Anup Sharma, Chandigarh V. Addl. CIT, Chandigarh

ITA 161/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80884 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Gift
• Section: 40A(3); 143(3); 133(6); 37(1); 68; 69; 37; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 161/CHD/2012 ASSESSMENT YEAR: 2008-09 ANUP SHARMA VS. THE ADDL. CIT H.NO. 3046, 2 ND FLOOR RANGE- III SECTOR 21-D CHANDIGARH CHANDIGARH. PAN NO. ACJPS6799K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. SURINDER MAHAJAN RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 26/08/2014 DATE OF PRONOUNCEMENT : 10.09.2014 ORDER PER T.R.SOOD, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 01/12/2011 OF CIT (APPEALS), CHANDIGARH. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1) THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, LEAR NED COMMISSIONER OF INCOME TAX (APPEALS)- CHANDIGARH [ LD. CIT(A)] HAS GROSSLY ERRED IN LAW IN CONFIRMING THA T THE ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE III, CHANDIGARH (LD. AO') IS WITH PROPER JUR ISDICTION. . 2) A)THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 1,80,000/- MADE BY THE LD. AO INVOKING PROVISION OF SECTION 64 (1)(III) AND 2 SECTION 40A(2)(B)/SECTION 37(1) OF THE INCOME TAX A CT, 1961(THE ACT). BEING SALARY PAID TO MRS. RASHMI SHARMA. 2) B)THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW I N NOT CONSIDERING THE CONTENTION OF THE APPELLANT THA T THE LD. ASSESSING OFFICER HAS NOT COMPLIED WITH THE CONDITI ONS REQUIRED FOR INVOKING PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. 2)C) THAT THE LD. CIT HAS GROSSLY ERRED IN LAW IN R EJECTING THE CONTENTION OF THE APPELLANT THAT PRINCIPLE OF CONS ISTENCY IS REQUIRE TO BE FOLLOWED BEFORE DISALLOWING THE SALAR Y PAID TO MRS. RASHMI SHARMA BY THE APPELLANT. 3) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING ADDITION OF RS. 2,77,63 2/- ON ACCOUNT OF ALLEGED DIFFERENCE IN THE ACCOUNTS OF FOLLOWING PAR TIES. PARTY AMOUNT(RS.) M/S GLASS PALACE 1,53,746 M/S HEALTHY WAY 1,23,886 TOTAL 2,77,632 THE AFORESAID ADDITION CANNOT BE MADE SINCEAMOUNT D UE FROM THESE PARTIES IS MORE IN THE APPELLANTS BOOKS OF ACCOUNT S AS COMPARED TO THE BALANCE IN THE BOOKS OF ACCOUNTS OF THE AFORESA ID PARTIES. 4) THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING ADDITION OF RS. 23,500/ - MADE BY THE LD. ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 40A(3) OF THE ACT. 5) THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW IN TREATING THE ADDITION MADE UNDER SECTION 68 BY THE LD. AO AS UNE XPLAINED INVESTMENT UNDER SECTION 69A BY APPLYING PROVISIONS OF SECTION 292B OF THE ACT. EVEN AFTER ACCEPTING THE APPELLANTS CO NTENTION THAT BANK PASS BOOKS ARE NOT BOOKS OF ACCOUNTS OF APPELLANT A TTRACTING SECTION 68 OF THE ACT. 6) THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW IN CONFIRMING ADDITION OF RS. 1856644/- BEING ALLEGED DEPOSITS IN CHANDIGARH 3 STATE COOPERATIVE BANK, SECTOR 22 B, CHANDIGARH, ADDITION CONFIRMED IS ILLEGAL AND BAD IN LAW. 3. GROUND NO. 1: THE LD. COUNSEL FOR THE ASSESSEE R EFERRED TO THE CIRCULAR OF THE BOARD, COPY OF WHICH IS AVAILABLE AT PAGE 54 OF THE PAPER BOOK. HE POINTED OUT THAT AS PER THIS CIRCULAR IF A CASE WAS SELECTED ONLY ON THE BASIS OF AIR INFORMATION THEN SCRUTINY WAS REQUIRED TO BE LI MITED ONLY TO THAT ISSUE AND THE SCOPE OF SCRUTINY COULD NOT BE EXPANDED WITHOUT PERMISSION OF THE CONCERNED COMMISSIONER. HE CONTENDED THAT IT IS SE TTLED POSITION THAT CIRCULAR ARE BINDING ON THE REVENUE AUTHORITIES, THEREFORE, SCOPE OF ASSESSMENT COULD NOT HAVE BEEN EXPENDED WITHOUT THE PERMISSION OF TH E COMMISSIONER. 4. