Appeal details
Counselvise Citation
[2017] 126 COUNSELVISE.COM (IT) 7694 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-08-2017
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
15-05-2017
Assessment Year
2005-2006
Appeal Filed On
20-06-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO S . 535 /P U N/201 3 & 1354/PUN/2016 / ASSESSMENT YEAR S : 20 0 4 - 05 & 2005 - 06 VIJAY ARJUNDAS LUTHRA, ANAND VILLA, OPP. KETAN HOSPITAL, LOKMANYA NAGAR, GANGAPUR ROAD, NASHIK 422002 . / APPELLANT PAN : AAHPL2981Q VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, NASHIK . / RESPONDENT . / ITA NO.21/PUN/2015 / ASSESSMENT YEAR : 2004 - 05 VIJAY ARJUNDAS LUTHRA, ANAND VILLA, OPP. KETAN HOSPITAL, LOKMANYA NAGAR, GANG APUR ROAD, NASHIK 422013 . / APPELLANT PAN : AAHPL2981Q VS. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, NASHIK . / RESPONDENT / APPELLANT BY : SHRI KISHOR PHADKE / RESPONDENT BY : SHRI SHIVANAND KALAKARI, JCIT / DATE OF HEARING : 1 8.05. 201 7 / DATE OF PRONOUNCEMENT: 16 . 0 8 .2017 ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 2 / ORDER PER SUSHMA CHOWLA, J M : THE ABOVE THREE APPEALS FILED BY THE SAME ASSESSEE ARE AGAINS T SEPARATE ORDER S OF CIT(A) - II , CIT(A) - I, NASHIK AND CIT(A) - 12, PUNE , DATED 18 - 12 - 2012, 30 - 10 - 2014 AND 23 - 03 - 2016 RESPECTIVELY R ELATING TO ASSESSMENT Y EAR S 20 0 4 - 05 , 2005 - 06 & 2004 - 05 AGAINST ORDER S PASSED UNDER SECTION 153A READ WITH SECTION 143(3) , 271(1 )(C) & 143(3) READ WITH SECTION 153A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) RESPECTIVELY. 2. ALL THE APPEAL S FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3 . THE ASS ESSEE IN ITA NO. 535 /PUN/2013 HAS RAISED THE FOLLOWING MODIFIED GROUNDS OF APPEAL : - GROUNDS RE L AT I NG TO ADDITION OF RS. 2,19,726 1 . THE LEARNED C I T(A) - II, NASIK E R RED IN LAW I N NOT ISSUING ENHANCEMENT NOTICE TO THE APPELLANT BEFORE PROCEEDING TO ENHANCE T HE TAXABLE INCOME BY RS . 2,19,726/ - FOR ALLEGED CASH PAYMENT TO SHRI K. S . LUTHRA. 2. THE LEARNED CIT(A) - II, NASIK ERRED IN LAW AND ON FACTS IN ENHANCING THE TAXABLE INCOME OF THE APPELLANT BY RS. 2,19 , 726/ - FOR AN ALTOGETHER DIFFERENT ISSUE RELATING TO SOME ALLEGED CASH ADVANCE PAYMENTS MADE TO SHRI K . S. LUTHRA WITHOUT APPRECIATING THAT THE ISSUE IN APPEAL WAS UNDERSTATEMENT OF GROSS PROFIT ON CONTRACT RECEIPTS AND WHICH ISSUE IN PARTICULAR WAS DECIDED IN FAVOR OF THE APPELLANT. 3 . THE LEARNED CIT(A) - II, NAS I K FURTHER ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE DOCUMENT RELA T ING TO THE SAID I SSUE OF RS. 2,19,726/ - WAS SEIZED FROM THE PREMISES OF SH R I K . S . LUTHRA AND HENCE, THE ASSESSMENT PROCEDURE RELATING TO ANY SEARCH F I NDINGS OUGHT TO H AVE BEEN FOLLOWED . THE LEARNED CIT(A( I I) , NASIK ERRED IN NOT FOLLOWING THE PROCEDURE U/S 153C AND ERRED IN PROCEEDING IN THE MATTER IN AN ARBITRARY MANNER. 4. WITHOUT PREJUDICE TO GROUND NO . 1, 2 & 3, THE LEARNED CI T(A) - I I, NASIK ERRED IN LAW AND ON FACT S IN ENHANCING THE TAXABLE INCOME OF THE APPE L LANT BY RS . 2 , 19 , 726/ - FOR THE ABOVE REFER R ED I SSUE W I THOUT APPRECIATING THAT THE APPELLANT HAS EMPHATICALLY DENIED PAYMENT OF RS. 219,726/ - IN CASH TO SHR I K . S . LUTHRA ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 3 AND W I THOUT CONSIDERING THE FO L LOWING SP EC I FIC DOCUMENTS & EXPLANATIONS IN TH I S REGARD . A) LEDGER EXTRACTS SHOWING BANK PAYMENTS FOR SETTLEMENT OF BILLS OF SHRI K S LUTHRA B) FULL SETTLEMENT OF THE ACCOUNT BY SH R I K . S . LUTHRA DULY CONFIRMED BY SHRI K . S . LUTHRA AND THE APPELLANT BY SIGNATURE S. GROUNDS RELATING TO ADDITION OF RS . 1,05,65,000 5. THE LEARNED CIT(A) - II , NASIK ERRED IN L AW AND ON FACTS IN ENHANC I NG THE TAXABLE INCOME OF THE APPELLANT BY RS . 1,05,65,000/ - FOR AN ALTOGETHER DIFFERENT ISSUE RELATING TO ENTRIES RECORDED IN ' DUMMY HO CASH BOOK ACCOUNT ' WITHOUT APPRECIATING THAT THE ISSUE IN APPEAL WAS UNDERSTATEMENT OF GROSS PROFIT ON CONTRACT RECEIPTS AND WH I CH ISSUE IN PARTICULAR WAS DECIDED IN FAVOR OF THE APPELLANT. 6. THE LEARNED CIT(A) - II , NASIK ERRED IN LAW AND ON FACTS IN ENHANCING THE TAXABLE I NCOME OF THE APPELLANT BY RS . 1,05,65,000/ - FOR AN ALTOGETHER DIFFERENT ISSUE RELATING TO ENTRIES RECORDED IN ' DUMMY HO CASH BOOK ACCOUNT ' WITHOUT APPRECIATING THAT THE SAID DOC U MENT WAS SEIZED FROM THE PREMISES OF SHRI PREM LUTHRA A ND NOT FROM THE PREMISES OF THE APPELLANT . FURTHER, THE LEARNED CIT(A) - II, NASIK ERRED IN NOT FOLLOWING PROCEDURE PRESCRIBED U/S 153C BEFORE PROCEEDING FOR THE SAID ADDITION . 7 . THE LEARNED CIT(A) - II, NASIK ERRED IN LAW AND ON FACTS IN NOT APPRECIATING T HAT THE SAID ISSUE OF ENTRIES RECORDED IN ' DUMMY HO CASH BOOK ' WAS ENQUIRED BY THE LEARNED AO VIDE HIS QUESTIONNAIRE DATED 31/10/2008 WHICH WAS REPLIED TO ON 2/12/2008 AND 26/12/2008 BY THE APPELLANT . THE LEARNED CIT(A) - II, NASIK ERRED IN EXCEEDING HIS POW ERS OF ENQUIRY ON SUCH A SUBJECT MATTER ON WHICH THERE WAS CONSPICUOUS MIND APPLICATION OF THE LEARNED AO. 8. WITHOUT PREJUDICE TO GROUND NO. 5, 6 & 7 AND ALTERNATELY, THE LEARNED CIT(A) - II, NASIK ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT MAJORI TY OF THE RECEIPTS ENTRIES STATED IN THE SAID ' DUMMY HO CASH BOOK ACCOUNT ' WERE RECORDED IN ACCOUNTS OF THE VARIOUS GROUP ENTITIES OF THE APPELLANT , AND AS SUCH, WERE NOT UNRECORDED. APPELLANT WAS ENT I TLED TO CORRESPONDING CREDITS CONSIDERED IN ACCOUNTS OF THE GROUP CONCERNS WHICH OUGHT TO HAVE BEEN GRANTED BY THE LEARNED CIT(A) - II , NASIK. 