOUNCEMENT : 04-08-2017 O R D E R PER CHANDRA POOJARI, A.M. : THESE TWO APPEALS FILED BY ASSESSEE AGAINST THE COMMO N ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, HYDERABAD, DATED 30-10-2015. SINCE THE GROUNDS FOR BOTH THE ASSES SMENT YEARS ARE SAME, EXCEPT THE AMOUNT MENTIONED IN GROUND N O.2, WE HEARD BOTH THE FILES TOGETHER AND DECIDED THE SAME BY THI S COMMON ORDER. 2. FOR THE SAKE OF CONVENIENCE, ITA NO. 1060/HYD/20 16 FOR THE AY. 2006-07 IS DISCUSSED IN DETAIL. THE GROUNDS OF APPEAL ARE AS UNDER: 1. THE ORDER OF THE HON'BLE CIT(A) IS ERRONEOUS IN LAW AS WELL AS FACTS OF THE CASE. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 2 - : 2. THE HON'BLE CIT(A) ERRED IN MAKING OBSERVATION T HAT THE PROPORTIONATE SHARE OF INVESTMENT OF THE ASSESSE AMOUNTING TO RS. 3,66,667/- HAS TO BE TAXED AS UNDISCLOSED INVESTMENT IN THE ASST. YEAR 2 006-07. 3. THE DIRECTIONS OF THE HON'BLE CIT(A) ARE NOT LEG AL AS THE SAME WERE BEYOND THE JURISDICTION OF THE HON'BLE CIT(A). 4. THE HON'BLE CIT(A) OUGHT NOT TO HAVE ISSUED SUCH DIRECTION AS THE GENUINENESS OF THE INVESTMENT OF RS.3,66,667/- WAS NOT AN ISSUE IN APPEAL BEFORE THE HON'BLE CIT(A). 5. THE HON'BLE CIT(A) WITHOUT ANY MATERIAL ON RECOR D ARRIVED AT THE CONCLUSION THAT THE AMOUNT OF RS.3,66,667/- CONSTIT UTE UNDISCLOSED INVESTMENT AND THEREFORE THE DIRECTION TO TAX THE S AME IN THE CASE OF THE ASSESSE FOR ASST. YEAR 2006-07 IS NOT LEGALLY VALID AND THEREFORE THE SAME IS LIABLE TO BE SET ASIDE. 6. THE DIRECTIONS ISSUED BY THE HON'BLE CIT(A) ARE IN VIOLATION OF PROVISIONS OF SECTION 150(2) OF THE IT ACT AND THEREFORE HELD TO BE NOT VALID. 7. THE DIRECTIONS ISSUED BY THE HON'BLE CIT(A) FOR THE ASST. YEARS 2007-08 AND 2008-09 ARE ALSO BEYOND JURISDICTION AS THE REL EVANT ASPECTS WERE NOT IN DISPUTE BEFORE THE HON'BLE CIT(A). FURTHER, ISSU ING OF SUCH DIRECTIONS WITHOUT ALLOWING A PROPER OPPORTUNITY TO THE ASSESS E ARE VIOLATIVE OF PROVISIONS OF NATURAL JUSTICE AND THEREFORE CANNOT BE HELD AS VALID. 8. ANY OTHER GROUND WILL BE RAISED AT THE TIME OF H EARING. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND CARRYING ON BUSINESS IN REAL ESTATE. FOR THE AY. 2006-07 THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,53,445/-. 3.1. THERE WAS A SURVEY OPERATION U/S. 133A OF THE I NCOME TAX ACT [ACT] IN THE CASE OF M/S. LEGEND REAL ESTATES P VT. LTD. ON 23-08-2006. THE CASE WAS IN JURISDICTION OF ITO. WA RD-16(1), HYDERABAD AND HE CARRIED ON THE SURVEY OPERATION U/S . 133A OF THE ACT. DURING THE COURSE OF SURVEY OPERATION, A SALE AG REEMENT DATED 09-03-2006 IN RESPECT OF A PROPERTY SITUATED IN SY. NO S. 5 & 6, I.T.A. NOS. 1060 & 1061/HYD/2016 :- 3 - : NAGARAM VILLAGE, MAHESHWARAM MANDAL, R.R. DISTRICT F OR A CONSIDERATION OF RS. 55,00,000/- PER ACRE WAS FOUND. AS PER FACTS DELINEATED IN SUCH AGREEMENT, IT IS OBSERVED THAT SHRI A. RAMI REDDY, THE ASSESSEE AND TWO OTHERS I.E. SHRI J.V. SUB BA RAO AND SHRI A. RAJENDRA PRASAD NAVE PURCHASED A LAND PROPE RTY TO THE EXTENT OF 8 ACRES VIDE THE ABOVE SAID AGREEMENT. BUT THE SE INVESTMENTS WERE NOT REFLECTED IN THEIR RESPECTIVE INCOM E TAX RETURNS. THEREFORE, THE AO INITIATED PROCEEDINGS U/S. 1 47 OF THE ACT IN THE CASE OF SHRI A. RAMI REDDY, THE ASSESSEE. 3.2. THE ASSESSEE ALONG WITH TWO OTHERS I.E. SHRI J.V. SUBBA RAO AND SHRI A. RAJENDRA PRASAD ENTERED INTO AN AGRE EMENT DATED 09-03-2006 WITH SHRI CH. NAVEEN KUMAR, SHRI CH. PRAV EEN KUMAR AND SHRI CH. VENKATAIAH FOR PURCHASE OF LAND ADMEASU RING AC 9.29 GTS SITUATED IN SY. NO.6, NAGARAM VILLAGE, MAHESH WARAM MANDAL, R.R. DIST. THE SALE CONSIDERATION IS STATED AT RS.4,10,40,000/-. FURTHER, AS PER AGREEMENT THE PURCHASERS HAD PAID RS. 11,00,000/- IN CASH AS ADVANCE. THE CONDITION-3 WAS THAT THE BALANCE SALE CONSIDERATION SHOULD BE PAID IN FOUR MO NTHS FROM THE DATE OF SALE AGREEMENT AND ON RECEIPT OF THE CONSIDERATI ON, THE VENDOR WILL REGISTER THE SALE DEED. 3.3. IT WAS SUBMITTED THAT THE ASSESSEE ALONG WITH SHRI J.V. SUBBA RAO ENTERED INTO A PARTNERSHIP VIDE DEED DATED 19-04-2006. THE NAME OF THE PARTNERSHIP CONCERN WAS M/S. R.R. ESTA TES. BOTH THE PARTNERS WERE HAVING 50% SHARE EACH. THE FIRM WAS PROMOTED WITH THE MAIN INTENTION FOR DEVELOPMENT OF LAND AND CAR RYON REAL ESTATE BUSINESS. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 4 - : 3.4. SUBSEQUENTLY, THE PARTNERSHIP DEED WAS AMENDED AND A FRESH DEED WAS EXECUTED ON 15-05-2006. AS PER THE AMENDED PARTNERSHIP DEED SHRI J.V. SUBBA RAO, SRI A. RAMI RE DDY AND SMT. J. RAJANI, W/O. J.V. SUBBA RAO WERE THE PARTNERS WIT H EQUAL SHARES I.E., 33.33%. ALL THE REMAINING CLAUSES OF THE PARTNERSHIP DEED DATED 19-04-2006 CONTINUED TO BE THE SAME IN THE AMENDED PARTNERSHIP DEED. 3.5. SHRI A. RAMI REDDY RETIRED FROM THE SAID PARTNER SHIP FIRM W.E.F. 02-05-2007 AND SHRI J.V. SUBBA RAO AND SMT J. RAJANI ENTERED INTO A FRESH PARTNERSHIP VIDE DEED DATED 02- 05-2007. IN THE PARTNERSHIP DEED IT WAS MENTIONED THAT THE ACCOUNT OF SHRI A. RAMI REDDY, RETIRING PARTNER WAS SETTLED ON 02-05-2007 BY PAYING BALANCE OF RS. 10,07,774/- BEING CAPITAL, INTEREST ON CAPITAL, REMUNERATION AND SHARE OF PROFIT AS FULL AND FINAL SE TTLEMENT. THUS, IT IS CLAIMED THAT THE ASSESSEE CEASED TO BE A PAR TNER OF THE FIRM M/S. R.R. ESTATES W.E.F. 02-05-2007 AND HE DI D NOT HAVE ANY FINANCIAL TRANSACTION WITH THE SAID FIRM AFTER THA T DATE. 3.6. AS MENTIONED EARLIER, THE ASSESSEE AND TWO OTHER S SHRI J.V. SUBBA RAO AND SHRI A. RAJENDRA PRASAD HAVE ENT ERED INTO AN AGREEMENT FOR PURCHASE OF 9.29 ACRES OF LAND SITUATED AT NAGARAM VILLAGE, FOR A CONSIDERATION OF RS. 4,10,40,000/- V IDE (UNREGISTERED SALE AGREEMENT DATED 09-03-2006). IT IS SUBMITTED BY TH E ASSESSEE THAT SUBSEQUENTLY, DUE TO CERTAIN DIFFERENCES SHRI A. RA JENDRA PRASAD DROPPED OUT FROM THE LAND DEAL AND THE ASSESSEE AND SHRI J.V. SUBBA RAO PROCEEDED WITH THE TRANSACTION. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 5 - : 3.7. AS PER THE AGREEMENT OF SALE DEED PRODUCED DURI NG APPEAL PROCEEDINGS, SHRI CH. NAVEEN KUMAR AND OTHER S EXECUTED A REGISTERED AGREEMENT OF SALE CUM GPA WITH POSSESSION DATED 22- 06-2006 IN FAVOUR OF M/S. R.R. ESTATES WITH REGARD TO S ALE OF 4 GTS IN SY.NO.6 SITUATED AT NAGARAM VILLAGE, MAHESHWARAM M ANDAL, R.R. DIST. THE SALE CONSIDERATION IS MENTIONED AT RS.12 LAKHS (RS.3 LAKHS PER ACRE BASING ON THE BASIC REGISTRAR OF THE STA MP DUTY AUTHORITIES). 3.8. AGAIN ANOTHER REGISTERED AGREEMENT OF SALE CUM GPA WITH POSSESSION DATED 03-07-2006 WAS EXECUTED BY SHRI CH. NAVEEN KUMAR AND OTHERS (LAND OWNERS) IN FAVOUR OF M /S. R.R. ESTATES WITH REGARD TO SALE OF AC.4.07 GUNTAS IN SY.NO.6 SITUATED AT NAGARAM VILLAGE, MAHESHWARAM MANDAL, R.R. DISTRICT AN D THE SALE CONSIDERATION WAS MENTIONED AT RS.12,52,500/- (RS.3 LA KHS PER ACRES AS PER BASIC REGISTRAR) 3.9. FROM THE ABOVE FACTS IT APPEARS THAT: I. SHRI A. RAMI REDDY THE ASSESSEE AND TWO OTHERS EN TERED INTO AN AGREEMENT DATED 09-03-2006 FOR PURCHASE OF AC.9.29 G UNTAS SITUATED AT NAGARAM VILLAGE FOR A CONSIDERATION OF RS. 4,10,40,000/- . II. SUBSEQUENTLY, A FIRM BY NAME M/S. R.R. ESTATES WA S PROMOTED BY PARTNERSHIP DEED DATED 19-04-2006 AND AMENDED LATER ON. SHRI A. RAMI REDDY, THE ASSESSEE AND TWO OTHERS WERE THE PA RTNERS. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 6 - : III. THE FIRM M/S. R.R. ESTATES ENTERED INTO THE AGRE EMENT OF SALE CUM GPA WITH POSSESSION FOR PURCHASE OF 4 ACRES OUT O F THE ABOVE MENTIONED LAND VIDE DOCUMENT DATED 22-06-2006 AT A CONSIDERATION OF RS.12 LAKHS ONLY. IV. THE FIRM M/S. R.R. ESTATES ENTERED INTO ANOTHER REG ISTERED AGREEMENT OF SALE CUM GPA WITH POSSESSION DATED 03-07- 2006 FOR PURCHASE OF AC.407 GUNTAS OUT OF THE REMAINING LAND M ENTIONED ABOVE AT A CONSIDERATION OF RS.12,52,000/- . 3.10. THUS, IT IS ARGUED THAT M/S. R.R. ESTATES (IN WHICH SHRI A. RAMI REDDY, SHRI J.V. SUBBA RAO AND SHRI J. RANI WERE PARTNERS) WAS THE PURCHASER AND LEGAL OWNER OF THE LAN D OF AC.8.07 GUNTAS SITUATED AT NAGARAM VILLAGE, WHICH WAS ORIGINALL Y INTENDED TO BE PURCHASED BY SHRI A. RAMI REDDY AND TWO OTHERS . 3.11. IT IS FURTHER SUBMITTED THAT THE FIRM M/S. R.R. ESTA TES FILED THEIR RETURN OF INCOME FOR THE AY. 2007-08 ON 31 -10-2007 BEFORE THE DCIT, CIRCLE-11(1), HYDERABAD. THE ASSES SEE FIRM FILED THE RETURN OF INCOME ALONG WITH AUDIT REPORT IN 3CD FOR M. IN THE PROFIT AND LOSS ACCOUNT THE FIRM M/S. R.R. ESTATES DEC LARED THE COST OF LAND OF AC.8.07 GUNTAS AT RS. 4,10,68,520/- AN D DEBITED THE SAME TO THAT ACCOUNT. THE SALE WERE SHOWN AT RS. 4,22,01 ,529/-. THE CLOSING WORK PROGRESS WAS SHOWN AT RS. 99,66,600 /-. THE PROFITS WERE DIVIDED AMONG THE ASSESSEE AND SHRI J.V . SUBBA RAO AND SMT J. RAJANI AT THE END OF ACCOUNTING YEAR 31-03- 2007. THE FIRM M/S. R.R. ESTATES IN THEIR FINANCIAL STATEMENTS FIL ED ALONG WITH THE RETURN OF INCOME FOR THE AY. 2007-08 DECLARED THE C OST OF ACQUISITION OF LAND ADMEASURING AC.8.07 GUNTAS AT RS . I.T.A. NOS. 1060 & 1061/HYD/2016 :- 7 - : 4,10,68,520/-. THUS IT WAS SUBMITTED THAT THE INVESTMENT IN LAND OF AC.8.07 GUNTAS WAS DISCLOSED IN THE CASE OF FIRM M /S. R.R. ESTATES IN WHICH THE ASSESSEE WAS A PARTNER. 3.12. THE ASSESSEE CONTENDED THAT AT THE TIME OF EXECUTIO N OF AGREEMENT FOR PURCHASE OF LAND THE THREE AGREEMENT HOLD ERS I.E. SRI A. RAMI REDDY, SRI J.V. SUBBA RAO AND SRI A. RAJEN DRA PRASAD PAID RS. 11,00,000/-. THUS, THE TOTAL INVESTMENT MADE B Y THE THREE PERSONS JOINTLY IN THE LAND IN THE SHAPE OF ADV ANCE WAS RS. 11,00,000/ - ONLY DURING THE ACCOUNTING YEAR 2005-06 RELEVANT FOR THE AY. 2006-07. IT IS FURTHER CLARIFIED BY ASSESSEE, THAT THE REMAINING PURCHASE COST OF LAND WAS MET OUT OF THE SALE PROCEEDS REALIZED BY SALE OF PLOTS OF LAYOUT PUT BY M/S. R.R. ESTATES, HYDERABAD THE FIRM IN WHICH THE ASSESSEE IS A PARTNER . 3.13. IN THE SWORN STATEMENT RECORDED ON 01-09-2006 SH RI. J.V. SUBBA RAO DEPOSED THAT THE LAND WAS PURCHASED FOR A CONSIDERATION OF RS. 4,10,40,000/-. WITH RESPECT TO PU RCHASE, SHRI J.V. RAO, IN HIS STATEMENT RECORDED U/S 131 OF THE AC T STATED AS FOLLOWS: ANS TO Q 7: IN THE ANSWER TO THE EARLIER QUESTION, I HAVE STATED THAT I HAVE PURCHASED THE 8 ACRES OF LAND FOR A TOTAL CONS IDERATION OF RS. 24,52,500/- ONLY WHICH IS A SUB-REGISTRAR'S VALUE A S PER THE REGISTERED DOCUMENTS. HOWEVER, I SUBMIT THAT THE LA ND WAS PURCHASED AT THE RATE OF RS. 4,10,40,000/- HAS BEEN PAID BY THREE OF US AND TAKEN THE POSSESSION OF THE LAND FOR DEVELOP ING INTO PLOTS AND MARKETING THE SAME. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 8 - : THE STATEMENT WAS THE BASIS FOR THE AO TO DRAW THE CONCL USION THAT THE ASSESSEE INVESTED 1/3 RD OF THAT AMOUNT I.E. RS. 1,36,80,000/- TOWARDS HIS SHARE OF PURCHASE CONSIDERATION. THUS, THE AO PROCEEDED TO CONCLUDE THAT THE ASSESSEE MADE INVESTMENT O F RS. 1,36,80,000/- FROM UNDISCLOSED SOURCES. 3.14. THE SALE TRANSACTION: AFTER THE PURCHASE OF THE LAND, IT WAS DIVIDED INTO 82 PLOTS TOTALING 19,675 SQ. YARDS. T HE ASSESSEE AND OTHERS ENTERED INTO MOU DATED 24-04-2006 WITH LEG END REAL ESTATES PVT. LTD AND IT WAS STATED THAT THEY HAVE RECEIVED R S. 90 LAKHS TO RS.1 CRORE TOWARDS SALE CONSIDERATION AND RS . 