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT CBDT HAS ISSUED INSTRUCTIONS , COPY OF WHICH IS PLACED AT PAGE NO. 54 WHICH IS REPRODUCED BELOW:- F.NO. 225/-26/2006-ITA.II (P) GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES NEW DELHI, DATED THE 8 TH SEPTEMBER, 2010 TO, ALL CHIEF COMMISSIONERS OF INCOME TAX ALL DIRECTORS GENERAL OF INCOME TAX SIR / MADAM SUBJECT:- SELECTION OF CASES FOR SCRUTINY ON THE BA SIS OF DATA IN AIR RETURNS AND SUBSEQUENT ASSESSMENT PROCEEDINGS REGARDING REFERENCE IS INVITED TO BOARDS LETTER OF EVEN NUM BER DATED 23 RD MAY 2007 REGARDING SCOPE OF ENQUIRY IN THE SCRUTIN Y CASES 4 SELECTED ONLY ON THE BASIS OF INFORMATION RECEIVED THROUGH THE AIR RETURNS. 2. THE ABOVE MENTIONED GUIDELINES HAVE BEEN RECONSI DERED BY THE BOARD AND IT HAS BEEN DECIDED THAT THE SCRUTINY OF SUCH CASES WOULD BE LIMITED ONLY TO THE ASPECTS OF INFORMATION RECEI VED THROUGH AIR. HOWEVER, A CASE MAY BE TAKEN UP FOR WIDER SCRUTINY WITH THE APPROVAL OF THE ADMINISTRATIVE COMMISSIONER, WHERE IT IS FELT THAT APART FROM THE AIR INFORMATION THERE IS A POTENTIAL ESCAPEMENT OF INCOME MORE THAN RS. 10 LACS. 3. IT HAS ALSO BEEN DECIDED THAT IN ALL THE CASES W HICH ARE PICKED UP FOR SCRUTINY ONLY ON THE BASIS OF AIR INFORMATIO N, THE NOTICE U/S 143(2) OF INCOME TAX ACT SHOULD CLEARLY BE STAMPED WITH AIR CASE. THIS SHOULD BE IMMEDIATELY BROUGHT TO THE NOTICE O F ALL THE OFFICERS WORKING IN YOUR REGION. YOURS FAITHFULLY SD/- (AJAY GOAYAL) DIRECTOR (ITA.II) TELEFAX: 23092151 6. THE CONTENTS OF THE ABOVE LETTER SHOW THAT THESE ARE INTERNAL INSTRUCTIONS AND COULD NOT BE CONSTRUED AS CIRCULAR. THE LD. CI T(A) HAS DEALT THIS ISSUE VIDE PARA 2.3, WHICH IS AS UNDER:- 2.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. CO UNSELS FOR THE APPELLANT AND HAVE GONE THROUGH THE ASSESSM ENT RECORDS OF THE CASE. THE FIRST NOTICE U/S 143(2) IN THIS CASE WAS ISSUED ON 02.09.2009 AND IN THIS NOTICE, IT WAS CLEARLY STATED THAT THIS CASE HAS BEEN SELECTED THROUGH CAS S. THE INSTRUCTION DATED 08.09.2010 QUOTED BY THE LD. COUN SELS COULD NOT HAVE BEEN FOLLOWED BY THE ASSESSING OFFIC ER, SINCE NOTICE U/S 143(2) HAD BEEN ISSUED ON 02.09.2009. MO REOVER , THE APPELLANT NEVER OBJECTED BEFORE THE ASSESSING O FFICER WHEN HE WAS CONVEYED ABOUT THE AIR INFORMATION VIDE QUESTIONNAIRE DATED 06.09.2010. IN ANY CASE, THIS W AS AN ADMINISTRATIVE MATTER AND IF THE APPELLANT HAD ANY GRIEVANCE, HE SHOULD HAVE APPROACHED THE COMMISSION ER OF INCOME TAX FOR REMEDY. GROUND OF APPEAL NO. 1 IS DISMISSED. 5 7. IN OUR OPINION THE LD. CIT(A) HAS CORRECTLY ADJ UDICATED THE ISSUE BECAUSE IN THIS CASE THE CASE WAS SELECTED ON THE B ASIS OF CASS WHICH IS ALSO KNOWN AS COMPUTER ASSISTED SCRUTINY SYSTEM. MOREOV ER, THE CASE WAS SELECTED FOR SECURITY ON 2.9.2009 WHEN A NOTICE U/S 143(2) WAS ISSUED WHEREAS THE INSTRUCTIONS HAVE BEEN ISSUED ON 8.9.2010 AND, THEREFORE, THEY CANNOT APPLY TO THE EARLIER PERIOD. ONCE THE CASE IS SELECTED F OR SCRUTINY UNDER THE CASS AND NOTICE IS ISSUED U/S 143(2) THEN WHOLE OF ASSE SSMENT IS OPEN FOR SCRUTINY. IN ANY CASE THE LD. CIT(A) HAS CORRECTLY OBSERVED T HAT THIS IS AN ADMINISTRATIVE MATTER AND COULD HAVE BEEN OBJECTED TO BEFORE THE C OMMISSIONER IN ADMINISTRATIVE CAPACITY AND CANNOT BE CHALLENGED IN THE APPEAL, THEREFORE, IN OUR OPINION NO INTERFERENCE IS REQUIRED IN THE ORDE R OF LD. CIT(A). 