9 . WITHOUT PREJUDICE TO GROUND NO. 5,6 &7 AND ALTERNATELY, THE LEARNED CIT(A) - II, NAS I K ERRED ON FACTS IN NOT RESTRICTING THE ADDITION OF CREDITS IN ' DUMMY HO CASH BOOK ACCOUNT ' ON A PROPORTIONATE BASIS IN APPELLANT'S HANDS. GENERAL GROUND 10 . THE LEARNED CIT(A) - II, NASIK ERRED IN LAW AND ON FACTS IN NOT CONSIDERING ALL REPLIES FILED FROM TIME TO TIME BEFORE PASSING THE APPELLATE ORDER . 4. IN ORDER TO ADJUDICATE T HE ISSUE WE MAKE A REFERENCE TO THE FACTS AND ISSUE IN ITA NO.535/PUN/2013. THE FIRST ISSUE RAISED BY THE ASSESSEE IS AGAINST ADDITION OF RS.2,19,726/ - ON ACCOUNT OF ALLEGED CASH PAYMENT TO SHRI ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 4 K.S. LUTHRA WITHOUT ISSUING ANY ENHANCEMENT NOTICE. THE SE COND ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ENHANCEMENT MADE BY THE CIT(A) OF RS.1,05,65,000/ - RELATING TO ENTRIES RECORDED IN DUMMY HO CASH BOOK ON ACCOUNT OF UNDER - STATEMENT OF GROSS PROFIT ON CONTRACT RECEIPTS. 5 . BRIEFLY, IN THE FACTS OF THE CASE , SEARCH AND SEIZURE OPERATIONS U/S.132 (1) OF THE ACT WERE CONDUCTED IN LUTHRA GROUP CASES OF NASHIK. R ESIDENTIAL PREMISES OF THE ASSESSEE WERE ALSO SEARCHED U/S.132 OF THE ACT ON 28 - 09 - 2006. THE ASSESSEE HAD ORIGINALLY FILED THE RETURN OF INCOME ON 14 - 0 9 - 2005 U/S.139 (1) OF THE ACT DECLARING INCOME OF RS.25,07,930/ - AND AGRICULTURAL INCOME OF RS.1,10,000/ - . IN RESPONSE TO NOTICE ISSUED U/S.153A OF THE ACT, THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME INITIALLY, BUT AFTER A GAP FURNISHED THE RETURN OF I NCOME DECLARING TOTAL INCOME OF RS.24,62,710/ - AND AGRICULTURAL INCOME OF RS.1,10,000/ - . THE ASSESSING OFFICER NOTED THAT CONSEQUENT TO SEARCH AND SEIZURE OPERATION IT HAD COME TO LIGHT THAT FOR THE CONTRACT BUSINESS IN THE LUTHRA ENTERPRISES, BOOKS OF AC COUNT HAVE BEEN MAINTAINED ON COMPUTER BUT THE TRANSACTIONS WERE RECORDED IN A FRACTURED MANNER THAT THE ASSESSEE HIMSELF COULD NOT DRAW PROFIT AND LOSS ACCOUNT OF THE CONTRACT BUSINESS. IN THE RETURN OF INCOME, THE ASSESSEE HAD SHOWN NET PROFIT OF RS.20, 55,571/ - FROM THE CONTRACT BUSINESS. THE ASSESSEE HAD ALONG WITH THE ORIGINAL RETURN OF INCOME ALSO NOT FURNISHED ANY PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CORRECTNESS FOR THIS PROFIT WAS NOT VERIFIABLE AND THE NET PROF IT SHOWN IN THE RETURN OF INCOME COULD NOT BE ACCEPTED. AS PER THE TDS CERTIFICATES ENCLOSED WITH THE ORIGINAL RETUR N OF INCOME, THE TOTAL CONTRACT RECEIPTS WORK ED TO THE TUNE OF RS.3,71,00,072/ - . IN ADDITION, THE ASSESSEE HAD NOT RECEIVED THE TDS CERTIF ICATE FROM NASHIK MUNICIPAL CORPORATION IN RESPECT OF TDS OF RS.27,581/ - WHICH WOULD BE EQUIVALENT TO CONTRACT RECEIPTS OF RS.11,07,670/ - . ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 5 THUS, THE TOTAL CONTRACT RECEIPTS WERE CALCULATED AT RS.3,82,07,742/ - . THE ASSESSING OFFICER IN VIEW OF THE NON - VE RIFIABILITY OF THE EXPENSES AND THE HIGH TURNOVER OF THE CONTRACT, ESTIMATED THE NET PROFIT AT 6% OF THE GROSS RECEIPTS WORKING TO RS.22,92,464/ - , WHICH RESULTED IN ADDITION OF RS.2,36,893/ - . 6 . THE CIT(A) NOTED THE TRANSACTIONS IN DUMMY H.O. CASH BOOK AC COUNT WHICH INCLUDED HUGE CASH RECEIPTS AND PAYMENTS FOR THE ASSESSMENT YEAR 2004 - 05. THE SAME ARE TABULATED AT PAGES 5 AND 6 OF THE APPELLATE ORDER. THE TOTAL DEBITS, I.E. RECEIPTS IN THE SAID ACCOUNT WERE TO THE TUNE OF RS.1,05,65,000/ - AND THE TOTAL C REDITS TO THAT ACCOUNTS WERE TO THE TUNE OF RS.96,91,000/ - WITH CLOSING BALANCE OF RS.8,74,000/ - . THE CIT(A) ASKED THE ASSESSEE TO GIVE HIS EXPLANATION WITH REGARD TO THE TRANSACTIONS. THE ASSESSEE DID NOT FILE ANY EXPLANATION. THE CIT(A) ISSUED A SHOW C AUSE NOTICE UNDER SECTION 251 OF THE ACT ON 31 - 10 - 2012 AS TO WHY HIS INCOME SHOULD NOT BE ENHANCED BY RS.96.91 LAKHS FOR ASSESSMENT YEAR 2004 - 05 ON ACCOUNT OF TRANSACTIONS MENTIONED AT PAGES 27 AND 28 OF SEIZED ANNEXURE - 1. IT MAY BE POINTED OUT HEREIN ITS ELF THAT THE SAID SUM OF RS.96.91 LAKHS WERE ON ACCOUNT OF THE EXPENSES DEBITED TO THAT ACCOUNT WHICH WERE NOTED TWICE. THE ASSESSEE IN REPLY TO THE SHOW CAUSE NOTICE POINTED OUT THAT THE ABOVE DOCUMENT WAS SEIZED FROM THE CUSTODY/RESIDENTIAL PREMISES/BU SINESS PREMISES OF MR. PREM ARJUNDAS LUTHRA. HE POINTED OUT THAT THE FINANCIAL ENTRIES IN ANNEXURE - 1 AT PAGES 1 TO 40 PERTAIN TO GROUP OF PEOPLE. HE ALSO POINTED OUT THAT HE HAD SUBMITTED A DETAILED REPLY ON ANNEXURE - 1, LOOSE PAPERS BEFORE THE ACIT WHO I NTURN HAD NOT RAISED ANY FURTHER QUERY DURING THE COURSE OF HEARING AND THE ASSESSMENT WAS FINALISED. HE FURTHER POINTED OUT THAT THE SAID ANNEXURE DID NOT BEAR ANY SIGNATURE OF THE SEARCHED PARTY OR ANY SEAL OF THE INCOME - TAX DEPARTMENT AT THE TIME OF SE ARCH ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 6 AND THE ASSESSEE ALSO OBJECTED TO THE ENHANCEMENT SINCE DOCUMENT PERTAIN ED TO NUMBER OF ASSESSEES. 7 . ANOTHER ASPECT WHICH WAS NOTED BY THE CIT(A) FROM THE SEIZED DOCUMENTS WAS THE CASH PAYMENT ON DIFFERENT DATES BY THE ASSESSEE, I.E. LUTHRA ENTERPRI SES TO LUTHRA CONSTRUCTION OF RS.2,19,726/ - . THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND CONFRONTED THE ASSESSEE. THE ASSESSEE OBJECTED TO THE CONTENTS OF THE REMAND REPORT. THE CIT(A) NOTED THAT THE FINANCIAL STATEMENTS FURNISH ED BY THE ASSESSEE REVEALED NO SUCH CASH PAYMENT REFLECTED IN THE REGULAR FINANCIAL STATEMENTS. SINCE THE ASSESSEE FAILED TO PROVE THE SAID CASH PAYMENTS OF RS.2,19,726/ - BEING MADE OUT OF REGULAR BOOKS OF ACCOUNT , THE SAME WAS CONSIDERED AS UNEXPLAINED E XPENSES OF THE ASSESSEE AND WAS TREATED AS ASSESSEES UNEXPLAINED INCOME. 