55 LAKHS TOWARDS ADVANCE FROM LEGEND REAL ESTATES PVT. LTD. THE A SSESSEE STATED THAT THEY HAVE INCURRED ABOUT RS. 30 LAKHS FOR DEV ELOPMENT. WITH RESPECT TO SALE TRANSACTION, SHRI J.V. RAO IN HIS S TATEMENT RECORDED U/S. 131 STATED AS FOLLOWS: 'QNO.8 HOW MANY NO OF PLOTS THAT HAVE BEEN DEMARCAT ED FOR MARKETING? ANS: THE LAND HAS BEEN DIVIDED INTO 82 PLOTS TOTALI NG TO 19,675 SQ. YARDS. QNO.9 WHAT IS THE EXPENDITURE THAT YOU HAVE INCURRE D FOR DEVELOPMENT OF THE LAND? ANS: THE ESTIMATED DEVELOPMENT CHARGES PER SQ. YD., WILL BE APPROXIMATELY RS. 500/-. HOWEVER, SO FAR WE HAVE I NCURRED ABOUT RS.150 PER SQ. YD OR ABOUT RS.30 LAKHS. IN THIS CO NNECTION, I WOULD LIKE TO STATE THAT THOUGH WE COULD NOT PROCURE THE LAND ON WESTERN SIDE OF THE LAYOUT, WE HAVE ALREADY INCURRED EXPEND ITURE IN RESPECT I.T.A. NOS. 1060 & 1061/HYD/2016 :- 9 - : OF LAYING OF ROADS, ETC., TO THE EXTENT OF ABOUT 32 00 SQ. YDS THE DEVELOPMENT WORK IS STILL GOING ON. QNO.10: WHAT IS THE RATE AGREE UPON BY YOU FOR SELL ING THE PLOTS WITH M/S. LEGEND REAL ESTATES (P) LTD? ANS: WE HAVE ENTERED INTO MOU WITH M/S. LEGEND REAL ESTATES (P) LTD., ACCORDING TO WHICH THE SELLING RATE PER SQ. Y D. IS RS,3,050/-. QNO. 11. SO FAR HOW MANY PLOTS YOU HAVE SOLD? ANS: SO FAR WE REGISTERED 9 PLOTS IN RESPECT OF WHI CH WE RECEIVED THE FULL SALE CONSIDERATION @ RS.3,050/- PER SQ.YD. OUT OF WHICH, 6 PLOTS HAVE BEEN MARKETED BY M/S. LEGEND REAL ESTATES [P) LTD. AND THE OTHER 3 PLOTS HAVE BEEN SOLD OFF INDEPENDENTLY. HOW EVER, ALL THE PLOTS HAVE BEEN REGISTERED AT RS. 3,050/- PER SQ. Y D. WE HAVE ALSO MARKETED ABOUT 40 PLOTS INDEPENDENTLY AND RECEIVED ADVANCES FROM THEM. I DO NOT EXACTLY REMEMBER HOW MUCH ADVANCES H AVE BEEN RECEIVED IN RESPECT OF THESE PLOTS. HOWEVER, I FUR NISH THE DETAILS IN COUPLE OF DAYS AS THE SAME IS AVAILABLE IN OUR OFFI CE. QNO.12. HAVE YOU RECEIVED THE ENTIRE SALE CONSIDERA TION OF THE 6 PLOTS MARKETED BY M/S. LEGEND REAL ESTATES (P) LTD. ? ANS: YES. WE HAVE RECEIVED THE ENTIRE SALE CONSIDER ATION IN RESPECT OF THE 6 PLOTS AND ALSO ADVANCES FOR THE PLOTS BEIN G MARKETED BY THE ABOVE COMPANY. SO FAR WE HAVE RECEIVED ABOUT RS.90 LAKHS TO RS 1 CRORE FROM M/S. LEGEND REAL ESTATES (P) LTD., WHICH INCLUDES THE TOTAL CONSIDERATION OF 6 PLOTS REGISTERED AS WELL A S ADVANCES RECEIVED BY IT FOR MARKETING THE PLOTS. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 10 -: QNO. 13. HAVE YOU RECEIVED ANY ADVANCE FROM M/S. LE GEND REAL ESTATES (P) LTD.? ANS: YES. WE HAVE RECEIVED ABOUT RS.55 LAKHS ON DIF FERENT DATES AT THE TIME OF EXECUTION OF THE MOU AND THIS AMOUNT IS AGREED TO BE ADJUSTED TOWARDS THE SALE VALUE OF THE PLOTS.' 3.15. THE AO BASING ON THE STATEMENT OF SHRI J. V. SU BBA RAO PROCEEDED TO ESTIMATE THE GROSS RECEIPTS AT RS. 6,00 ,08,750/- IN THE ASSESSMENT FOR THE AY. 2007-08. WHEN QUESTIONED ABOUT THE DETAILS OF LAND SOLD AND THE SALE CONSIDERATION ACCRU ED IT WAS EXPLAINED BY SRI J.V. SUBBA RAO THAT THE LAND WAS DI VIDED INTO 82 PLOTS COVERING 19675 SQ. YARDS [QUESTION NO.8]. IT WAS FURTHER DEPOSED THAT THE LAND WAS SOLD AT THE RATE OF RS.3,05 0/- PER SQ. YARD. 3.16. THE AO AS CAN BE SEEN FROM THE ASSESSMENT ORDE R PROCEEDED TO WORK OUT THE SHARE OF SALES OF THE ASSESSE E FOR THE AY. 2007-08 AS UNDER: SALE PROCEEDS OF 19675 SQ. YARDS @ RS. 3,050 PER SQ. YARD RS.6,00,08,750 LESS: DEVELOPMENT EXPENDITURE RS.500 X 19675 RS. 98,37,500 ----------------------- NET RECEIPTS FOR THE 3 PERSONS RS.5,01,71,250 ASSESSEE'S 1/3 RD SHARE (RS.5,01,71,250/3) RS.1,67,23,750 THUS, THE AO PROCEEDED TO INCLUDE THE ABOVE FIGURE OF RS.1,67,23,750/-, WHILE COMPUTING THE TOTAL INCOME FOR THE A.Y. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 11 -: 2007-08. AGAINST THIS, THE ASSESSEE WENT IN APPEAL B EFORE THE CIT(A). 4. BEFORE THE CIT(A) THE ASSESSEE FILED ADDITIONAL E VIDENCE. THE CIT(A) CALLED FOR THE REMAND REPORT FROM THE AO. I N THE REMAND REPORTS DATED 24-04-2015, THE AO HAS RAISED THE ISSUE O F NON- COOPERATION DURING ASSESSMENT PROCEEDINGS AND THE MATT ER OF ADMISSION OF ADDITIONAL EVIDENCE. THE AO CONTENDED TH AT 'IN SPITE OF GIVING SEVERAL OPPORTUNITIES BY WAY OF SEVERAL NO TICES, THE ASSESSEE SHRI A. RAMI REDDY DID NOT TURN UP BEFORE THE AO. SINCE THE ASSESSMENT IS GETTING BARRED BY LIMITATION OF TIME, T HE AO HAD NO CHOICE BUT TO COMPLETE THE ASSESSMENT U/S 144 OF THE IT ACT. SINCE THE ASSESSEE NEITHER ATTENDED HIMSELF IN RESPONS E TO ANY OF THE NOTICES ISSUED, NOR PREFERRED TO AUTHORIZE ANY AUDI TOR TO REPRESENT HIS CASE, THE ASSESSMENT WAS COMPLETED BY RA ISING A DEMAND OF RS. 89,10,265/- FOR AY. 2006-07 & RS. 1,0 L,37,162/ - FOR THE AY. 2007-08' 4.1. THE LD.CIT(A) OBJECTED WITH REGARD TO ADMISSION OF ADDITIONAL EVIDENCE DURING APPELLATE PROCEEDINGS THAT PRIOR TO THE INSERTION OF RULE 46A, THE POWER OF THE FIRST APPELLAT E AUTHORITY WAS SOLELY GOVERNED BY SECTION 250(4) OF THE 1961 ACT {COR RESPONDING TO SECTION 31(2) OF THE ACT OF 1922}. THE SAID ACTION EMPO WERED THE COMMISSIONER OF INCOME-TAX (APPEALS), THE FIRST APPELL ATE AUTHORITY UNDER THE ACT, TO MAKE SUCH FURTHER INQUIRY AS HE THOUGH T FIT OR CAUSE FURTHER INQUIRY TO BE MADE BY THE AO BEFORE DIS POSING THE APPEAL FILED BEFORE HIM. THE DISCRETIONARY POWER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) TO TAKE ADDITIONA L EVIDENCE AND TO MAKE FURTHER INQUIRY, U/S. 31(2) OF THE 1922 AC T, WAS I.T.A. NOS. 1060 & 1061/HYD/2016 :- 12 -: ENDORSED BY THE SUPREME COURT IN KESHAV MILLS CO. LTD. VS. CIT (1956) 56 ITR 365 (SC), IN THE CONTEXT OF RULE 29 OF TH E INCOME- TAX (APPELLATE TRIBUNAL) RULES, 1946 {CORRESPONDING TO RULE 29 OF THE PRESENT INCOME-TAX (APPELLATE TRIBUNAL RULES, 1963}. V IDE THE FINANCE ACT, 1972, WITH EFFECT FROM 1 ST APRIL, 1972, CLAUSE (MM] IN SECTION 295(2) WAS INSERTED IN THE ACT WITH A VIEW TO R EGULATE THE DISCRETION OF THE FIRST APPELLATE AUTHORITY IN THE MATTER OF ADMISSION OF NEW EVIDENCE, EMPOWERING THE CENTRAL BOARD OF DIRE CT TAXES TO LAY DOWN CIRCUMSTANCES OR CONDITIONS SUBJECT TO WHICH AND THE MANNER IN WHICH THE FIRST APPELLATE AUTHORITY MAY PERM IT AN APPELLANT TO PRODUCE EVIDENCE WHICH HE DID NOT PRODUCE OR WHICH HE WAS NOT ALLOWED TO PRODUCE BEFORE THE AO [REFER, BO ARD'S CIRCULAR NO, 108, DATED 20TH MARCH, 1973]. CONSEQUENTL Y, RULE 46A WAS INSERTED IN THE RULES BY THE INCOME-TAX (SECON D AMENDMENT) RULES, 1973, W.E.F. 1 ST APRIL, 1973. AS PER THE SAID RULE, THE ASSESSEE SHALL NOT BE ENTITLED TO PRODUCE BEF ORE THE FIRST APPELLATE AUTHORITY ANY EVIDENCE, ORAL OR DOCUMENTARY , OTHER THAN THE EVIDENCE PRODUCED DURING THE COURSE OF PROCEEDING S BEFORE THE AO, EXCEPT IN THE FOLLOWING CIRCUMSTANCES, VIZ., (A) WHERE THE AO HAS REFUSED TO ADMIT EVIDENCE WHICH O UGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE ASSESSEE WAS PREVENTED BY SUFFICIENT CA USE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE AO; OR (C) WHERE THE ASSESSEE WAS PREVENTED BY SUFFICIENT CA USE FROM PRODUCING BEFORE THE AO ANY EVIDENCE WHICH IS RELEVA NT TO ANY GROUND OF APPEAL; OR I.T.A. NOS. 1060 & 1061/HYD/2016 :- 13 -: (D) THE AO HAS MADE THE ORDER APPEALED AGAINST WITHOU T GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENC E RELEVANT TO ANY GROUND OF APPEAL. 