8. GROUND NO. 2(A) TO 2(C):- AFTER HEARING BOTH TH E PARTIES, WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS PAID A SALARY OF RS. 1,80,000/- TO HIS WIFE. THE AS SESSING OFFICER RAISED A QUERY THAT WHY THIS SALARY SHOULD NOT BE DISALLOWED US/ 40A(2)(B) AS NO SERVICES HAVE BEEN RENDERED BY MRS. RASHMI SHARMA T HAT IS WIFE OF THE ASSESSEE. HE ALSO CONFRONTED THE ASSESSEE THAT WHY SALARY SHOULD NOT BE DISALLOWED AS PER SECTION 64(1). IN RESPONSE, IT WAS STATED VIDE LETTER DATED 19.11.2010 AS UNDER:- MS RASHMI SHARMA IS MSC BOTANY 1 ST CLASS, AND WAS ENGAGED IN THE ENGLISH COPY WRITING AND PREPARING A DD- BROCHURES, THE COPY OF THE MASTER OF PHILOSOPHY EDU CATION CERTIFICATE HAD BEEN SUBMITTED THEREFORE WE UNDERST AND THE PROVISIONS OF SECTION 64(1) ARE NOT APPLICABLE IN T HIS CASE. 9. THE ASSESSING OFFICER AFTER CONSIDERING THE ABOV E SUBMISSION OBSERVED THAT ASSESSEE WAS ENGAGED IN THE ADVERTISING BUSIN ESS AND THERE WAS NO EVIDENCE OR ANY MATERIAL ON RECORD TO SHOW THAT MRS . RASHMI SHARMA WAS ENGAGED IN THE ENGLISH COPY WRITING AND PREPARING T HE ADVERTISEMENT 6 BROCHURES. THEN HE REFERRED TO VARIOUS PROVISIONS O F THE ACT AND ULTIMATELY DISALLOWED THE SALARY IN VIEW OF THE CLUBBING PROVI SIONS OF SECTION 64(1) OF THE ACT. 10. ON APPEAL BEFORE CIT(A), IT WAS MAINLY SUBMITT ED THAT MRS RASHMI SHARMA IS M.SC. IN BOTANY AND THE EXPRESSION TECHN ICAL OR PROFESSIONAL QUALIFICATION DO NOT NECESSARY CONNOTE A QUALIFIC ATION BY RECOGNIZED UNIVERSITY AND IT MUST BE GIVEN A VIDE MEANING. FU RTHER, THE SALARY HAS BEEN ALLOWED IN THE EARLIER YEARS. 11. AFTER EXAMINING THE SUBMISSIONS, LD. CIT(A) DID NOT FIND FORCE IN THE SAME. HE OBSERVED THAT THERE IS NO FORCE IN THE CON TENTION THAT NO SUCH DISALLOWANCE WAS MADE IN THE EARLIER YEARS BECAUSE ASSESSMENTS IN THOSE CASES MIGHT HAVE BEEN COMPLETED WITHOUT SCRUTINY. IN ANY CASE THERE IS NO RES JUDICATA IN THE INCOME TAX PROCEEDINGS. HE FURTHER OBSERVED THAT IN VIEW OF THE PROVISIONS OF SECTION 64(1)(II) OF THE ACT, THE REQ UIREMENT OF SPECIFIC PROFESSIONAL QUALIFICATION IS THERE AND IN THE ABSE NCE OF THE SAME, THE EXPENDITURE WAS NOT ALLOWABLE AND CONFIRMED THE ACT ION OF THE ASSESSING OFFICER. 12. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT MRS. RASHMI SHARMA IS MSC BOTANY AND WAS DOING THE WORK OF COP Y WRITING IN ENGLISH. THE EXPRESSION TECHNICAL OR PROFESSIONAL QUALIFICA TION DO NOT NECESSARY CONNOTE A QUALIFICATION BY A DEGREE OF A RECOGNIZED UNIVERSITY AND THE EXPRESSION SHOULD BE GIVEN A WIDER MEANING. IN THIS REGARD, HE REFERRED TO THE FOLLOWING DECISIONS:- A) ASHABEN ROHITBHAI AND OTHERS V CIT 237 ITR 561 (GUJ.) B) CIT V SMT. R. BHARATHI 240 ITR 697 (MADRAS) C) CIT V R. JAYALAKSHMI 240 ITR 773 (MADRAS) 7 HE ALSO CONTENDED THAT PROVISIONS OF SECTION 64(1) COULD NOT BE INVOKED IF THE EXPENSES WERE NOT ALLOWABLE U/S 37 OR 40A(2)(A). F URTHER THE SIMILAR EXPENDITURE WAS ALLOWED IN EARLIER YEARS AND IN FEW OF THOSE EARLIER YEARS THE ASSESSMENT WAS FRAMED U/S 143(3) AND IN THIS REGAR D HE REFERRED TO PAGES 117 TO 121 WHICH IS COPY OF THE ASSESSMENT ORDER. 13. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED TH E ORDER OF CIT(A). 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT MRS RASHMI SHARMA IS HOLDING A POST GRADUATE DEGREE I.E. M.SC IN BOTA NY WHICH HAS NOTHING TO DO WITH THE COPY WRITING OR ADVERTISING BUSINESS, THER EFORE, IT CANNOT BE SAID THAT SHE WAS HAVING ANY PROFESSIONAL OR TECHNICAL QUALIF ICATION FOR DOING THIS JOB. AS FAR AS THE DECISION OF HON'BLE HIGH COURT OF GU JARAT IN THE CASE OF ASHABEN ROHITBHAI AND OTHERS V CIT (GUJ.) IN 237 ITR 561 IS CONCERNED, IN THAT CASE THE WIFE WAS WORKING AS MANAGING DIRECTOR OF A COMPANY BUT IT HAS TO BE NOTED THAT SHE HAD WORKED AS MANAGING DIRECTOR IN OTHER C OMPANIES IN THE PAST WHICH ACCORDING TO COURT WAS A SUFFICIENT QUALIFICATION A ND EXPERIENCE WITHIN THE MEANING OF PROVISO TO CLAUSE (2) TO SECTION 64(1). THE OBSERVATION OF THE COURT HAS BEEN EXTRACTED IN THE HEAD NOTE AS UNDER; - CLAUSE (II) OF SUB-SECTION (1) OF SECTION 64 CONTE MPLATES THAT IN COMPUTING THE TOTAL INCOME OF ANY