8 . THE NEXT DOCUMENTS WHICH WERE CONSIDERED BY THE CIT(A) WERE PAGES 27 AND 28 OF ANNEXURE - 1 FOUND AND SEIZED FROM THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 28 - 09 - 2006 DURING THE SEARCH U/S.132 OF THE ACT. THE SAID DOCUMENT WAS DUUMY H.O. CASH BOOK FOR ASSESSMENT YEAR 2004 - 05 FROM 01 - 04 - 2003 TO 31 - 03 - 2004. PAGES 29 TO 35 OF THE SAID ANNEXURE - 1 REFLECTED VARIOUS LEDGER ACCOUNTS OF DUMMY H.O. LEDGER ACCOUNT. ACCORDING TO THE DUMMY H.O. CASH BOOK, SUM OF RS.1,05,65,000/ - WAS SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE DURING THE ASSESSMENT YEAR 2004 - 05. THE ASSESSEE KEPT ON TAKING ADJOURNMENT BUT DID NOT ATTEND THE OFFICE OF THE CIT(A) AND DID NOT FURNISH THE INFORMATION INITIALLY. LATER ON, SOME EXPLANATION WAS FILED. THE CIT(A) REFERRED TO THE SHOW CAUSE NOTICE AS TO WHY TOTAL EXPENSES OF RS.96.91 LAKHS SHOWN FOR ASSESSMENT YEAR 2004 - 05 IN THE DUMMY H.O. CASH BOOK SHOULD BE NOT BE TREATED AS UNEXPLAINED EXPENSES AND INCOME TO TH AT EXTENT ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 7 SHOULD NOT BE ADDED. ANOTHER SHOW CAUSE NOTICE WAS ISSUED ON 30 - 11 - 2012 ASKING THE ASSESSEE AS TO WHY TOTAL RECEIPTS OF RS.1,05,65,000/ - AS SHOWN IN THE DUMMY H.O. CASH BOOK FOR ASSESSMENT YEAR 2004 - 05 SHOULD NOT BE ADDED TO THE INCOME. IN THE SHOW CAUSE NOTICE, THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN AND IN THE ABSENCE OF ANY EXPLANATION THE CIT(A) STATED THAT INCOME WOULD BE ENHANCED BY RS.1.05 CRORES. THE ASSESSEE SOUGHT ADJOURNMENTS AND DID NOT GIVE THE REPLIES. THE CIT(A) VIDE PA RA 12 OBSERVED AS UNDER : 12. AS REGARDS TRANSACTIONS REFLECTED ON P. 27 TO 35 OF ANNEXURE - I, (LOSE PAPER 1 TO 48) PERTAINING TO A.Y. 2004 - 05, THERE IS NO DISPUTE THAT THE SAID ANNEXURE WAS FOUND AND SEIZED FROM THE RESIDENCE OF THE APPELLANT AND HIS BROT HER SHRI PREM KUMAR LUTHRA LOCATED AT ANAND VILLA, LOMKMANYA N A GAR, GANGAPUR ROAD, NASHIM BY PARTY NO.3 DURING SEARCH U/S.132 ON 28 - 09 - 2006/29 - 09 - 2006. IT IS ALSO NOT IN DISPUTE THAT THE COPIES OF ANN.I HAVE BEEN PROVIDED TO THE APPELLANT BY THE ASSESSMEN T WING AS WELL AS BY ME FOR HIS COMMENTS. THE APPELLANT IS ONE OF THE DIRECTORS IN LUTHRA AUTOWHEELS (P) LTD., AND PROPRIETOR OF LUTHRA ENTERPRISES AND LUTHRA STONE METAL. THE APPELLANTS IMMEDIATE FAMILY MEMBERS CONSIST OF MRS. URMIL LUTHRA (WIFE), RAME SH LUTHRA (SON) AND MS. AARTI LUTHRA (DAUGHTER). IT IS ALSO A MATTER OF RECORD THAT THE APPELLANT DESPITE REPEATED OPPORTUNITIES, DID NOT OFFER TRANSACTION - WISE EXPLANATION OF THE ENTRIES REFLECTED IN DUMMY HO CASH BOOK AND DUMMY HO LEDGER ACCOUNTS RELEVA NT FOR A.Y. 2004 - 05 (PG 27 TO 35). A PERUSAL OF THE SAID PAGES PRIMA - FACIE ESTABLISHES THAT THE TRANSACTIONS REFLECTED IN THE SEIZED PAPERS PERTAIN TO THE APPELLANT AND HIS FAMILY MEMBERS. ACCORDING TO THE DUMMY HO CASH BOOK THERE IS A TOTAL CASH RECEIPT OF RS.1,05,65,000/ - DURING A.Y. 2004 - 05 INCLUDING CASH RECEIPTS ON ACCOUNT OF ADVANCE AGAINST PROPERTIES, NAGAR PLOT ETC. THE APPELLANT HAS NOT PROVIDED ANY EXPLANATION FOR THE SAID CASH RECEIPTS. SIMILARLY, THERE ARE EXPENSES AMOUNTING TO RS.96,91,000/ - FOR WHICH ALSO NO PLAUSIBLE EXPLANATION HAS BEEN OFFERED BY THE APPELLANT. VIDE LETTER DTD.02 - 12 - 208 APPELLANT HAD STATED THAT ENTRIES MENTIONED IN DUMMY HO CASH BOOK WERE IMAGINARY AND WRONGLY MADE BY THE ACCOUNTANT. THE EXPLANATION OF THE APPELLANT IS DEVOID OF ANY MERIT IN ABSENCE OF ANY SUPPORTING EVIDENCE. THE APPELLANT HAS FAILED TO ESTABLISH THAT THE SAID ENTRIES ARE PART OF REGULAR BOOKS OF ACCOUNTS MAINTAINED BY HIM O HIS FAMILY MEMBERS. AS REGARDS NATURE OF THE SEIZED PAPERS, I FIND THAT THE SAME ARE MAINTAINED ON DAY TO DAY BASIS WHERE OPENING AND CLOSING BALANCES ARE DRAWN VERY METICULOUSLY. OPENING BALANCE AS ON 01 - 04 - 2003 AND CLOSING BALANCE AS ON 31 - 03 - 2003 ARE REFLECTED VERY CLEARLY. SIMILARLY, THERE ARE METICULOUSLY MAINTAINED VARIOUS LEDGER ACCOUNTS AT PG.NO.29 TO 35 OF ANN.I. VOUCHER NUMBERS ARE WRITTEN AGAINST EACH RECEIPT AND PAYMENT. THE DUMMY HO LEDGER ACCOUNT FROM 01 - 04 - 2003 TO 15 - 12 - 2004 ARE SERIALLY NUMBERED FROM 1 TO 6. SIMILARLY DUMMY CASH BOOK FOR THIS PERIOD IS SERIALLY NUMBERED FROM PAGES NO. 1 TO 3. PRIMA - FACIE, WHILE IT APPEARS THAT SOME OF THE CASH PAYMENTS MADE TO VARIOUS PERSONS RELATE TO APPELLANTS BUSINESS OF ROAD CONTRACTS/CIVIL CONSTRUCTION, CERTAIN CASH PAYMENTS PERTAIN HOSPITAL EXPENSES. THERE ARE CASH EXP ENSES OF APPELLANTS DAUGHTER AARTIS FEES (RS.18,000/ - ON 14 - 05 - 2003) AND CONSTRUCTION OF TEMPLE (RS.40,000/ - AND RS.10,000/ - ON 30 - 05 - 2003). AS STATED EARLIER THE APPELLANT HAS FAILED TO PLACE ON RECORD ANY CONCRETE EVIDENCE TO SUBSTANTIATE HIS ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 8 SUBMISSI ON THAT SOME OF THE TRANSACTIONS WERE PART OF THE REGULAR BOOKS OF ACCOUNTS. IN VIEW OF THE DISCUSSION ABOVE, I AM OF THE CONSIDERED VIEW THAT TRANSACTIONS REFLECTED IN THE AFORESAID SEIZED PAPERS PERTAIN TO APPELLANT FOR A.Y. 2004 - 05. THE DUMMY HO CASH B OOK AND DUMMY HO LEDGER ACCOUNTS CANNOT BE TREATED AS DUMB DOCUMENTS AS THE ENTRIES RECORDED VERY METICULOUSLY AND PERTAIN TO APPELLANTS BUSINESS AND PERSONAL EXPENSES, NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS. 9 . THE CIT(A) THUS ADDED SUM OF RS.1 .05 CRORES TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED RECEIPTS. THE CIT(A) HAD ALREADY ADDED THE CASH PAYMENT IN ADVANCE OF RS.2,19,726/ - AND THE INCOME WAS ENHANCED BY RS.1,07,84,726/ - . 