4.2. SUB-RULE (2) OF RULE 46A EXPRESSLY REQUIRES TH E FIRST APPELLATE AUTHORITY TO RECORD HIS REASONS FOR ADMITTING THE ADDITIONAL EVIDENCE. FURTHER, SUB-RULE (3) MANDATORILY REQUIRES THE COMMISSIONER OF INCOME-TAX (APPEALS) TO AFFORD AN OPP ORTUNITY TO THE AO TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS-E XAMINE THE WITNESS PRODUCED BY THE ASSESSEE AND ALSO TO PRODUC E NEW EVIDENCE ON HIS SIDE TO REBUT THE ADDITIONAL EVIDENCE P RODUCED BY THE ASSESSEE. THE SO-CALLED RESTRICTIONS PLACED BY SUB -RULE (L) OF RULE 46A HAVE BEEN RENDERED SUPERFLUOUS BY THE OVERR IDING PROVISION OF SUB-RULE (4) WHICH SPECIFICALLY PROVID ES THAT THE RESTRICTIONS PLACED ON THE PRODUCTION OF ADDITIONAL EV IDENCE BY THE ASSESSEE SHALL NOT AFFECT THE POWER OF THE FIRST APPELL ATE AUTHORITY TO CALL FOR THE PRODUCTION OF ANY DOCUMENT OR THE EXAMI NATION OF ANY WITNESS IN ORDER TO ENABLE HIM TO DISPOSE OF THE APPEAL OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING ENHANCEMENT OF THE ASSESSMENT OR PENALTY OR THE IMPOSITION OF PENALTY U /S. 271 OF THE ACT. IN ADDITION TO ABOVE, SUB-SECTION (5) FURTHER C ONFERS DISCRETION ON THE COMMISSIONER OF INCOME-TAX (APPEALS) TO ALLOW THE ASSESSEE TO RAISE ANY NEW GROUND OF APPEAL IF HE IS SATISFIED THAT THE OMISSION OF THAT GROUND FROM THE FORM OF APPEAL WAS N OT WILFUL OR UNREASONABLE. 4.3. THE LD.CIT(A) RELIED ON THE DECISION RENDERED IN THE CASE OF SMT. PRABHAVATI S. SHAH VS. CIT REPORTED AT 231 ITR 1, THE HON'BLE BOMBAY HIGH COURT, CATEGORICALLY POINTED OUT TH AT WITH THE I.T.A. NOS. 1060 & 1061/HYD/2016 :- 14 -: AVOWED OBJECT OF ENSURING THAT EVIDENCE IS PRIMARILY L ED BEFORE THE AO, RULE 46A(1) PUTS FETTERS ON THE RIGHT OF THE ASSESSE E TO PRODUCE BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) ANY A DDITIONAL EVIDENCE, NOT PREVIOUSLY RAISED BEFORE THE AO. PUTTING FETTER ON THE RIGHT OF ASSESSEE IN THE MATTER OF PRODUCING ADDITIONAL EVIDENCE BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), CLAR IFIED THE COURT, DOES NOT MEAN AFFECTING IN ANY WAY THE POWERS O F THE FIRST APPELLATE AUTHORITY CONFERRED BY SUB-RULE(4) AND SEC TION 250 OF THE ACT. THE COURT HELD AS UNDER: '3 ON A PLAIN READING OF RULE 46A, IT IS CLEAR THAT THIS RULE IS INTENDED TO PUT FETTERS ON THE RIGHT OF THE APPELLANT TO PRO DUCE BEFORE THE AAC ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER TH AN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF THE PROCEEDING S BEFORE THE ITO EXCEPT IN THE CIRCUMSTANCES SET OUT THEREIN. IT DOE S NOT DEAL WITH THE POWERS OF THE AAC TO MAKE FURTHER ENQUIRY OR 10 DIR ECT THE ITO TO MAKE FURTHER ENQUIRY AND TO REPORT THE RESULT OF TH E SAME TO HIM. THIS POSITION HAS BEEN MADE CLEAR BY SUB-RULE (4) W HICH SPECIFICALLY PROVIDES THAT THE RESTRICTIONS PLACED ON THE PRODUC TION OF ADDITIONAL EVIDENCE BY THE APPELLANT WOULD NOT AFFECT THE POWE RS OF THE AAC TO CALL FOR THE PRODUCTION OF ANY DOCUMENT OR THE EXAM INATION OF ANY WITNESS TO ENABLE HIM TO DISPOSE OF THE APPEAL. UND ER SUB-SECTION (4) OF SECTION 250, THE AAC IS EMPOWERED TO MAKE SUCH F URTHER INQUIRY AS HE THINKS FIT OR TO DIRECT THE ITO TO MAKE FURTH ER INQUIRY AND TO REPORT THE RESULT OF THE SAME TO HIM. SUB-SECTION ( 5) OF SECTION 250 EMPOWERS THE AAC TO ALLOW THE APPELLANT AT THE HEAR ING OF THE APPEAL, TO GO INTO ANY GROUND OF APPEAL NOT SPECIFI ED IN GROUNDS OF APPEAL, ON HIS BEING SATISFIED THAT THE OMISSION OF THE GROUND FROM THE FORM OF APPEAL WAS NOT WILFUL. IT IS CLEAR FROM THE ABOVE PROVISIONS THAT THE POWERS OF THE AAC ARE MUCH WIDE R THAN THE POWERS OF AN ORDINARY COURT OF APPEAL. THE SCOPE OF HIS POWERS IS COTERMINOUS WITH THAT OF THE ITO. HE CAN DO WHAT TH E ITO CAN DO. HE CAN ALSO DIRECT THE ITO TO DO WHAT HE FAILED TO DO. THE POWER CONFERRED ON THE AAC UNDER SUB-SECTION (4) OF SECTI ON 250 BEING QUASI-JUDICIAL POWER, IT IS INCUMBENT ON HIM TO EXE RCISE THE SAME IF THE FACTS AND CIRCUMSTANCES JUSTIFY. IF THE AAC FAI LS TO EXERCISE HIS DISCRETION JUDICIALLY AND ARBITRARILY REFUSES TO MA KE ENQUIRY IN A CASE WHERE THE FACTS AND CIRCUMSTANCES SO DEMAND, H IS ACTION WOULD BE OPEN FOR CORRECTION BY A HIGHER AUTHORITY. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 15 -: 4. ON A CONJOINT READING OF SECTION 250 AND RULE 46 A, IT IS CLEAR THAT THE RESTRICTIONS PLACED ON THE APPELLANT TO PRODUCE EVIDENCE DO NOT AFFECT THE POWERS OF THE AAC UNDER SUB-SECTION (4) OF SECTION 250. THE PURPOSE OF RULE 46A APPEARS TO BE TO ENSURE THA T EVIDENCE IS PRIMARILY LED BEFORE THE ITO. 5. WE ARE SUPPORTED IN OUR ABOVE CONCLUSION BY THE DECISION OF THE ORISSA HIGH COURT IN B.L. CHOUDHURY V. CIT (1976) 1 05 ITR 371 IN WHICH IT WAS HELD: 'WIDE PROVISION HAS, THUS, BEEN MADE CONFERRING JUR ISDICTION ON THE FIRST APPELLATE AUTHORITY TO MAKE SUCH INQUIRY AS HE DEEMS FIT. THE PROVISION SEEMS TO HAVE BEEN BASED ON THE FACT THAT BEFORE THE APPELLATE ASSISTA NT COMMISSIONER THERE IS GENERALLY NO OPPOSITE PARTY. THE APPELLATE AUTHORIT Y HIMSELF IS THE DEPARTMENTAL AUTHORITY REPRESENTING THE REVENUE. THEREFORE, HE H AS BEEN INVESTED WITH THE POWER OF MAKING FURTHER INQUIRY. HE DOES NOT EXCEED HIS JURISDICTION IF HE ASKS OR ALLOWS THE ASSESSEE TO PRODUCE OR FILE ADDITIONAL P APERS OR ADDITIONAL EVIDENCE IN THE MATTER HE THINKS FIT.....' (P. 376) IT WAS FURTHER HELD THAT- . IN FACT, RECEIVING NEW MATERIAL BY THE APPELL ATE ASSISTANT COMMISSIONER CANNOT BE EQUATED WITH RECEIPT OF ADDI TIONAL EVIDENCE AS CONTEMPLATED IN ORDER 41. RULE 27 OF THE CODE OF CIVIL PROCEDURE OR EVEN AT THE STAGE OF SECOND APPEAL BY THE TRIBUN AL .... (P. 376)' THUS, A COJOINT READING OF SECTION 250(4) AND, (5) OF THE ACT AND RULE 46A(1) AND (4) OF THE RULES CLARIFIES THAT RESTRIC TION IS ONLY IMPOSED ON THE APPELLANTS RIGHT TO PRODUCE ADDITIONA L EVIDENCE BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). 