INDIVIDUAL, THERE SHALL BE INCLUDED ALL SUCH INCOME AS ARISES DIRECTLY OR INDI RECTLY TO THE SPOUSE OF SUCH INDIVIDUAL. CLAUSE (II) REFERS TO PA YMENT MADE BY WAY OF SALARY, COMMISSION, FEES OR ANY OTHER FORM O F REMUNERATION TO THE SPOUSE OF SUCH INDIVIDUAL IN WH ICH SUCH INDIVIDUAL HAS SUBSTANTIAL INTEREST. BUT THE PROVIS O ENGRAFTS AN EXCEPTION AND PROVIDES THAT CLAUSE (II) WILL NOT AP PLY IN RELATION TO ANY INCOME ARISING TO THE SPOUSE WHERE THE SPOUS E POSSESSES TECHNICAL OR PROFESSIONAL QUALIFICATIONS AND THE IN COME IS SOLELY ATTRIBUTABLE TO THE APPLICATION OF HIS OR HER TECHN ICAL OR 8 PROFESSIONAL KNOWLEDGE AND EXPERIENCE. THE PROVISO CONTEMPLATES TWO CONDITIONS : (I) THE SPOUSE MUST P OSSESS TECHNICAL OR PROFESSIONAL QUALIFICATIONS; AND (II) INCOME DERIVED BY HIM OR HER MUST BE ATTRIBUTABLE TO THE APPLICATI ON OF SUCH TECHNICAL OR PROFESSIONAL KNOWLEDGE AND EXPERIENCE. THE REQUIREMENT OF TECHNICAL OR PROFESSIONAL QUALIFICAT ION IS NOT GENERAL IN TERMS. IT MUST RELATE TO THE POST WHICH HE OR SHE OCCUPIED AND, SECONDLY, THE SALARY OR FEES MUST BE ATTRIBUTABLE TO THE APPLICATION OF HIS OR HER TECHNICAL OR PROFE SSIONAL KNOWLEDGE. IF THESE TWO CONDITIONS ARE FULFILLED, T HE INCOME MUST BE CONSIDERED TO BE OF THAT PERSON AND SHOULD BE AS SESSED ACCORDINGLY. IF THE JOB IS OF A TECHNICAL NATURE REQUIRING A DEGREE OR DIPLOMA, THE HOLDING OF SUCH DEGREE OR DI PLOMA WOULD BE ESSENTIAL. THE NATURE OF PROFESSIONAL QUAL IFICATIONS, HOWEVER, VARIES FROM PROFESSION TO PROFESSION. LIKE WISE, THE NATURE OF TECHNICAL QUALIFICATIONS ALSO DIFFERS DEP ENDING ON THE NATURE OF THE JOB. IT IS NOT EACH AND EVERY QUALIFI CATION, ACADEMIC OR OTHERWISE, WHICH CAN BRING THE SPOUSE W ITHIN THE SCOPE OF THE PROVISO SO AS TO ENABLE HIM OR HER TO TAKE THE INCOME OUT OF THE CLUBBING PROVISION. IF THE SPOUSE POSSESSES TECHNICAL OR PROFESSIONAL QUALIFICATIONS NECESSARY TO UNDERTAKE THE PARTICULAR TECHNICAL JOB OR CARRY ON THE PROFES SION TO WHICH THE INCOME IS ATTRIBUTED, THAT WILL MEET THE REQUIR EMENT OF THE FIRST PART OF THE PROVISO. BUT EVEN IF THE FIRST PA RT OF THE PROVISO IS COMPLIED WITH, IT MUST FURTHER BE SHOWN THAT THE PAYMENT MADE TO THE SPOUSE IS ATTRIBUTABLE TO THE APPLICATI ON OF SUCH TECHNICAL OR PROFESSIONAL KNOWLEDGE AND EXPERIENCE FALLING UNDER THE LATTER PART THEREOF. 15. THE HIGHLIGHTED PORTION CLEARLY SHOWS THAT IF A JOB IS OF A TECHNICAL NATURE THEN SUCH TECHNICAL QUALIFICATION WOULD BE E SSENTIAL. THE JOB OF A COPY WRITER IS DEFINITIVELY A TECHNICAL JOB AND CANNOT B E DESCRIBED AS A GENERAL ADMINISTRATIVE JOB. BY NO STRETCH OF IMAGINATION, M .SC. (BOTANY) WILL HAVE ANYTHING TO DO WITH THE JOB OF COPY WRITING. 16. SIMILARLY, IN THE CASE OF CIT V SMT. R. BHARATH I 240 ITR 697 (MADRAS), THE SALARY WAS PAID TO THE HUSBAND OF THE ASSESSEE. THE LADY WAS DOING 9 BUSINESS OF JEWELLERY AND HER HUSBAND WAS HAVING EX PERIENCE OF VALUATION OF JEWELLERY. THE VALUATION OF JEWELLERY IS AN INTEGR AL PART OF THE JEWELLERY BUSINESS AND THAT IS WHY SALARY WAS HELD TO BE ALLO WABLE, THEREFORE, CLEARLY THIS A DISTINGUISHABLE CASE. 17. FURTHER IN THE CASE OF CIT V R. JAYALAKSHMI 24 0 ITR 773 (MADRAS), AGAIN THE SALARY WAS PAID BY THE CONCERN WHERE WIFE WAS A PARTNER IN THE PRINTING PRESS. THE SALARY WAS PAID BY THE FIRM TO THE HUSBAND OF THE LADY WHO WAS PARTNER. THE HUSBAND WAS EMPLOYED AS MANAGER OF THE PRINTING PRESS. IT WAS NOTICED BY THE COURT THAT HUSBAND HAD WORKED PR EVIOUSLY IN ANOTHER PRINTING PRESS AS MANAGER AND THAT IS WHY SALARY WA S HELD TO BE ALLOWABLE. BUT IN THE CASE BEFORE US, NOWHERE IT HAS BEEN SHOWN T HAT WIFE HAS WORKED AS A COPY WRITER IN SOME OTHER CONCERN. 