1 0 . THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT (A). 1 1 . THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ENHANCEMENT BY THE CIT(A) WAS A PRELIMINARY ISSUE IN THE PRESENT APPEAL WHEREIN THE CIT(A) VIDE PARA 5 HAD ESTIMATED PROFIT ON DIFFERENCE IN CONTRACT RECEIPTS. IN PARA 14 TH E CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND ISSUED AN ENHANCEMENT NOTICE. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE CLEARLY POINTED OUT THAT ONCE ASSESSEE GROUNDS OF APPEAL IS ALLOWED, THERE IS NO QUESTION OF ANY ENHANCEMENT. HE FURTHER REFERRED TO THE FIRST ENHANCEMENT NOTICE ISSUED WHEREIN THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN THE PAYMENTS MADE TOTALLING TO RS.96.91 LAKHS. FURTHER, SECOND SHOW CAUSE NOTICE WAS ISSUED WHICH IS PLACED ON PAGE 175 OF THE PAPER BOOK IN RESPEC T OF RECEIPTS OF RS.1.05 CRORES. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT NO ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER ON THE RECEIPTS AND THE SOLE BASIS OF ENQUIRY BY THE ASSESSING OFFICER WAS ONLY ON PAYMENTS. THE CIT(A) ALSO IN THIS REGARD HAS ISSUED THE FIRST SHOW CAUSE NOTICE ON PAYMENTS BUT IN THE SECOND SHOW CAUSE NOTICE HE REFERRED TO ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 9 THE RECEIPTS OF THE SAID CASH BOOK FOUND DURING THE COURSE OF SEARCH, ON WHICH NO QUERIES WERE RAISED BY THE ASSESSING OFFICER. OUR ATTENTION WAS DRAWN TO THE DETAILED SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER WHICH IS PLACED AT PAGE 29 OF THE PAPER BOOK AND THE REPLY OF THE ASSESSEE AT PAGE 50 OF THE PAPER BOOK WHEREIN THE TOTAL ENQUIRY WAS REGARDING THE PAYMENTS. HE REFERRED TO THE OBSERVATIONS OF THE CIT(A) AT PAGE 11 AND POINTED OUT THAT ENHANCEMENT PROPOSED ON ACCOUNT OF RECEIPTS WAS A NEW SOURCE OF INCOME. OUR ATTENTION WAS DRAWN TO THE LIST OF EVENTS IN THIS REGARD AND IT WAS POINTED OUT THAT THE CIT(A) ULTIMATELY MADE ADDITION ON ACCOUNT OF NEW SOURCE OF INCOME, WHICH IS NOT WARRANTED. 1 2 . AS PART OF THE ENHANCEMENT EXERCISE CARRIED OUT BY THE ASSESSEE HE PLACED RELIANCE ON THE FOLLOWING DECISIONS : 1. CIT VS. SARDARI LAL & CO. (2002) 120 TAXMAN 595 (DELHI) 2. RAM I NFRASTRUCTURE LTD. VS. JCIT ITA NO.746/PN/2013 ORDER DATED 30 - 12 - 2016. 3. NATIONAL AUTO WORLD VS. ITO (2014) 49 TAXMANN.COM 411 (PUNE - TRIB.) 4. M/S. VIJAY BUILDERS VS. ITO ITA NO.863/PN/2013 ORDER DATED 25 - 02 - 2015 5. M/S. JAIHIND ENGINEER S VS. ITO & SHRI LALITA G. KALE (PROP.) VS. ITO ITA NOS. 791 AND 792/PN/2016 ORDER DATED 15 - 07 - 2016 6. CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (1967) 66 ITR 0443 1 3 . THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE STRESSE D THAT THE RECEIPTS WERE NEVER I NQUIRED BY THE ASSESSING OFFICER AND EVEN THE CIT(A) SUPPORTED THE ENQUIRIES AND REFERRED TO THE PAYMENTS BUT LATER ON HE REFERRED TO THE RECEIPTS; IN SUCH CIRCUMSTANCES, ENHANCEMENT CARRIED OUT BY THE CIT(A) WAS BEYOND THE JURISDICTION TO BE EXERCISED BY HIM. IN RESPECT OF THE OTHER ENHANCEMENT OF RS.2,19,726/ - IT WAS POINTED OUT BY THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE THAT NO SUCH ENHANCEMENT NOTICE WAS ISSUED BY THE CIT(A) AND HENCE NO ADDITION IS WARRANTED. ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 10 1 4 . THE LD. DEPART MENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND POINTED OUT THAT THE POWERS OF THE CIT ARE COTERMINOUS WITH THAT OF THE ASSESSING OFFICER, THEREFORE, HE HAS THE POWER TO LOOK INTO THE FACTUAL ASPECT WHERE ENHANCEMENT NOTICE WAS GIVEN TO THE ASSESSE E. HE HAS TO ISSUE SHOW CAUSE NOTICE AND THERE WAS NO MERIT IN THE PLEA OF THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD . HE FURTHER REFERRED TO THE OBSERVATION OF THE ASSESSING OFFICER AT PAGE 11 WHEREIN IT WAS POINTED OUT BY THE ASS ESSING OFFICER THAT THE ENTRIES MADE IN THE DUMMY HO CASH BOOK OF THE ASSESSEE. 1 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE PRELIMINARY ISSUE RAISED IN THE PRESENT APPEAL HAS BEEN HEARD BY US , WHEREIN THE ASSESSEE HAS CHALLENGED T HE EXERCISE OF ENHANCEMENT CARRIED OUT BY THE CIT(A). THE ASSESSEE IS AGGRIEVED BY THE ADDITION MADE BY THE CIT(A) UNDER SECTION 251 OF THE ACT AT RS.1.05 CRORES . BEFORE GOING INTO MERITS OF ENHANCEMENT MADE BY THE CIT(A) UNDER SECTION 251 OF THE ACT, WE MAY FIRST LOOK AT THE POWERS OF THE CIT(A) IN THIS REGARD. THE POWERS OF CIT(A) ARE STIPULATED IN SECTION 251 OF THE ACT AND HE HAS TO FUNCTION WITHIN THOSE LIMITATIONS WHILE DECIDING ANY APPEAL ; H E CANNOT EXCEED HIS POWERS IN MAKING AN ADDITION ON ACCOU NT OF NEW SOURCE OF INCOME. 