4.4. HE ALSO REFERRED THE DECISION RENDERED IN THE C ASE OF K. RAVINDRANATHAN NAIR REPORTED AT 184 CTR (KER) 46, THE KERALA HIGH COURT TOOK COGNIZANCE OF THE DECISION IN THE CASE OF P RABHAVATI S. SHAH AND FURTHER SPECIFIED THAT 'IF THE PROVISIONS OF R .46A SUB-RULE (1) THEREOF IS HELD TO BE MANDATORY, THAT WILL GO AGAIN ST THE I.T.A. NOS. 1060 & 1061/HYD/2016 :- 16 -: PROVISIONS OF SECTION 250 OF THE ACT CONFERRING POWER ON THE FIRST APPELLATE AUTHORITY TO ENQUIRE INTO THE MATTER AND PASS A PPROPRIATE ORDERS. IN OTHER WORDS, RULE 46A WITHOUT SUB-RULE (4) WILL BE OPEN TO CHALLENGE AS ULTRA VIRES SECTION 250 OF THE ACT'. TH E KERALA HIGH COURT, IN THE INSTANT CASE, ACCORDINGLY HELD THAT IN SPI TE OF THE RESTRICTIVE PROVISIONS OF RULE 46A(1), SECTION 250 OF THE ACT READ WITH SUB-RULE (4) OF RULE 46A ENABLE THE COMMISSIONE R OF INCOME- TAX (APPEALS) TO ACCEPT ADDITIONAL EVIDENCE IN APPROPRI ATE CASES, THE COURT THEREFORE, UPHELD THE IMPUGNED ORDER OF THE TRIBUNAL WHEREBY THE AO WAS DIRECTED TO CONSIDER THE EVIDENCE P RODUCED BY THE APPELLANT BEFORE THE FIRST APPELLATE AUTHORITY TO PR OVE THE GENUINENESS OF THE CREDITS. 4.5. ACCORDING TO CIT(A), A READING OF THE EXPOSITIO N OF LAW RELATING TO THE POWER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) TO ADMIT ADDITIONAL EVIDENCE, AS MADE BY THE BOMBAY H IGH COURT AND RELIED ON BY THE KERALA HIGH COURT (DISCUSSED AB OVE) REVEALS THAT EVEN IF REPEATED OPPORTUNITIES WERE GIVEN TO THE AP PELLANT TO PRODUCE EVIDENCE AND EVEN IF THE ASSESSEE DOES NOT SU O MOTU PRODUCE ANY EVIDENCE, IN THE SPIRIT OF JUSTICE AND FAI R-PLAY, IT IS INCUMBENT ON THE FIRST APPELLATE AUTHORITY, BEING A QU ASI-JUDICIAL AUTHORITY, TO REQUIRE THE ASSESSEE TO PRODUCE REQUISITE EVIDENCE OR TO MAKE NECESSARY INQUIRY AND ADMIT ANY SUCH FRESH AN D ADDITIONAL EVIDENCE, OF COURSE, BY VIRTUE OF SECTION 2 50(4) AND (5) READ WITH SUB-RULE (4) OF RULE 46A. 4.6. ACCORDING TO CIT(A), THE DETAILS SUBMITTED BY THE ASSESSEE ARE CRUCIAL TO THE GROUNDS RAISED IN APPEA L. IN RESPONSE TO SPECIFIC QUERY BY CIT(A) THE ASSESSEE EXPLAINED TH AT THE ASSESSEE I.T.A. NOS. 1060 & 1061/HYD/2016 :- 17 -: FURNISHED A NOTARIZED AFFIDAVIT DATED 17-08-2015 CONFI RMING THE SUBMISSIONS IN CONNECTION WITH NON-COMPLIANCE. ASSESS EE ALSO ENCLOSED COPY OF THE PASSPORT AND OTHER PROOF AS EVI DENCE. IT WAS SUBMITTED THAT THE ASSESSEE LEFT FOR USA ON 17 TH APRIL, 2012 AND RETURNED TO INDIA ON 14-06-2012. IN THE MEANTIME, THER E WAS CHANGE OF RESIDENCE AND HE HAD SHIFTED TO HIS RENTED ACCOMMODATION IN VISHAL TOWERS, KUKATPALLY. THUS, IT W AS CLAIMED THAT SUBSEQUENT NOTICES WERE NOT RECEIVED BY THE ASSESSEE . 4.7. ONE OF THE CLAIMS MADE IN THE SUBMISSION THAT TH E ENTIRE PURCHASE AND SALE OF LAND IS REFLECTED IN THE ACCOUNTS OF A PARTNERSHIP FIRM M/S. R.R. ESTATES. IN THIS RESPECT AS SESSMENT OF THE FIRM AND THE OTHER PARTNER AND DETAILS OF INCOME TAX PROCEEDINGS WERE SUBMITTED. FURTHER, COPY OF REGISTERE D SALE DEEDS WERE PRODUCED. SINCE, THESE DOCUMENTS AND EVIDENCES A RC PART OF STATUTORY RECORD, THESE ARE CONSIDERED WHILE DECIDING THIS APPEAL AS THE GENUINENESS OF SUCH DOCUMENTS ARE NOT IN DOUBT. 4.8. THE ASSESSMENTS WERE FINALIZED U/S. 144 FOR BO TH THE ASST. YEARS. SINCE THE ASSESSMENT FOR BOTH THE ASSESSMEN T YEARS WERE COMPLETED U/S. 144, NO DETAILS WERE THERE BEFORE THE AO AND THE INFORMATION AND DETAILS FILED DURING THE APPEAL STA GE WERE NOT AVAILABLE WITH THE AO, IT CONSTITUTED ADDITIONAL EVIDENC E AND AS SUCH REQUIRED TO BE EXAMINED BY THE AO AS PER RULE 46 A OF THE IT. RULES. THE RELEVANT INFORMATION AND THE PETITION FOR AD MITTING ADDITIONAL EVIDENCE WERE FORWARDED TO THE AO FOR NECE SSARY VERIFICATION AND FOR FURNISHING THE REPORT. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 18 -: 4.9. THE AO IN HIS REMAND REPORT SUBMITTED THAT: 'FROM THE INFORMATION SUBMITTED BY THE ASSESSEE, IT IS OBSERVED THAT THE ASSESSEE ALONG WITH OTHER TWO PERSONS, ARE PART NERS IN A FIRM, M/S. R.R. ESTATES, ON BEHALF OF WHICH THE LAND IN Q UESTION WAS PURCHASED. IT IS ALSO SEEN FROM THE INFORMATION SU BMITTED, THAT THE DCIT, CIRCLE-11(1), HYDERABAD HAS COMPLETED THE ASS ESSMENTS OF M/S. R.R. ESTATES FOR THE A.Y.2006-07, IN WHICH THE PURCHASE AND SALE RECEIPTS OF THE ABOVE LAND TRANSACTIONS WERE A DMITTED, ON 08- 06-2009 RAISING A DEMAND OF RS. 4,05,255/-. SIMILA RLY IN THE CASE OF ANOTHER PARTNER SHRI J V. SUBBA RAO, THE DCLT, C IRCLE-11(1), HYDERABAD HAS COMPLETED THE ASSESSMENT FOR THE AY. 2006-07 ON 28-03-2014, RAISING A DEMAND OF RS.7,07,454/-, TREA TING THE INVESTMENT MADE BY SHRI J.V. SUBBA RAO TO THE EXTEN T OF RS. 10.00 LAKHS AS UNEXPLAINED INVESTMENT IN THE FIRM M/S. R. R. ESTATES. FROM THE ABOVE ASSESSMENTS, WHICH ARE DULY COMPLETE D BY THE DCIT, CIRCLE 11(1), HYDERABAD WITH REGARD TO THE FI RM, M/S. R.R. ESTATES IN WHICH THE ASSESSEE IS A PARTNER AND ALSO WITH REGARD TO SHRI J.V. SUBBA RAO, WHO IS THE OTHER PARTNER, IT C AN BE SEEN THAT THE LAND TRANSACTIONS OF 8 ACRES, WHICH WAS PURCHASED A ND SOLD BY THE ASSESSEE IS IN FACT THE TRANSACTIONS OF THE FIRM, M /S. R.R.ESTATES, WHICH WAS ACKNOWLEDGED BY THE DCIT, CIRCLE-11(1), H YDERABAD DURING THE ASSESSMENTS OF THE FIRM AND OTHER PARTNE RS. SINCE THE LAND TRANSACTIONS ARE ACCEPTED TO BE BELONGING TO T HE FIRM, IT IS TREATED THAT THE ASSESSEE DOES NOT HAVE ANY LIABILI TY TOWARDS THESE TRANSACTIONS IN HIS INDIVIDUAL CAPACITY. THE INVEST MENT MADE BY THE ASSESSEE IN THE FIRM, M/S. R.R. ESTATES TO THE EXTE NT OF RS. 30.00 LAKHS IS TO BE VERIFIED. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 19 -: THOUGH THE LAND TRANSACTION I.E., PURCHASE OF LAND AND SALE OF PLOTS BELONGING TO THE FIRM. SINCE THE ASSESSEE DID NOT A PPEAR IN RESPONSE TO ANY OF THE NOTICES AND ALSO SINCE THE AO DID NOT HAVE ANY OF THE INFORMATION BEFORE HIM WHILE COMPLETING THE ASSESSM ENT, THE ABOVE TRANSACTIONS WERE TREATED TO BE BELONGING TO THE AS SESSEE AND ASSESSMENT WAS COMPLETED BY TREATING THE INCOME OU T OF THE TRANSACTIONS BELONGING TO THE ASSESSEE'. 