18. IT WAS ALSO CONTENDED THAT PROVISO OF SECTION 6 4(1)(II) CANNOT BE INVOKED IF EXPENDITURE ARE NOW ALLOWABLE U/S 37(1) AND 40A (2)(A). WE FIND NO FORCE IN THESE SUBMISSIONS. THOUGH ASSESSING OFFICER HAS REF ERRED TO THE PROVISION OF SECTION 40A(2)((B) INITIALLY BUT FINALLY DISALLOWAN CE HAS BEEN MADE U/S 64(1)(II). THIS HAS BEEN DONE BECAUSE THE ASSESSEE IS RUNNING A BUSINESS IN HIS INDIVIDUAL CAPACITY AND ANY REMUNERATION PAID TO TH E WIFE IS REQUIRED TO BE CLUBBED WITH HIS INCOME. WHETHER THE INCOME IS CLU BBED OR THE EXPENDITURE IS DISALLOWED WOULD AMOUNT TO THE SAME THING BECAUSE N ET EFFECT WOULD BE TO THE INCREASE IN THE INCOME OF ASSESSEE. FURTHER THE LD . CIT(A) HAS FINALLY CONFIRMED THE DISALLOWANCE BY WAY OF CLUBBING U/S 64(1)(II) AND WE ARE CONCERNED WITH THE IMPUGNED ORDER WHERE REFERENCE H AS BEEN MADE TO SECTION 64(I)(II) OF THE ACT AND NO COGNIZANCE CAN BE TAKEN FOR THE REFERENCE MADE BY ASSESSING OFFICER TO SECTION 40A(2)(B). 10 19. ONE MORE CONTENTION WAS RAISED BY LD. COUNSEL O F THE ASSESSEE THAT THE SIMILAR EXPENDITURE HAS BEEN ALLOWED IN THE EARLIE R YEARS EVEN UNDER THE SCRUTINY ASSESSMENT COMPLETED FOR ASSESSMENT YEAR 2007-08. WE ARE UNABLE TO AGREE WITH THIS CONTENTION BECAUSE HON'BLE SUPREME COURT IN THE CASE OF CIT V BRITISH PAINTS INDIA LTD IN 188 ITR 44 (SC) HAS C LEARLY OBSERVED AT PAGE 53 AS UNDER;- IT IS NOT ONLY THE RIGHT BUT THE DUTY OF THE ASSES SING OFFICER TO CONSIDER WHETHER OR NOT THE BOOKS DISCLOSE THE T RUE STATE OF ACCOUNTS AND THE CORRECT INCOME CAN BE DEDUCED THER EFROM. IT IS INCORRECT TO SAY, AS CONTENDED ON BEHALF OF THE ASSESSEE, THAT THE OFFICER IS BOUND TO ACCEPT THE SYSTEM OF A CCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE THE CORRECTNESS OF WHICH HAD NOT BEEN QUESTIONED IN THE PAST. THERE IS NO ES TOPPEL IN THESE MATTERS AND THE OFFICER IS NOT BOUND BY THE M ETHOD FOLLOWED IN THE EARLIER YEARS. 20. THE ABOVE CLEARLY SHOWS THAT THERE CANNOT BE AN Y ESTOPPEL IF EARLIER A WRONG PROPOSITION WAS ACCEPTED BY THE ASSESSING OFF ICER AGAINST THE CLEAR PROVISION OF LAW. THIS IS SO BECAUSE AN ERROR CANNO T BE ALLOWED TO BE PERPETUATE FOREVER. 21. IN VIEW OF THE ABOVE OBSERVATION, WE FIND NOTHI NG WRONG WITH THE ORDER OF LD. CIT(A) AND WE CONFIRM THE SAME. 22. GROUND NO. 3 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS ASSESSING OFFICER CONDUCTED ENQUIRIES BY CALLING INFORMATION US/ 133(6) FORM CERTAIN PARTIES. CERTA IN DISCREPANCIES WERE NOTED IN THE ACCOUNT OF M/S GLASS PALACE AND ASSESSEE WAS ASKED TO RECONCILE THE DISCREPANCIES. ACCORDING TO ASSESSING OFFICER M/S G LASS PALACE HAD MADE AN ENTRY OF RS. 1,53,746/- ON 31.3.2008 WITH A NARRATI ON REBATE ON BILLS OF M/S PECIFIC ADS CREDITED IN THIS VOUCHER FOR BILLING FO R FINANCIAL YEAR 2007-08 AS 11 PER VERBAL SETTLEMENT OF ACCOUNT. NO SUCH ENTRY W AS FOUND IN THE BOOKS OF THE ASSESSEE. HE ALSO NOTED THAT M/S GLASS PLACE HAD M ADE THE FOLLOWING ENTRIES:- 30.03.2008 ADJUSTMENT PURCHASES FURNITURE AGAINST 15000 31.03.2008 CASH 1950 31.03.2008 GLASS PALACE 55000 31.03.2008 AGAINST PURCHASE FURNITURE 10000 23. THE ASSESSING OFFICER OBSERVED THAT THE ABOVE E NTRIES SHOW THAT ASSESSEE HAD PURCHASED SOME FURNITURE ITEMS AND THE SAME HAS BEEN ADJUSTED IN THE REBATE ACCOUNT. IN THIS BACKGROUND, THE SUM OF RS. 1,53,746/- WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. 24. SIMILARLY, IT WAS SEEN THAT AS PER THE ACCOUNT S FURNISHED BY M/S HEALTHWAY, THE CLOSING CREDIT BALANCE WAS OF RS. 5, 37,963/- WHEREAS THE DEBIT BALANCE IN THE BOOKS OF THE ASSESSEE IS IN THE NAME OF M/S HEALTHWAY WAS RS. 6,61,849/-. ACCORDING TO ASSESSING OFFICER THE ASS ESSEE HAD GIVEN GENERAL EXPLANATION AND COULD NOT RECONCILE THESE AMOUNTS, THEREFORE, THIS DIFFERENCE OF RS. 1,23,886/- WAS ALSO ADDED TO THE INCOME OF THE ASSESSEE. 