1 6 . THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHAPOORJI PALLONJI MISTRY (1962) 44 ITR 891 (SC) HAS HELD THAT AAC IS NOT COMPETENT TO ENHANCE ASSESSMENT IN APPEAL BY DISCOVERING NEW SOURCE OF INCOME NOT MENTIONED IN RETURN OR CONSIDER ED BY THE ASSESSING OFFICER IN ASSESSMENT. THE HONBLE APEX COURT IN THE AFORESAID CASE HELD AS UNDER: - ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 11 8THE ONLY QUESTION IS WHETHER IN ENHANCING THE ASSESSMENT FOR ANY YEAR HE CAN TRAVEL OUTSIDE THE RE CORD, THAT IS TO SAY, THE RETURN MADE BY THE ASSESSEE AND THE ASSESSMENT ORDER PASSED BY THE INCOME TAX OFFICER WITH A VIEW TO FINDING OUT NEW SOURCES OF INCOME, NOT DISCLOSED IN EITHER. IT IS CONTENDED BY THE COMMISSIONER OF INCOME TAX THAT THE WORD ' ASS ESSMENT ' HERE MEANS THE ULTIMATE AMOUNT WHICH AN ASSESSEE MUST PAY, REGARD BEING HAD TO THE CHARGING SECTION AND HIS TOTAL INCOME. IN THIS VIEW, IT IS SAID THAT THE WORDS ' ENHANCE THE ASSESSMENT ' ARE NOT CONFINED TO THE ASSESSMENT REACHED THROUGH A PART ICULAR PROCESS BUT THE AMOUNT WHICH OUGHT TO HAVE BEEN COMPUTED IF THE TRUE TOTAL INCOME HAD BEEN FOUND. THERE IS NO DOUBT THAT THIS VIEW IS ALSO POSSIBLE. ON THE OTHER HAND, IT MUST NOT BE OVERLOOKED THAT THERE ARE OTHER PROVISIONS LIKE SECTIONS 34 AND 33 B, WHICH ENABLE ESCAPED INCOME FROM NEW SOURCES TO BE BROUGHT TO TAX AFTER FOLLOWING A SPECIAL PROCEDURE. THE ASSESSEE CONTENDS THAT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER EXTEND TO MATTERS CONSIDERED BY THE INCOME TAX OFFICER, AND IF A NEW SOU RCE IS TO BE CONSIDERED, THEN THE POWER OF REMAND SHOULD BE EXERCISED. BY THE EXERCISE OF THE POWER TO ASSESS FRESH SOURCES OF INCOME, THE ASSESSEE IS DEPRIVED OF A FINDING BY TWO TRIBUNALS AND ONE RIGHT OF APPEAL. 9. THE QUESTION IS WHETHER WE SHOULD AC CEPT THE INTERPRETATION SUGGESTED BY THE COMMISSIONER IN PREFERENCE TO THE ONE, WHICH HAS HELD THE FIELD FOR NEARLY 37 YEARS. IN VIEW OF THE PROVISIONS OF SECTIONS 34 AND 33B BY WHICH ESCAPED INCOME CAN BE BROUGHT TO TAX, THERE IS REASON TO THINK THAT THE VIEW EXPRESSED UNIFORMLY ABOUT THE LIMITS OF THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER TO ENHANCE THE ASSESSMENT HAS BEEN ACCEPTED BY THE LEGISLATURE AS THE TRUE EXPOSITION OF THE WORDS OF THE SECTION. IF IT WERE NOT, ONE WOULD EXPECT THAT THE LEG ISLATURE WOULD HAVE AMENDED SECTION 31 AND SPECIFIED THE OTHER INTENTION IN EXPRESS WORDS. THE INCOME TAX ACT WAS AMENDED SEVERAL TIMES IN THE LAST 37 YEARS, BUT NO AMENDMENT OF SECTION 31(3) WAS UNDERTAKEN TO NULLIFY THE RULINGS, TO WHICH WE HAVE REFERRED . IN VIEW OF THIS, WE DO NOT THINK THAT WE SHOULD INTERPRET SECTION 31 DIFFERENTLY FROM WHAT HAS BEEN ACCEPTED IN INDIA AS ITS TRUE IMPORT, PARTICULARLY AS THAT VIEW IS ALSO REASONABLY POSSIBLE. 1 7 . THE HONBLE APEX COURT THEREAFTER IN THE CASE OF COMMIS SIONER OF INCOME TAX VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA ( 1967 ) 66 ITR 443 (SC) HAS REAFFIRMED ITS VIEW TAKEN IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHAPOORJI PALLONJI MISTRY (SUPRA) AND IT WAS HELD AS UNDER : - AS WE HAVE ALREADY STATED, IT I S NOT OPEN TO THE APPELLATE ASSISTANT COMMISSIONER TO TRAVEL OUTSIDE THE RECORD, I.E., THE RETURN MADE BY THE ASSESSEE OR THE ASSESSMENT ORDER OF THE INCOME TAX OFFICER WITH A VIEW TO FIND OUT NEW SOURCES OF INCOME AND THE POWER OF ENHANCEMENT UNDER SECTIO N 31(3) OF THE ACT IS RESTRICTED TO THE SOURCES OF INCOME WHICH HAVE BEEN THE SUBJECT MATTER OF CONSIDERATION BY THE INCOME TAX OFFICER FROM THE POINT OF VIEW OF TAXABILITY. IN THIS CONTEXT ' CONSIDERATION ' DOES NOT MEAN ' INCIDENTAL ' OR ' COLLATERAL ' E XAMINATION OF ANY MATTER BY THE INCOME TAX OFFICER IN THE PROCESS OF ASSESSMENT. THERE MUST BE SOMETHING IN THE ASSESSMENT ORDER TO SHOW THAT THE INCOME TAX OFFICER APPLIED HIS MIND TO THE PARTICULAR SUBJECT MATTER OR THE PARTICULAR SOURCE OF INCOME WITH A VIEW TO ITS TAXABILITY OR TO ITS NON TAXABILITY AND NOT TO ANY INCIDENTAL CONNECTION. ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 12 1 8 . THE LAW LAID DOWN BY THE HONBLE APEX COURT HAS BEEN REITERATED BY THE FULL BENCH OF THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SARD ARI LAL & CO. ( 2001 ) 251 ITR 864 (DEL)(SB) . THE HONBLE DELHI HIGH COURT HELD: - LOOKING FROM THE AFORESAID ANGLES, THE INEVITABLE CONCLUSION IS THAT WHENEVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BEE N CONSIDERED BY THE ASSESSING OFFICER, THE JURISDICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEALT WITH UNDER SECTION 147/148 OF THE ACT AND SECTION 263 OF THE ACT, IF REQUISITE CONDITIONS ARE FULFILLED. IT IS INCONCEIVABLE THAT IN THE PRESENC E OF SUCH SPECIFIC PROVISIONS, A SIMILAR POWER IS AVAILABLE TO THE FIRST APPELLATE AUTHORITY. 19 . THE PUNE BENCH OF TRIBUNAL IN M/S. JAIHIND ENGINEERS VS. ITO IN ITA NO.791/PN/2016 RELATING TO ASSESSMENT YEAR 2008 - 09 AND IN SHRI LALITA G. KALE (PROP.) VS . ITO IN ITA NO.792/PN/2016, RELATING TO ASSESSMENT YEAR 2009 - 10, VIDE ORDER DATED 15.07.2016 HELD AS UNDER: - 13. THE TRIBUNAL IN M/S. VIJAY BUILDERS VS. THE INCOME TAX OFFICER (SUPRA) WHILE DECIDING SIMILAR ISSUE OF THE POWER OF ENHANCEMENT OF THE COMMIS SIONER OF INCOME TAX (APPEALS) HAD RELIED ON THE RATIO LAID DOWN IN THE FOLLOWING DECISIONS : I . CIT VS. SHAPOORJI PALLONJI MISTRY 44 ITR 891 (SC). II . CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA 66 ITR 443 (SC). III . CIT VS. SARDARILAL AND COMPANY 120 TAXMANN 295 (DELHI). IV . CIT VS. UNION TYRES 107 TAXMANN 447 (DELHI). 