4.10. THE ADDITIONAL CIT WHILE ENDORSING THE REPORT OF THE AO ALSO CLARIFIED THAT: 'IN THIS CONNECTION, AFTER EXAMINING THE INFORMATIO N SUBMITTED, HAS REPORTED THAT, THE ASSESSEE HAS ADMIT TED THE PURCH ASE AND SALE OF 8 ACRES OF LAND IN THE RETURN OF INCOME FOR THE AY. 2 006-07, IN THE CASE OF THE FIRM M/S. R.R. ESTATES, WHEREIN THE ASSESSEE AND TWO OTHERS ARE PARTNERS. IT HAS ALSO BEEN INFORMED THAT THE AS SESSMENT IN THE CASE OF M/S. R.R. ESTATES, FOR THE A.Y.2006-07 HAS BEEN COMPLETED BY THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-11(1) , HYDERABAD ON 08-06-2009, RAISING A DEMAND OF RS.4,05,255/-. THE ASSESSMENT IN THE CASE OF THE PARTNER SHRI J.V. SUBBA RAO, FOR TH E AY. 2006-07 HAS ALSO BEEN COMPLETED BY THE DCIT, CIRCLE-11(1), HYDE RABAD ON 28-03- 2014, RAISING A DEMAND OF RS.7,07,454/- TREATING TH E INVESTMENT, MADE BY THE ASSESSEE, TO THE EXTENT OF RS. 10,00,00 0/- AS UNEXPLAINED INVESTMENT IN THE FIRM, M/S. R.R.ESTATE S. AS THE ASSESSEE HAS ADMITTED THE PURCHASE AND SALE OF 8 ACRES OF LAND IN THE SAID FIRM M/S. R.R.ESTATES, WHEREIN THE ASSESSEE AND SHRI J.V. SUBBA RAO ARE PARTNERS, THE ASSESSEE IS N OT LIABLE TOWARDS THE TRANSACTIONS, IN HIS INDIVIDUAL CAPACITY. HOWEV ER, THE AO HAS I.T.A. NOS. 1060 & 1061/HYD/2016 :- 20 -: INFORMED THAT, THE INVESTMENT OF RS. 30,00,000/- MA DE BY THE ASSESSEE, IN THE FIRM, M/S. R.R.ESTATES HAS TO BE V ERIFIED' . THUS THE AO CLARIFIED THAT BOTH PURCHASE AND SALE TRANS ACTIONS ASSOCIATED WITH 8 ACRES OF LAND ARE REFLECTED IN THE A CCOUNTS OF FIRM M/S. R.R.ESTATES, WHEREIN THE ASSESSEE AND SHRI J.V. S UBBA RAO ARE PARTNERS. ACCORDINGLY THE ASSESSEE IS NOT LIABLE TOWARDS THE TRANSACTIONS, IN HIS INDIVIDUAL CAPACITY. 4.11. THE CIT(A) EXAMINED THE ASSESSMENT RECORD OF M /S. R.R.ESTATES FOR AY.2007-08. M/S. R.R. ESTATES IS A PA RTNERSHIP FIRM INCORPORATED ON 21-04-2006, SHOWING ITS MAIN BU SINESS ACTIVITY OF REAL ESTATE DEVELOPMENT. AS PER SCHEDULE TO BALANCE SHEET AS ON 31-03-2007, THREE PARTNERS ARE SHRI J.V.S UBBA RAO, SHRI A. RAMI REDDY AND SMT J.RAJANI. EACH OF THEM WER E HAVING 33.33% OF PROFIT SHARE. DURING THE YEAR 2006-07, THE Y HAVE CONTRIBUTED RS. 11 LAKHS, RS.22 LAKHS AND RS.L LAKH A S THEIR CAPITAL CONTRIBUTION RESPECTIVELY. 4.12. AS PER THE DETAILS SUBMITTED ALONG WITH RETURN, TH E FIRM HAD PURCHASED LAND 9.29 GUNTAS IN SY.NO.5 & 6 SITUATED AT NAGARAM VILLAGE. THE SAID PURCHASE WAS MADE FROM SH RI CH. PRAVEEN KUMAR AND NAVEEN KUMAR AT A CONSIDERATION OF RS.4,10,68,520/-. AS PER THE DETAILS, THE PURCHASED L AND WAS CONVERTED INTO PLOTS AND THESE PLOTS MEASURED TO 22,850 SQ YARDS. AFTER DEVELOPMENT OF THE PLOT AND OTHER AMENITIES, THE PL OTS WERE SOLD TO VARIOUS CUSTOMERS AND THE TOTAL SALE CONSIDERATIO N IS SHOWN AT 4.22 CRORES. DURING THE FINANCIAL YEAR THE FIRM HAD SOLD 17.550 SQ. YARDS AND THERE WERE 5,300 SQ YARDS SHOWN AS WOR K-IN- I.T.A. NOS. 1060 & 1061/HYD/2016 :- 21 -: PROGRESS AT THE END OF THE YEAR. IN THE SUBSEQUENT YE AR I.E. IN FINANCIAL YEAR 2007-08 THE FIRM WAS DISSOLVED. AS PER THE AUDITED STATEMENT OF ACCOUNTS, THE PURCHASE O F LAND IS SHOWN AT RS. 4,10,68,520/- AND THE SALES AT RS.4,22,0 1,529/- AND CLOSING WORK-IN-PROGRESS AT RS.99,66,600/-. THE ASSE SSMENT OF THE FIRM WAS COMPLETED U/S 143(3) WITH AN ADDITION OF RS .42,20,153/-. 4.13. THUS, THE PURCHASE OF LAND AND SALE OF PLOTTED LAND ARE DISCLOSED IN THE HANDS OF THE FIRM M/S. R.R. ESTATES. THE PURCHASE AND SALE TRANSACTION OF LAND AND ASSOCIATED DEVELOPMEN TS WERE EXAMINED BY THE AO OF THE FIRM. THERE ARE ALSO VARIOU S AGREEMENT OF SALES WHICH SHOW THE TRANSACTION BETWEEN R.R. ESTATE S AND THE PURCHASERS LIKE SHRI D.SASHIBHUSHAN REDDY, SHRI RAJ U DOIKER, SHRI B.RAVINDER, ETC. THUS THE TRANSACTION OF PURCHASE AND SALES ARE REFLECTED IN THE HANDS OF THE FIRM. HENCE, HE OBS ERVED THAT NO ADDITIONS WERE WARRANTED IN THE CASE OF ASSESSEE INDIV IDUAL. 4.14. THUS, TAKING INTO ACCOUNT THE REMAND REPORT FURN ISHED BY THE AO, THE CLARIFICATION BY THE RANGE ADDL CIT. SUB MISSION OF THE ASSESSEE, ASSESSMENT RECORDS OF FIRM ETC. THE CIT( A) HELD THAT BOTH PURCHASE OF LAND AND SALES OF PLOTTED LAND ARC R EFLECTED IN THE ACCOUNTS OF THE FIRM R R ESTATES. THUS NO ADDITIONS WERE WARRANTED IN THE AY. 2006-07 FOR UNDISCLOSED INVESTMEN TS IN THE FORM OF LAND U/S 69 AND NO ADDITIONS FOR AY. 2007-08 FOR UNRECORDED SALES OF SUCH LANDED PROPERTIES. 4.15. HOWEVER, HE OBSERVED THAT THERE WERE TWO QUESTI ONS WHICH ARE REQUIRED TO BE ANSWERED. (1) THE SHARE OF ASSESSEE IN I.T.A. NOS. 1060 & 1061/HYD/2016 :- 22 -: INITIAL INVESTMENTS AMOUNTING TO 11 LAKHS MADE IN CASH . THIS INVESTMENT WAS NOT DISCLOSED BY THE ASSESSEE. HENCE THE PROPORTIONATE SHARE OF INVESTMENT AMOUNTING TO RS 3,66, 667/- IS TO BE TAXED IN THE HANDS OF THE ASSESSEE AS UNDISCLOSED INVESTMENTS IN AY. 2006-07 (2) THE CONTRIBUTION OF RS.22 LAKHS BY THE ASSESSEE TOW ARDS CAPITAL OF THE FIRM R.R. ESTATES. SINCE THERE IS NO EXPLANATION REGARDING THE SOURCE OF CAPITAL OF RS.22 LAKHS, IT IS TO BE ADDE D IN THE HANDS OF THE ASSESSEE FOR AY. 2007-08, (3) THE AMOUNT RECEIVED AS SETTLEMENT FOR RETIREMENT OF PARTNER IS TO BE TAXED IN THE HANDS OF THE ASSESSEE IN AY. 2008-0 9. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IN APPEAL BEFORE US FOR BOTH THE ASSESSMENT YEARS. 