25. ON APPEAL BEFORE CIT(A), IT WAS MAINLY SUBMITTE D THAT IN CASE OF M/S GLASS PALACE THE TOTAL AMOUNT OF SALES BY THE ASSES SEE MATCHES WITH THE AMOUNT OF PURCHASES SHOWN BY M/S GLASS PALACE. IT WAS POI NTED OUT THAT DIFFERENCE AROSE BECAUSE THE ASSESSEE HAS SHOWN VARIOUS REBATE S BY WAY OF INDIVIDUAL ENTRIES WHEREAS M/S GLASS PALACE HAS MADE ONE ENTRY FOR SUCH REBATE AT THE END OF THE YEAR. FURTHER, THE AMOUNT OF REBATE AMOUNT ING TO RS. 1,53,746/- INCLUDE A SUM OF RS. 25,000/- TOWARDS ADJUSTMENT OF FURNITU RE AND DEBIT ON ACCOUNT OF FURNITURE HAS BEEN DULY RECORDED IN THE BOOKS OF TH E ASSESSEE. IN RESPECT OF M/S HEALTHWAY, IT WAS POINTED OUT THAT AMOUNT DUE FROM THAT PARTY AS PER ASSESSEES BOOKS WAS RS. 6,61,849/- WHEREAS THAT PARTY WAS SHO WING LESS CREDIT, THEREFORE, NO ADVERSE INFERENCE CAN BE TAKEN PARTICULARLY WHEN NO ENTRY FOR CASH IS THERE 12 IN THE BOOKS. IN ANY CASE THE DIFFERENCE IS ON ACCO UNT OF REBATE BECAUSE M/S HEALTHWAY HAS DEBITED REBATE AMOUNTING TO RS. 18,37 ,300/- WHEREAS ASSESSEE PARTY HAS ALLOWED REBATE OF RS. 16,45,653/-. THE L D. CIT(A) DID NOT FIND FORCE IN THESE SUBMISSIONS AND DECIDED THE ISSUE AGAINST THE ASSESSEE VIDE PARA 5.2 OF HIS ORDER, WHICH IS AS UNDER:- 5.2 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSELS FOR THE APPELLANT. WHEN THE APPELLANT WAS ASKED TO RECONCILE THE DISCREPANCIES APPEARING IN THE ACC OUNTS OF M/S GLASS PALACE AND M/S HEALTHYWAY, HE COULD NO T MAKE THE RECONCILIATION. IT IS SEEN THAT THE APPELL ANT HAD PURCHASED FURNITURE FROM M/S GLASS PALACE AND THESE ENTRIES HAVE BEEN SHOWN AS REBATE BY M/S GLASS PALA CE IN ITS BOOKS OF ACCOUNTS. REGARDING CLOSING BALANCE DIFFERENCE IN THE ACCOUNT OF M/S HEALTHYWAY, THE AP PELLANT EXPLAINS THAT IT WAS ON ACCOUNT OF REBATES ALLOWED, BUT THE FACT REMAINS THAT THERE IS A DIFFERENCE IN CLOSING BALANCE AS ON THE LAST DATE OF THE FINANCIAL YEAR. IN VIEW OF THIS DISCUSSION, IT IS HELD THAT THE ASSESSING OFFICER H AS RIGHTLY MADE THE ADDITION ON ACCOUNT OF DIFFERENCE IN CLOSI NG BALANCES OF THESE TWO PARTIES AND THE SAME IS UPHEL D. GROUND OF APPEAL NO. 5 IS DISMISSED. 26. BEFORE US, LD. COUNSEL FOR THE ASSESSEE MAINLY REITERATED THE SUBMISSIONS MADE BEFORE THE FIRST APPELLATE AUTHORITY AND ALSO REFERRED TO THE COPIES OF VARIOUS ACCOUNTS AND POINTED OUT THAT IF REBATE WAS PROPERLY CONSIDERED THEN THERE WAS NO DIFFERENCE. 27. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED TH E ORDER OF CIT(A). 28. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE. PERUSAL OF THE CO PY OF ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S GLASS PALACE AND COPY OF THE AC COUNT OF GLASS PALACE IN THE BOOKS OF THE ASSESSEE WHICH ARE PLACED AT PAGES 55 TO 66 AND 67 TO 71 OF THE PAPER BOOKS CLEARLY SHOW THAT THERE IS NO DIFFERENC E IN THE SALES. FURTHER, 13 ASSESSEE HAS CREDITED THE ACCOUNT OF GLASS PALACE W ITH INDIVIDUAL ENTRIES FOR REBATES ALLOWED E.G. AGAINST THE BILL OF RS. 22,244 /- AS REBATE OF RS. 1,747/- IS CREDITED BUT NO ENTRY FOR REBATE HAS BEEN MADE BY M /S GLASS PALACE. THUS, IT BECOMES CLEAR THAT M/S GLASS PALACE HAS MADE ONLY O NE ENTRY AT THE END OF YEAR TOWARDS REBATES ALLOWED TO THEM THROUGH THE YEAR WH ICH ALSO INCLUDE ADJUSTMENTS ON ACCOUNT OF FURNITURE. SIMILARLY, I N THE OF M/S HEALTHWAY, PERUSAL OF ACCOUNT AT PAGES 71 TO 117 WOULD SHOW TH AT THEY HAVE TAKEN CREDIT OF TOTAL REBATE AMOUNTING TO RS. 18,37,300/- WHEREAS T HE ASSESSEE HAS ALLOWED REBATES ONLY UP TO RS. 16,45,654/-. IF OTHER PARTY DEBITS ACCOUNT WITH MORE DEBIT WITHOUT THE CONSENT OF THE ASSESSEE THEN ASSE SSEE COULD NOT BE BLAMED. THEREFORE, READING OF THE VARIOUS ENTRIES CLEARLY S HOW THAT ACCOUNT WAS DULY RECONCILED AND WHATEVER DIFFERENCE IS THERE STAND D ULY EXPLAINED, THEREFORE, THERE IS NO JUSTIFICATION IN THIS ADDITION. ACCORD INGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DELETE THE ADDITION AMOUNTING TO RS. 2,77,000/- ON ACCOUNT OF DIFFERENCE WITH M/S GLASS PALACE AND HEALTHWAY. 