14. THE TRIBUNAL AFTER CONSIDERING THE FACTUAL ASPECTS OF THE CASE HELD AS UNDER : 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON BEING QUESTIONED BY THE AO, THE ASSESSEE VIDE LETTER DATED 10 - 12 - 2010 HAD CLARIFIED THAT ALL THE ADVANCES RECEIVED AND PAID HAVE ALREADY BEEN PROPERLY RECORDED IN THE REGULARLY MAINTAINED BOOKS OF ACCOUNTS. IT WAS ALSO BROUGHT TO THE NOTICE OF THE AO THAT DURING THE SURVEY OPERATION THE PARTNER SHRI PRAKASH SANKLECHA WAS UPSET A ND COULD NOT GIVE PROPER ANSWERS DUE TO TENSION. RELYING ON VARIOUS DECISIONS THE ASSESSEE HAD ARGUED BEFORE THE AO THAT NO ADDITION IS CALLED FOR. THE ASSESSEE HAD ALSO PRODUCED THE BOOKS OF ACCOUNTS BEFORE THE AO TO SUBSTANTIATE THAT ALL THOSE FIGURES AR E ALREADY RECORDED IN THE BOOKS OF ACCOUNT. ON THE BASIS OF THE ABOVE THE AO HAS NOT MADE ANY ADDITION. FROM THE COPY OF THE AUDITED ACCOUNTS FILED IN THE PAPER BOOK WE FIND THE ASSESSEE HAS SHOWN WORKS EXPENSES AT RS.75,42,955/ - AS PER SCHEDULE - M. THE SCH EDULE - M ANNEXED TO THE AUDITED ACCOUNTS SHOWS LABOUR CHARGES AT RS.14,38,060/ - . SIMILARLY, THE ASSESSEE HAS ALSO SHOWN PURCHASES TO THE TUNE OF RS.68,11,278/ - . WE ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 13 THEREFORE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE FIGURES I N THE IMPOUNDED DOCUMENT AREA ALREADY ENTERED IN THE REGULAR BOOKS OF ACCOUNT AND THEREFORE NO ADDITION IS CALLED FOR. ACCORDINGLY, WE HOLD THAT THE ORDER OF THE LD.CIT(A) ENHANCING THE INCOME BY RS.25 LAKHS IS NOT PROPER. 14.1 EVEN OTHERWISE ALSO WE ARE OF THE CONSIDERED OPINION THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE INCOME OF THE ASSESSEE BY RS.25 LAKHS. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHAPOORJI PALLONJI MISTRY (SUPRA) HAS HELD THAT IT WOULD NOT BE OPEN TO THE AAC TO INTR ODUCE INTO ASSESSMENT NEW SOURCES, AS HIS POWER OF ENHANCEMENT IS RESTRICTED ONLY TO INCOME WHICH WAS SUBJECT MATTER OF CONSIDERATION FOR PURPOSES OF ASSESSMENT. THE HONBLE SUPREME COURT IN THE CASE OF RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (SUPRA) HAS HE LD THAT THE POWER OF ENHANCEMENT OF AAC IS RESTRICTED TO SUBJECT MATTER OF ASSESSMENT OR SOURCES OF INCOME WHICH HAVE BEEN CONSIDERED EXPRESSLY OR BY CLEAR IMPLICATION BY ITO FROM POINT OF VIEW OF TAXABILITY OF ASSESSEE. THEREFORE, AAC HAD NO JURISDICTION TO ASSESSEE A SOURCE OF INCOME WHICH HAD NOT BEEN PROCESSED BY ITO AND WHICH WAS NOT DISCLOSED EITHER IN RETURN FILED BY THE ASSESSEE OR IN ASSESSMENT ORDER. WE FIND THAT FOLLOWING THE ABOVE DECISIONS THE HONBLE DELHI HIGH COURT IN THE CASE OF SARDARILAL AND COMPANY (SUPRA) HAS HELD THAT WHENEVER QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED WHICH HAS NOT BEEN CONSIDERED BY THE AO, JURISDICTION TO DEAL WITH SAME IN APPROPRIATE CASES MAY BE DEALT WITH U/S.147/148 AND SECTION 263 IF REQUISITE CONDITIONS ARE SATISFIED. IT IS INCONCEIVABLE THAT IN PRESENCE OF SUCH SPECIFIC PROVISIONS A SIMILAR POWER IS AVAILABLE TO THE FIRST APPELLATE AUTHORITY. THE HONBLE DELHI HIGH COURT IN THE CASE OF UNION TYRES (SUPRA) HAS ALSO HELD SIMILAR VIE W AND HELD THAT IT IS NOT OPEN TO THE APPELLATE COMMISSIONER TO INTRODUCE IN ASSESSMENT A NEW SOURCE OF INCOME AND ASSESSMENT HAS TO BE CONFINED TO THOSE ITEMS OF INCOME WHICH WAS SUBJECT MATTER OF ORIGINAL ASSESSMENT. THE RELEVANT OBSERVATIONS OF HONBLE DELHI HIGH COURT AT PARA NOS. 11 TO 13 OF THE ORDER READS AS UNDER : 11. A QUESTION REGARDING POWERS OF THE FIRST APPELLATE AUTHORITY CAME UP FOR CONSIDERATION BEFORE THE SUPREME COURT RECENTLY IN CIT V. NIRBHERAM DALURAM [1977] 224 ITR 610/ 91 TAXMAN 18 1. FOLLOWING THEIR EARLIER DECISIONS IN KANPUR COAL SYNDICATE'S CASE (SUPRA) AND JUTE CORPN. OF INDIA LTD.'S CASE (SUPRA) THOUGH THEIR LORDSHIPS REITERATED THAT THE APPELLATE POWERS CONFERRED ON THE COMMISSIONER UNDER SECTION 251 COULD NOT BE CONFINED TO T HE MATTER WHICH HAD BEEN CONSIDERED BY THE ITO, AS THE COMMISSIONER IS VESTED WITH ALL THE PLENARY POWERS WHICH THE ITO MAY HAVE WHILE MAKING THE ASSESSMENT, BUT DID NOT COMMENT ON THE ISSUE WHETHER THESE WIDE POWERS ALSO INCLUDE THE POWER TO DISCOVER A NE W SOURCE OF INCOME. THEREFORE, THE PRINCIPLE OF LAW LAID DOWN IN SHAPOORJI PALLONJI MISTRY'S CASE (SUPRA) AND RAI BAHADUR HARDUTROY MOTILAL CHAMARIA'S CASE (SUPRA) STILL HOLDS THE FIELD. 12. THUS, THE PRINCIPLE EMERGING FROM THE AFORENOTED PRONOUNCEMENTS OF THE SUPREME COURT IS, THAT THE FIRST APPELLATE AUTHORITY IS INVESTED WITH VERY WIDE POWERS UNDER SECTION 251(1)(A) AND ONCE AN ASSESSMENT ORDER IS BROUGHT BEFORE THE AUTHORITY, HIS COMPETENCE IS NOT RESTRICTED TO EXAMINING ONLY THOSE ASPECTS OF THE ASSE SSMENT ABOUT WHICH THE ASSESSEE ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 14 MAKE A GRIEVANCE AND RANGES OVER THE WHOLE ASSESSMENT TO CORRECT THE ASSESSING OFFICER NOT ONLY WITH REGARD TO A MATTER RAISED BY THE ASSESSEE IN APPEAL BUT ALSO WITH REGARD TO ANY OTHER MATTER WHICH HAS BEEN CONSIDERED BY T HE ASSESSING OFFICER AND DETERMINED IN THE COURSE OF ASSESSMENT. HOWEVER, THERE IS A SOLITARY BUT SIGNIFICANT LIMITATION TO THE POWER OF REVISION, VIZ., THAT IT IS NOT OPEN TO THE COMMISSIONER TO INTRODUCE IN THE ASSESSMENT A NEW SOURCE OF INCOME AND THE A SSESSMENT HAS TO BE CONFINED TO THOSE ITEMS OF INCOME WHICH WERE THE SUBJECTMATTER OF ORIGINAL ASSESSMENT. 