5. THE LD.AR SUBMITTED THAT FOR THESE ASSESSMENT YEAR S, THE CIT(A) GIVEN DIRECTION TO SUSTAIN ADDITION OF RS. 3 ,66,667/- FOR THE AY. 2006-07 AND RS. 22 LAKHS FOR THE AY. 2007-08 FOR WHICH HE HAS NO POWER. MORE SO, HE HAS NOT GIVEN ANY MAND ATORY NOTICE FOR THE ENHANCEMENT OF ASSESSMENT U/S. 251(1)(A) OF TH E ACT. HE SUBMITTED THAT CIT(A) CANNOT INTRODUCE NEW SOURCE OF INC OME WHICH IS NOT SUBJECT MATTER OF ASSESSMENT. FURTHER, HE S UBMITTED THAT IN CASE OF CO-OWNER SHRI J.V. SUBBA RAO, NO SUCH ADDITION HAS BEEN MADE FOR THE AY. 2006-07 BEING 1/3 RD SHARE OF HIS INVESTMENT. IN SUCH CIRCUMSTANCES, SUCH ADDITION IN TH E HANDS OF ASSESSEE IS UNWARRANTED. HE RELIED ON THE FOLLOWING JUDGMENTS IN SUPPORT OF HIS ARGUMENT: 1. CIT VS. G. VISWANATHAM [172 ITR 401]; 2. CIT VS. DINESH JAIN (HUF) (DELHI) [352 ITR 629]; I.T.A. NOS. 1060 & 1061/HYD/2016 :- 23 -: 3. COMPUTER SCIENCE CORPORATION INDIA (P) LTD. VS. ACIT (MP) [99 DTR 383]; 4. SMT. PRAMOD KUMAR SINGHAL VS. ITO (MP) [99 DTR 386]; 5. RAJINDER NATH VS. CIT (SUPREME COURT) [120 ITR 014]; 6. ITO VS. MURLIDHAR BHAGWAN DAS (SUPREME COURT) [052 I TR 335]; 7. JASWANT RAI VS. CIT (P&H) [107 ITR 477]; 8. CIT VS. S. MUTHUKARUPAN (MADRAS) [290 ITR 154]; 9. GAJJAM CHINNA YELLAPPA VS. ITO (T&AP) [370 ITR 671] ; 10. CIT VS. NARESH KUMAR AGARWAL (T&AP) [369 ITR 171]; 11. CIT VS. S. KHADER KHAN SON (MADRAS) [300 ITR 157]; 12. CIT VS. P.H. PATEL (AP) [171 ITR 128]; 13. CIT VS. MOHANBHAI PAMABHAI (GUJARAT) [91 ITR 393]; 14. ADDL.CIT VS. MOHANBHAI PAMABHAI (SUPREME COURT) [1 65 ITR 166]; 15. CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (SUPR EME COURT) [66 ITR 443]; 16. CIT VS. SHAPPORJI PALLONJI MISTRY (SUPREME COURT) [44 ITR 891]; 17. CIT VS. R. LINGMALLU RAGHUKUMAR (SUPREME COURT) [247 ITR 801]; 5.1. FINALLY HE SUBMITTED THAT THE TOTAL INVESTMENT IN LAN D HAS BEEN DECLARED BY ASSESSEE-FIRM VIZ., R.R. ESTATE S AS SUCH THERE CANNOT BE ANY FURTHER ADDITION IN THE HANDS OF ASSESSE E. 5.2. FOR THE AY. 2007-08 THE AR SUBMITTED THAT THE SUM O F RS. 22 LAKHS WAS INVESTED BY THE ASSESSEE IN R.R. ES TATES AND FIRST I.T.A. NOS. 1060 & 1061/HYD/2016 :- 24 -: OF ALL R.R. ESTATES HAS TO EXPLAIN THE SOURCES OF INV ESTMENT IN THEIR HAND. ONCE IT IS EXPLAINED BY R.R. ESTATES, THEN IT IS THE BURDEN OF ASSESSEE TO EXPLAIN THE SOURCES OF INVESTMENT. IN THE PRESENT CASE, THERE WAS NO EXPLANATION ASKED FROM R.R. ESTATES AND S TRAIT AWAY THE ADDITION WAS MADE IN THE HANDS OF ASSESSEE, WHICH IS NOT PROPER. 6. ON THE OTHER HAND, DR SUBMITTED THAT ASSESSEE-FIRM , R.R. ESTATES WAS FORMED ON 19-04-2006. BEFORE THE FO RMATION OF FIRM, THERE WAS AN AGREEMENT OF PURCHASE OF PROPERTY BY THREE PERSONS VIZ., J.V. SUBBA RAO, A. RAMI REDDY AND A. RAJENDRA PRASAD WITH THREE VENDORS ON 09-03-2006. AS PER THA T SUM OF RS. 11 LAKHS WAS PAID BY THESE PURCHASERS TO THE VENDORS. THIS AMOUNT WAS PAID BEFORE FORMATION OF THE FIRM. THE SAI D RS. 11 LAKHS TO BE EXPLAINED BY THESE THREE ASSESSEES, HOW THE SOURCES WAS MET. SINCE THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE SOURCES FOR THIS RS. 11 LAKHS, 1/3 RD OF THIS WAS CONSIDERED IN THE HANDS OF ASSESSEE AS UNEXPLAINED INVESTMENT AND IT CANNOT BE SAID THAT THIS IS A NEW SOURCE OF ADDITION IN THE HANDS OF ASSES SEE OR ENHANCEMENT OF ASSESSEE SO AS TO GIVE NOTICE TO THE ENH ANCEMENT TO ASSESSEE BEFORE MAKING ANY ADDITION BY CIT(A). 6.1. IN THE SAME WAY FOR THE AY. 2007-08, IT WAS SUBM ITTED BY THE DR THAT AMOUNT OF RS. 22 LAKHS INVESTMENT IN R.R. ESTATES WAS NOT AT ALL EXPLAINED BY ASSESSEE. HENCE, IT WAS M ADE ADDITION IN THE HANDS OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. FOR THE AY. 2006-07, THE CIT(A) AFTER I.T.A. NOS. 1060 & 1061/HYD/2016 :- 25 -: CONSIDERING THE REMAND REPORT FROM AO, OBSERVED THAT THE RE IS NO QUESTION OF MAKING ANY ADDITION IN THE HANDS OF ASSES SEE TO THE TUNE OF RS. 1,67,23,750/- SINCE IT WAS SHOWN IN THE HA NDS OF THE FIRM, R.R. ESTATES. HOWEVER, THERE WAS AN INVESTMENT O F RS. 11 LAKHS BEFORE FORMATION OF THE PARTNERSHIP FIRM ON PURC HASE OF LAND. THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION R EGARDING THE SOURCE OF THIS INVESTMENT. BEING SO, 1/3 RD OF THE SHARE WAS CONSIDERED IN THE HANDS OF ASSESSEE. NOW THE CONTENTI ON OF THE AR IS THAT THIS IS A NEW SOURCE OF INCOME CONSIDERED BY THE CIT(A) AND NOT AT ALL CONSIDERED BY THE AO WHICH AMOUNTS TO ENHAN CEMENT OF ASSESSMENT AND NOTICE FOR SUCH ACTION OF CIT(A) IS R EQUIRED U/S. 251(1)(A) OF THE ACT. IN OUR OPINION, THE POWER OF CIT(A) IS RESTRICTED TO THE SOURCE OF INCOME AS MENTIONED IN THE RETURN AND IN THE ASSESSMENT ORDER. THUS, PROVIDED AN INCOME WAS CON SIDERED BY THE AO, THE CIT(A) HAS THE FULLEST JURISDICTION IN RESPE CT OF IT; HE CAN INCLUDE IT IN THE ASSESSMENT, EVEN THOUGH IT WAS EX CLUDED BY THE AO, AND, NATURALLY WHEN HE INCLUDES IT, HE MUST INC LUDE IT UNDER ONE OR OTHER HEAD, THERE CANNOT BE ANY JUSTIFIC ATION FOR SAYING THAT, WHILE HE CAN DO SO, HE CANNOT TAKE AN INC OME WRONGLY INCLUDED BY UNDER ONE HEAD BY THE AO AND IT UNDER THE CORRECT HEAD. IT FOLLOWS THAT APPEAL IS NOT CONFINED TO THE SU BJECT MATTER OF THE APPEAL AS RESTRICTED BY THE ASSESSEE, BUT THE POWER O F THE CIT(A) EXTENDS TO CONSIDER AND DECIDING OF SOURCES O F ITEMS IN RESPECT OF WHICH ASSESSMENT IS MADE. THE EXPRESSION ASSESSMENT IS MADE DOES NOT CARRY THE MEANING THAT THE SOURCES AN D ITEM HAVE BEEN BROUGHT TO TAX. THUS, IF A PARTICULAR ITEM O R MATTER IS SUBJECT MATTER OF ASSESSMENT BY THE AO OR EVEN IT WAS D ONE BY THE ASSESSEE IN HIS RETURN, THE CIT(A) WILL UNDOUBTEDLY HA VE THE JURISDICTION TO CONSIDER AND DECIDE THE SAME IN THE APP EAL ALTHOUGH I.T.A. NOS. 1060 & 1061/HYD/2016 :- 26 -: SUCH ITEM WAS SUSTAINED BY THE AO ON DIFFERENT GROUNDS . THE LEGISLATURE HAS CONFERRED ON THE CIT(A) EXTRAORDINAR Y POWER. IT IS THE CIT(A) HAS BEEN CONSTITUTED A REVISING AUTHORITY A GAIN THE DECISIONS OF THE AO; A REVISING AUTHORITY NOT IN THE NARROW SENSE OF REVISING WHAT IS THE SUBJECT MATTER OF APPEAL NOT IN TH E SENSE OF REVISING THOSE MATTERS ABOUT WHICH THE ASSESSEE MAKES A GRIEVANCE, BUT REVISING AUTHORITY IS THE SENSE THAT ONC E THE APPEAL IS BEFORE HIM HE CAN REVISE NOT ONLY ULTIMATE COMPUTAT ION ARRIVED AT BY THE AO, BUT HE CAN REVISE EVERY PROCESS WHICH L EAD TO THE ULTIMATE COMPUTATION OR ASSESSMENT. IN OTHER WORDS, WHA T HE CAN REVISE IS NOT MERELY AN ULTIMATE AMOUNT WHICH IS LIABLE TO TAX, BUT HE IS ENTITLED TO REVISE THE VARIOUS DECISIONS GIVEN BY AO IN THE COURSE OF THE ASSESSMENT AND ALSO VARIOUS INCOMES OR DEDUCTION WHICH MAKE IN FOR CONSIDERATION FOR AO. [NARRONDAS MANORDASS VS. CIT (31 ITR 909)] AND [208 ITR 312]. IN OTHER WORDS, HIS POWERS ARE LIMITED TO THE SUBJECT MATTER OF THE ASSESSMENT AND NOT SUBJECT MATTER OF THE APPEAL. WHE N IT IS SAID THAT HE CANNOT TRAVEL BEYOND THE SUBJECT MATTER OF ASSESSMENT WHAT IS MEANT IS THAT HE CANNOT INTRODUCE INTO THE NEW SOUR CE OF INCOME TO THE ASSESSMENT, AS IT IS THE POWERS OF ENHANC EMENT AND IT IS RESTRICTED ONLY TO THE INCOME WHICH WAS SUBJECT MA TTER OF CONSIDERATION FOR THE PURPOSE OF ASSESSMENT BY THE AO. THEREFORE, IF AN INCOME IS SUBJECT MATTER OF CONSIDERATION BY THE AO AND EVEN THOUGH THE AO MAY COME TO THE CONCLUSION THAT INCOME IS N OT SUBJECT TO TAX IT WOULD BE OPEN TO CIT(A) TO TAKE A DIFFER ENT VIEW AND TO BRING THAT INCOME TO TAX. [MRS. BANOO E. COWASJ I VS. CIT (138 ITR 686)]. I.T.A. NOS. 1060 & 1061/HYD/2016 :- 27 -: 8. THE EXPLANATION TO SECTION 251 SHOWS THAT THE COMPETENCE OR JURISDICTION OF THE CIT(A) IN DEALING W ITH THE APPEAL BEFORE HIM IS NOT RESTRICTED ONLY TO MATTERS RAISED OR COMPLAINED OF BY THE ASSESSEE IN THE APPEAL, BUT IT EXTENDS TO ALL MATTE RS ARISING OUT OF THE PROCEEDINGS WHICH MIGHT HAVE BEEN CONSIDERE D AND DETERMINED BY THE AO IN THE COURSE OF ASSESSMENT PRO CEEDINGS, ALTHOUGH SUCH MATTERS MAY NOT HAVE BEEN RAISED BEFORE HIM IN APPEAL BY THE ASSESSEE. IN APPEAL, THEREFORE, THE COM PETENCE OF THE CIT(A) RANGES OVER THE WHOLE ASSESSMENT PROCEEDINGS WHICH ARE THROWN OPEN, AS THERE WERE BEFORE THE AO, WITHOUT ANY RE STRICTIONS OR HIM TO CONSIDER WHETHER THOSE MATTERS RAISED BEFORE HIM IN APPEAL BY THE ASSESSEE. HIS JURISDICTION IS, THEREF ORE, NOT CONFINED TO THE SUBJECT MATTER OF THE APPEAL BUT EXTENDS TO THE SU BJECT MATTER OF ASSESSMENT. IN EXERCISING OF SUCH JURISDIC TION, SECTION 251 HAS GIVEN WIDE POWERS INCLUDING EVEN A POWER OF ENHANCEMENT OF THE ASSESSMENT SUBJECT TO AN OPPORTUNITY OF BEING HEA RD GIVEN TO ASSESSEE BEFORE DOING SO AS IS REQUIRED UNDER SUB-S ECTION (2) OF ACT. 9. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OP INION THAT THE CIT(A) IN THIS CASE NOT INTRODUCED THE NEW SOUR CE OF INCOME FOR ASSESSMENT. HE HAS CONSIDERED THE TOTAL INV ESTMENT CONSIDERED BY THE AO AND OUT OF THIS HE DELETED THE INV ESTMENT SHOWN BY THE FIRM AFTER THE FORMATION OF THE FIRM AND S HOWN IN ITS BOOKS OF ACCOUNT AND THE INVESTMENT WHICH WAS MADE BEFO RE THE FORMATION CANNOT BE CONSIDERED IN THE HANDS OF FIRM WH ICH IS TO BE CONSIDERED ONLY IN THE HANDS OF INVESTORS I.E., THREE PARTNERS, WHO JOINED SUBSEQUENTLY AFTER AGREEMENT OF PROPERTY. SO, WE DO NOT FIND ANY INFIRMITY IN THE DIRECTION OF THE CIT(A) IN DIRECTING THE AO I.T.A. NOS. 1060 & 1061/HYD/2016 :- 28 -: TO CONSIDER 1/3 RD OF RS. 11 LAKHS WHICH WAS PAID TOWARDS PURCHASE CONSIDERATION BEFORE FORMATION OF THE FIRM, R.R. ESTATES AND THE SAME IS CONFIRMED. THIS GROUND OF APPEAL BY THE ASSESSEE IS REJECTED. 10. COMING TO AY. 2007-08, RS.22 LAKHS CONTRIBUTED BY ASSESSEE IN THE FIRM. THIS INVESTMENT SHOWN IN THE H ANDS OF ASSESSEE, IT IS THE DUTY OF THE ASSESSEE TO EXPLAIN WIT H THE COGENT MATERIAL, THE SOURCE OF WHICH IN TERMS OF SECTION 69 O F THE ACT. IN THE PRESENT CASE, THE ASSESSEE HAS NOT EXPLAINED THE SOU RCE OF INVESTMENT. BEING SO, THE CIT(A) CONSIDERED THAT AMOUNT OF RS. 22 LAKHS AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE. THE ARGUMENT OF THE LD.AR IS THAT NO EXPLANATION IS AS KED FOR REGARDING SOURCE OF THIS INVESTMENT. CONSIDERING THE P LEA OF AR, WE ARE INCLINED TO REMIT THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO ASSESSEE TO EXPLAIN THE SOURCES OF INVES TMENT AND AO HAS TO DECIDE IN ACCORDANCE WITH LAW; AFTER GIVING OP PORTUNITY OF HEARING TO THE ASSESSEE. THUS, THIS ISSUE IS REMITTED TO AO FOR RE- CONSIDERATION. 11. FURTHER ARGUMENT OF AR IS THAT DIRECTION OF THE CIT (A) THAT AMOUNT RECEIVED AS SETTLEMENT FOR RETIREMENT OF PARTNE R IS TO BE TAXED IN THE HANDS OF ASSESSEE IN THE AY. 2008-09, WHICH CANNOT BE GIVEN WHILE ADJUDICATING THE APPEALS RELATIN G TO AYS. 2006-07 AND 2007-08. IN OUR OPINION, JURISDICTION OF THE CIT(A) IS STRICTLY CONFINED TO THE ASSESSMENT ORDER OF THE PARTI CULAR YEAR [ITO VS. MURLIDHAR BHAWAN DAS (52 ITR 335)]. WHEN THE ORDER PASSED BY HIM IS BEYOND THE SCOPE OF POWERS CONFERRE D UPON HIM U/S. 251 COULD BE AN ORDER WITHOUT JURISDICTION. IN O THER WORDS, I.T.A. NOS. 1060 & 1061/HYD/2016 :- 29 -: HE IS COMMITTED TO DECIDE WHETHER A PARTICULAR ITEM OR P ARTICULAR AMOUNT IS INCOME OF AN ASSESSMENT YEAR, BUT HE HAS NO JURISDICTION FURTHER TO DECIDE IN THAT APPEAL, THE APPROP RIATE YEAR IN WHICH THE SAID INCOME WOULD FALL. [MATHURADAS B. MO HTA VS. CIT (56 ITR 269)]. 12. IN THE PRESENT CASE, THE CIT(A) DEALING IN THE AY S. 2006- 07 & 2007-08, HE CAN DECIDE WHETHER INCOME CONSIDERE D BY THE AO WHETHER IT FALLS TO THE AY. 2006-07 OR 2007-08, HE CAN GIVE DIRECTION RELEVANT TO THESE ASSESSMENT YEARS ONLY HE C ANNOT TRAVEL BEYOND THE ASSESSMENT YEAR UNDER APPEAL BEFORE HIM WH ICH IS NOT NECESSARY FOR THE PURPOSE OF DISPOSE OF THE PRESENT AP PEAL. BEING SO, WE VACATE THE FINDINGS OF THE CIT(A) THAT AMOUNT REC EIVED AS SETTLEMENT FOR RETIREMENT OF PARTNER IS TO BE TAXED IN THE HANDS OF ASSESSEE IN THE AY. 2008-09. IN OTHER WORDS, IT IS LE FT TO THE WISDOM OF THE AO WHILE FRAMING ASSESSMENT FOR THE AY. 2008-09 AND HE CANNOT ACT ON THE DIRECTION OF THE CIT(A) GIVEN I N THESE TWO ASSESSMENT YEARS. ACCORDINGLY, APPEAL IN ITA NO. 106 0/HYD/2016 FOR THE AY.2006-07 IS ALLOWED AND APPEAL IN ITA NO. 1061/HYD/2016 FOR THE AY.2007-08 IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH AUGUST, 2017 SD/- SD/- (D. MANMOHAN) (CHANDRA POOJARI) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 4 TH AUGUST, 2017 TNMM I.T.A. NOS. 1060 & 1061/HYD/2016 :- 30 -: COPY TO : 1. A. RAMI REDDY, C/O. B. NARSING RAO & CO., CHARTE RED ACCOUNTANTS, PLOT NO. 554, ROAD NO. 92, JUBILEE HIL LS, HYDERABAD. 2. INCOME TAX OFFICER, WARD-11(3), HYDERABAD. 3. CIT (APPEALS)-5, HYDERABAD. 4. PR.CIT-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.