13. APPLYING THE ABOVE WELL - SETTLED PRINCIPLES OF LAW TO THE FACTS OF THE INSTANT CASE, WE ARE OF THE VIEW THAT THE TRIBUNAL WAS JUSTIFIED IN HOLDI NG THAT IN CALLING FOR A REMAND REPORT ON THE AFORENOTED FOUR POINTS, THE COMMISSIONER HAD EXCEEDED HIS JURISDICTION. WHILE COMPUTING THE TOTAL BUSINESS INCOME OF THE ASSESSEE, THE ASSESSING OFFICER HAD ESTIMATED THE SALES AT AN ENHANCED FIGURE AND HAD APP LIED A HIGHER RATE OF GROSS PROFIT. THUS, THE ONLY MATTER DEALT WITH BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WAS THE ESTIMATION OF PROFITS AND GAIN OF THE BUSINESS OF THE ASSESSEE. NONE OF THE AFORENOTED FOUR POINTS HAD ANY BEARING ON THE QUESTION OF ESTIMATION OF EITHER THE SALES OR THE GROSS PROFIT RATE. FROM THE OBSERVATIONS, EXTRACTED ABOVE', IT IS EVIDENT THAT THE COMMISSIONER HAD HIS DOUBTS ABOUT THE CAPACITY OF THE ASSESSEE TO RAISE FINANCES FOR THE PURCHASE OF GOODS AND SHOW A HUGE TURNOVER IN THE VERY FIRST YEAR OF HIS BUSINESS. IN OTHER WORDS, THE ENQUIRY ORDERED BY THE COMMISSIONER WAS TO SATISFY HIMSELF ABOUT THE SOURCE OF INVESTMENT BY THE ASSESSEE. IT IS AXIOMATIC THAT FAILURE TO PROVE THE SOURCES OF INVESTMENT WILL RESULT IN ADDITION IN THE HANDS OF THE ASSESSEE UNDER A DIFFERENT PROVISION OF LAW AND WILL NOT HAVE MUCH RELEVANCE IN THE ESTIMATION OF SALES AND GROSS PROFIT RATE ADOPTED BY THE ASSESSING OFFICER. IN OUR. OPINION, ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT WOULD CON STITUTE A NEW SOURCE OF INCOME WHICH WAS NOT THE SUBJECT - MATTER OF ASSESSMENT BEFORE THE ASSESSING OFFICER AND, THEREFORE, IT WAS NOT OPEN TO THE FIRST APPELLATE AUTHORITY TO DIRECT THE ASSESSING OFFICER TO CONDUCT ENQUIRY ON THE SAID FOUR POINTS. 14. FO R THE FOREGOING REASONS, WE ANSWER THE QUESTION IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. NO ORDER AS TO COSTS. 14.2 IN VIEW OF THE ABOVE DECISIONS WE HOLD THAT THE LD.CIT(A) HAS NO POWER TO ENHANCE THE INCOME OF THE A SSESSEE BY INTRODUCING A NEW SOURCE OF INCOME WHICH HAD NOT BEEN CONSIDERED BY THE AO. ADDITION, IF ANY, ON THAT ACCOUNT CAN BE MADE BY TAKING RECOURSE INTO PROVISIONS OF SECTION 147/148 AND SECTION 263. WE ACCORDINGLY HOLD THAT BOTH FACTUALLY AS WELL AS L EGALLY THE LD.CIT(A) IS NOT JUSTIFIED IN ENHANCING THE INCOME OF THE ASSESSEE BY RS.25 LAKHS. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION. 15. THE ISSUE BEFORE THE HON'BLE DELHI HIGH COURT IN CI T VS. UNION TYRES (SUPRA) WAS ALSO WITH REGARD TO SUPPRESSED ADDITION ON ACCOUNT OF SOURCE OF INVESTMENT AND THE HON'BLE HIGH COURT HELD THAT THE SAID ADDITION WOULD BE UNDER A DIFFERENT PROVISIONS OF LAW AND WOULD NOT HAVE ANY RELIANCE TO ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 15 ESTIMATING THE S ALES AND GROSS PROFIT RATE ADOPTED BY THE ASSESSING OFFICER AND WAS BEYOND THE SCOPE OF THE FIRST APPELLATE AUTHORITY. 2 0 . THE TRIBUNAL IN M/S. JAIHIND ENGINEERS VS. ITO (SUPRA) APPLIED THE ABOVE SAID PROPOSITIONS AND HELD AS UNDER: - 15 IN IDENTICAL F ACTS OF THE PRESENT CASE, THE ASSESSING OFFICER HAD MADE THE ADDITION ON ACCOUNT OF THE SUPPRESSED PRODUCTION WHEREIN GP RATE WAS APPLIED TO WORK OUT THE ADDITION IN THE HANDS OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE DEALING WITH TH E SAID ISSUE HAD FURTHER ISSUED AN ENHANCEMENT NOTICE TO THE ASSESSEE WITH REGARD TO THE COST OF PURCHASES UTILIZED FOR UNACCOUNTED PRODUCTION. THOUGH, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS WIDE POWERS UNDER SECTION 251(1)(A) OF THE ACT BUT HIS POW ERS ARE RESTRICTED AND HE HAS NO POWER TO ASSESS A NEW SOURCE OF INCOME IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, I DELETE THE ENHANCEMENT MADE BY THE ASSESSEE TO THE TUNE OF `13,20,144/ - . THE GROUND OF APPEAL NO. 1 RAISED BY THE ASSESSEE IS THUS, ALLOW ED. SINCE, THE ISSUE HAS BEEN DECIDED ON JURISDICTION OF COMMISSIONER OF INCOME TAX (APPEALS), THE ISSUE ON MERITS S TAND ALLOWED. 2 1 . SIMILAR PROPOSITION HAS BEEN LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN RAM INFRASTRUCTURE LTD. VS. JCIT IN ITA NO.746 /PN/2013, RELATING TO ASSESSMENT YEAR 2009 - 10, ORDER DATED 30.12.2016. 2 2 . NOW, COMING TO THE FACTS OF THE PRESENT CASE, PURSUANT TO SEARCH AND SEIZURE OPERATIONS CONDUCTED IN LUTHRA GROUP OF CASES AT NASHIK, RESIDENTIAL PREMISES OF THE ASSESSEE W ERE ALSO SEARCHED UNDER SECTION 132 OF THE ACT ON 28.09.2006. THE ASSESSING OFFICER IN VIEW OF INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH AND ALSO IN VIEW OF TDS CERTIFICATES FILED WITH THE ORIGINAL RETURN OF INCOME, WHEREIN THE TOTAL CONTRACT RECE IPTS WORKED OUT TO RS.3.82 CRORES AND SINCE EXPENSES CLAIMED WERE NOT VERIFIABLE , ESTIMATED THE NET PROFIT AT 6% OF GROSS RECEIPTS AND CALCULATED THE SAME AT RS.22,92,464/ - AND CONSEQUENTLY, MADE AN ADDITION OF RS.2,36,893/ - . THE CIT(A) ON THE OTHER HAND, NOTED THE TRANSACTIONS IN DUMMY HO CASH BOOK ACCOUNT AND IN THE FIRST INSTANCE, SHOW CAUSE NOTICE WAS ISSUED UNDER SECTION 251 OF THE ACT AND T HE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE INCOME OF THE ASSESSEE SHOULD ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 16 NOT BE ENHANCED BY RS.96.91 LAKHS I .E. ON ACCOUNT OF TOTAL CREDITS IN DUMMY HO CASH BOOK ACCOUNT I.E. EXPENSES DEBITED TO THAT ACCOUNT. THE ASSESSEE POINTED OUT THAT DETAILED REPLY WAS FILED BEFORE THE ASSESSING OFFICER AND THE ASSESSMENT WAS MADE BY CONSIDERING THE SAID EXPENSES AND BY AP PLYING NP RATE OF 6%. THE SECOND PLEA OF ASSESSEE BEFORE THE CIT(A) WAS THAT THE SAID DOCUMENTS PERTAINED TO NUMBER OF ASSESSEES AND THE TOTAL CREDITS ON ACCOUNT OF EXPENSES COULD NOT BE ADDED IN THE HANDS OF ASSESSEE. LATER, ANOTHER SHOW CAUSE NOTICE WA S ISSUED ON 30.11.2012 ASKING THE ASSESSEE AS TO WHY THE TOTAL CREDITS OF RS.1.05 CRORES AS SHOWN IN THE DUMMY HO CASH BOOK SHOULD NOT BE ADDED TO THE INCOME OF ASSESSEE. THE CIT(A) ADDED SUM OF RS.1.05 CRORES TO THE INCOME OF ASSESSEE ON ACCOUNT OF UNEXP LAINED RECEIPTS. ANOTHER ADDITION WHICH WAS MADE WAS ON ACCOUNT OF CASH PAYMENT IN ADVANCE OF RS.2,19,726/ - FOR WHICH, NO ENHANCEMENT NOTICE WAS ISSUED BY THE CIT(A). IN THE FIRST INSTANCE, SINCE NO ENHANCEMENT NOTICE HAS BEEN GIVEN TO THE ASSESSEE IN RE SPECT OF ADDITION OF RS.2,19,726/ - , THE SAME MERITS TO BE DELETED IN THE HANDS OF ASSESSEE AND HENCE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. 2 3 . NOW, COMING TO THE NEXT ADDITION WHICH WAS MADE BY THE CIT(A) BY WAY OF ENHANCEMENT NOTICE IS ON ACCOUNT OF UNEXPLAINED RECEIPTS OF RS.1.05 CRORES. THE ASSESSING OFFICER HAD CONSIDERED THE SAID SEIZED DOCUMENTS AND HA D ESTIMATED THE PROFITS IN THE HANDS OF ASSESSEE BY APPLYING NET PROFIT RATE. THE ASSESSING OFFICER HAD CONSIDERED THE TOTAL RECEIPTS IN THE HANDS OF ASSESSEE AS PER TDS CERTIFICATE S AT RS.3.71 CRORES AND HAD ALSO NOTED THE NON - RECEIPT OF TDS CERTIFICATES FROM NASHIK MUNICIPAL CORPORATION. IN RESPECT OF TDS OF RS.27,581/ - , WHICH HE HELD TO BE EQUIVALENT TO CONTRACT RECEIPTS OF RS.11,07, 670/ - AND THE TOTAL CONTRACT RECEIPTS WERE CALCULATED AT RS.3.82 CRORES. THE ASSESSING OFFICER BECAUSE OF NON - VERIFIABILITY OF EXPENSES AND THE HIGH ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 17 TURNOVER OF CONTRACT, ESTIMATED THE NET PROFIT AT 6% OF THE GROSS RECEIPTS. THE ASSESSING OFFICER THUS, H AD ACCEPTED THE TOTAL CONTRACT RECEIPTS IN THE HANDS OF ASSESSEE BUT BECAUSE OF NON - VERIFIABILITY OF EXPENSES HAD ESTIMATED THE NET PROFIT. 2 4 . THE CIT(A) HAS FOUND NEW SOURCE OF INCOME I.E. TOTAL RECEIPTS FOUND IN THE DUMMY HO CASH BOOK AT RS.1.05 CROR ES AND HAS MADE THE ADDITION ON THAT ACCOUNT. THE CIT(A) IN THE PRESENT CASE HAS TRAVELLED BEYOND THE SOURCES OF INCOME WHICH WAS THE SUBJECT MATTER OF CONSIDERATION BY THE ASSESSING OFFICER, WHEREIN THE ASSESSING OFFICER AFTER ACCEPTING THE CONTRACT RECE IPTS HAD DOUBTED THE EXPENSES CLAIMED BY THE ASSESSEE AND ACCORDINGLY, APPLIED THE NET PROFIT RATE TO DETERMINE THE INCOME IN THE HANDS OF ASSESSEE. THE CIT(A) HAD FIRST STARTED ENQUIRIES IN RESPECT OF PAYMENTS MADE BY THE ASSESSEE WHICH WAS THE ISSUE CONS IDERED BY THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT UNDER SECTION 143(3) OF THE ACT. LATER, THE CIT(A) HAS ISSUED THE SHOW CAUSE NOTICE, WHEREIN REFERENCE WAS MADE TO RECEIPTS, WHICH WERE ACCEPTED BY THE ASSESSING OFFICER AND NOT DISTURBED. IN TH E ABSENCE OF ANY ENQUIRY BY THE ASSESSING OFFICER REGARDING RECEIPTS RECORDED IN THE DUMMY HO CASH BOOK, THE SAME WAS OUTSIDE THE PURVIEW OF E NHANCEMENT SCOPE OF THE CIT(A). IN CASE ANY NEW SOURCE OF INCOME IS TO BE ADDED IN THE HANDS OF ASSESSEE WHICH WA S NOT CONSIDERED BY THE ASSESSING OFFICER, THE JURISDICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES, IS TO BE DEALT WITH UNDER SECTION 147/148 OF THE ACT AND / OR UNDER SECTION 263 OF THE ACT, WHERE REQUISITE CONDITIONS ARE FULFILLED. SUCH IS THE PROPO SITION LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN CIT VS. SARDARI LAL & CO. (SUPRA). APPLY ING THE SAID PROPOSITIONS AND THE DICTATE OF THE HON'BLE SUPREME COURT ON THE ISSUE, WE HOLD THAT IT IS NOT OPEN TO THE CIT(A) TO INTRODUCE IN THE ASSESSMENT A NEW SOURCE OF INCOME AND THE ASSESSMENT HAD ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 18 TO BE CONFINED TO THOSE ITEMS OF INCOME WHICH WERE THE SUBJECT MATTER OF ORIGINAL ASSESSMENT. ACCORDINGLY, WE REVERSE THE ORDER OF CIT(A) IN THIS REGARD AND DELETE THE ADDITION OF RS.1.05 CRORES. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 2 5 . THE FACTS AND ISSUES ARISING IN ITA NO.1354/PUN/2016 ARE IDENTICAL TO THE FACTS AND ISSUES IN ITA NO.535/PUN/2013 AND OUR DECISION IN ITA NO.535/PUN/2013 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.1354/PUN /2016. 2 6 . THE ASSESSEE IN ITA NO.21/PUN/2015 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS NOT JUSTIFIED IN DECIDING THE APPEAL EX PARTE WITHOUT GIVING PROPER OPPORTUNITY OF BEIN G HEARD TO THE APPELLANT. 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE CIT(A) - I, NASHIK IS NOT JUSTIFIED IN CONFIRMING PENALTY OF RS.53,38,440/ - LEVIED BY THE AO U/S.271(1)(C) OF THE ACT. 3. THE APPELLANT CRAVES FOR A DDITION TO, DELETION, ALTERATION, MODIFICAT ION, CHANGE ANY OF THE GROUNDS. 27. THE ASSESSEE IN ITA NO.21/PUN/2015 IS AGGRIEVED BY THE EX - PARTE ORDER PASSED BY THE CIT(A) IN UPHOLDING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 2 8 . THE PERUSAL OF PENALTY ORDER REFLECTS THAT THE PENALTY HAS BEEN LEVIED ON ACCOUNT OF ENHANCEMENT MADE BY THE CIT(A), WHERE THE CIT(A) HAD DIRECTED THE ASSESSING OFFICER TO ISSUE NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT. THE NOTICE WAS RETURNED BY THE POS TAL AUTHORITIES AND THEREAFTER, THE SAME WAS AFFIXED AT THE PREMISES OF ASSESSEE. THE CIT(A) LEVIED PENALTY ON THE ADDITION OF RS.1.05 CRORES AND RS.2,19,726/ - . BOTH THESE ADDITIONS WERE MADE ITA NO. 5 35 /P U N/20 1 3 , ITA NO.21/PUN/2015 & ITA NO.1354/PUN/2016 VIJAY ARJUNDAS LUTHRA 19 IN THE HANDS OF ASSESSEE PURSUANT TO ENHANCEMENT MADE BY THE C IT(A). WE HAVE IN THE PARAS HEREINABOVE ALREADY DELETED THE ENHANCEMENT AND IN VIEW THEREOF, WE HEREBY DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON SUCH ENHANCED INCOME. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 29 . IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 16 TH D AY OF AUGUST , 2017 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 16 TH AUGUST , 2017 . SATISH / GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I , II, NASHIK, CIT(A) - 12, PUNE 4. / THE CIT - I, II, NASHIK AND CIT - 12, PUNE. 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE
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