29. GROUND NO. 4 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT ASSESSE E HAD MADE CASH PAYMENT OF RS. 23,500/-. ON AN ENQUIRY, IT WAS SUBMITTED THA T PAYMENTS WERE MADE IN VARIOUS INSTALLMENTS FOR PURCHASE OF FESTIVAL GIFTS BUT ASSESSING OFFICER DID NOT FIND FORCE IN THESE SUBMISSIONS AND ADDED THE SUM O F RS. 23,500/- TO THE INCOME OF THE ASSESSEE. 30. ON APPEAL, THE SUBMISSIONS MADE BEFORE THE ASSE SSING OFFICER WAS REITERATED. THE LD. CIT(A) DID NOT FIND FORCE IN TH E SAME AND OBSERVED THAT EVEN IF THE PAYMENT WAS MADE IN INSTALLMENTS, THE S AME WAS COVERED BY THE PROVISIONS OF SECTION 40A(3). 14 31. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE SUM OF RS. 23,500/- WAS PAID IN INSTALLMENTS OF RS. 3,500/- AN D RS. 20,000/-, THEREFORE, THE SAME IS NOT IN VIOLATION PROVISIONS OF SECTION 40A(3) OF THE ACT PARTICULARLY IN VIEWS OF THE DECISION OF HON'BLE ORRISA HIGH CO URT IN THE CASE OF CIT V ALOO SUPPLY CO. 121 ITR 680 (ORISSA) AND CIT(A) VS . TRIVENIPRASAD PANNALAL 228 ITR 680 M.P.). HE FURTHER SUBMITTED THAT PARLIAMENT HAS AMENDED THE L AW BY FINANCE ACT 2008 AND W.E.F. 1.4.2009, THE AGGREG ATE PAYMENT HAVE TO BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE U/S 40 A(3) AND THE AMENDMENT IS NOT APPLICABLE IN THE RELEVANT YEAR. 32. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED TH E ORDER OF CIT(A). 33. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT BEFORE 31.3.2008, THE DISALLOWANCE OF INTEREST U/S 40A(3) COULD BE MA DE FOR ANY PAYMENT IN CASH IN EXCESS OF RS. 20,000/-. HOWEVER, THE PROVISION DID NOT CONTAIN THE EXPRESSION AGGREGATE OF PAYMENT AND HON'BLE ORIS SA HIGH COURT HAS HELD THAT IN THE CASE OF CIT V ALOO SUPPLY CO. (SUPRA) T HAT IF PAYMENTS WERE MADE AT VARIOUS POINTS OF TIME IN A PARTICULAR DAY BUT L ESS THAN RS. 2,500/- (AS APPLICABLE IN THE RELEVANT YEAR WHICH WAS LATER CHA NGED TO RS. 20,000/-) THEN PROVISIONS OF SECTION 40A(3) WAS NOT ATTRACTED. TH E RELEVANT OBSERVATIONS OF THE ORISSA HIGH COURT ARE AS UNDER:- THE WORD SUM HAS NO STATUTORY DEFINITION AND MUS T HAVE THE COMMON PARLANCE MEANING. WHILE LEGISLATING, PAR LIAMENT TRIES TO CONVEY ITS INTENTION THROUGH EXPRESS WORDS . IT IS ONE OF THE WELL SETTLED RULES OF INTERPRETATION THAT WH ERE A WORD USED IN A STATUTE CARRIES MORE THAN ONE MEANING, TH AT MEANING WHICH MAKES THE PROVISION WORKABLE AND IS N EAREST TO THE LEGISLATIVE INTENTION, HAS TO BE ADOPTED. TH E WORD SUM IN S.40A(3), SECOND PROVISO, OF THE I.T. ACT, 1961, IS USED ONLY TO INDICATE AN AMOUNT OF MONEY AND DOES N OT REFER TO THE TOTALITY OF THE EXPENDITURE. 15 THEREFORE, IF AN ASSESSEE MAKES PAYMENTS AT DIFFERE NT TIMES DURING THE DAY AND HE HAS NO IDEA THAT HE HAS TO PA Y TO THE SAME PERSON ON MORE THAN ONE OCCASION, HE CANNOT BE SUBJECTED TO THE STATUTORY PROVISION CONTAINED IN S . 40 A(3) OF THE ACT, UNLESS ANY ONE PAYMENT IS ABOVE RS. 2,5 00. THE STATUTORY LIMIT OF RS. 2,500 UNDER S. 40A(3) OF THE ACT APPLIES TO PAYMENT MADE TO A PARTY AT A TIME AND NO T TO THE AGGREGATE OF THE PAYMENTS MADE TO A PARTY IN THE CO URSE OF THE DAY AS RECORDED IN THE CASH BOOK. 34. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE MADH YA PRADESH HIGH COURT IN THE CASE OF CIT(A) VS. TRIVENIPRASAD PANNALAL (S UPRA). THE GOVERNMENT TO WIPE OUT THE IMPACT OF ABOVE JUDGMENTS AMENDED THE LAW AND THE EXPRESSION ON AGREEMENT OF PAYMENTS MADE TO A PERSON IN A DAY WAS ADDED BY FINANCE ACT 2008 W.E.F. 1.4.2009, THEREFORE, IT IS CLEAR TH AT AMENDMENT IS OPERATIONAL FROM 1.4.2009 AND CANNOT BE APPLIED IN THIS YEAR. T HUS, IN VIEW OF THE DECISION OF HON'BLE ORISSA HIGH COURT, WE ARE OF THE OPINION THAT THIS DISALLOWANCE IS NOT JUSTIFIED AND ACCORDINGLY WE SET ASIDE THE ORDE R OF LD. CIT(A) AND DELETE THE ADDITION. 35. GROUND NOS. 5 & 6: AFTER HEARING BOTH THE PART IES WE FIND THAT FROM AIR INFORMATION IT WAS NOTED THAT ASSESSEE HAS DEPO SITED CASH IN EXCESS OF RS. 10 LAKHS IN THE YEAR UNDER CONSIDERATION . THE CAS H WAS DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE WITH THE CHANDIGARH STATE C OOPERATIVE BANK LIMITED, SECTOR 22-B, CHANDIGARH. THEREAFTER, INFORMATION WAS CALLED FROM THE BANK U/S 133(6). THE BANK VIDE LETTER NO. 3725 DATED 1 5.9.2010 SUPPLIED A COPY OF THE ACCOUNT MAINTAINED BY SHRI ANOOP SHARMA I.E. TH E ASSESSEE. PERUSAL OF THIS SAVING BANK ACCOUNT NO.1967 REVEALED THAT A LARGE A MOUNT OF CASH WAS DEPOSITED. THE ASSESSEE WAS ASKED TO EXPLAIN THE SO URCES OF DEPOSIT IN THIS ACCOUNT BUT NO SOURCE WAS GIVEN. THE ASSESSING OFF ICER FURTHER VERIFIED THE BOOKS OF ACCOUNT OF THE PROPRIETORSHIP CONCERN M/S PECIFIC ADS AND ALSO OF THE PARTNERSHIP FIRM AND M/S ALFA ADVERTISING AND MARKE TING SERVICES AND 16 PARTNERSHIP FIRM WHERE ASSESSEE WAS PARTNER AND FOU ND THAT NO SUCH CASH WAS WITHDRAWN. HE FURTHER NOTED THAT AS PER AIR INFORM ATION THE DEPOSIT WAS SHOWN AT RS. 15,01,1000/- BUT AS PER THE BANK ACCOU NT TOTAL DEPOSIT WAS OF RS. 19,50,644/- AND DETAIL OF THE DEPOSITS HAS BEEN EXT RACTED BY THE ASSESSING OFFICER VIDE PARA 5.2 OF THIS ORDER. IN VIEW OF TH ESE FACTS THE ASSESSING OFFICER ADDED RS. 19,50,644/- U/S 68 OF THE ACT OF THE INCO ME OF THE ASSESSEE. 36. ON APPEAL, IT WAS MAINLY SUBMITTED THAT BANK PA SS BOOK WOULD NOT CONSTITUTE THE BOOKS OF THE ASSESSEE AND, THEREFORE , SECTION 68 WAS NOT ATTRACTED. IN THIS REGARD, RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- A ) COMMISSIONER OF INCOME TAX VS. BHAICHAND H. GA NDHI HIGH COURT OF BOMBAY SOURCE : ( 1983) 141 ITR 67 (B OM) B) JAWAHAR LAL OSWAL VS. ASSISTANT COMMISSIONER OF INCOME TAX* ITAT, CHANDIGARH BENCH 71 ITD 324 (CHD) C) ANAND RAM RAITANI VS. COMMISSIONER OF INCOME TA X HIGH COURT OF GAUHAT (1997) 139 CTR (GAU) 235 : 22 3 ITR 544 (GAU) D) MS. MAYAWATI VS. DEPUTY COMMISSIONER OF INCOME TAX, ITAT, DELHI A BENCH (2008) 113 TTJ (DEL) 178 : 1 9 SOT 460 37. THE LD. CIT(A) EXAMINED THIS ISSUE AND THE SUBM ISSIONS AND FOUND FORCE TO THE EXTENT THAT ADDITION COULD NOT BE MADE U/S 6 8 OF THE ACT. HOWEVER, HE FURTHER OBSERVED THAT CIT(A) HAS CO-TERMINUS POWER AND, THEREFORE, EXERCISING THE SAME THE ADDITION WAS CONFIRMED U/S 69A. HOWEVE R, HE NOTED THAT DURING THE YEAR ONLY SUM OF RS. 18,46,644/- WAS DEPOSITED, THEREFORE, ADDITION WAS RESTRICTED ONLY TO RS. 18,56,644/- AND THE ASSESSIN G OFFICER WAS DIRECTED TO MAKE BALANCE ADDITION OF RS. 94,000/- IN ASSESSMENT YEAR 2009-10 BECAUSE THIS AMOUNT PERTAIN TO FINANCIAL YEAR 2008-09. 17 38. BEFORE US LD. COUNSEL FOR THE ASSESSEE NARRATED THE FACTS AND SUBMITTED THAT CIT(A) IS NOT CORRECT AFTER HAVING OBSERVED TH AT SECTION 68 IS NOT ATTRACTED TO MAKE THE ADDITION U/S 69A. HE SUBMITTED THAT OBS ERVATION THAT SUCH OF ADDITION IS ALSO PROTECTED BY SECTION 292B IS NOT C ORRECT AND IN THIS REGARD HE RELIED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. NORTON MOTORS 275 ITR 595 (P&H). IN ANY CA SE, EVEN IF CIT(A) HAS ENHANCEMENT POWERS THE SAME CANNOT BE EXERCISED TO FIND OUT A NEW SOURCE OF INCOME AND IN THIS REGARD HE RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V SARODRI LAL AND CO. 251 ITR 86 4(DEL). HE ALSO RELIED ON THE DECISION OF ACIT V LAXMI VISHNU SILK MILLS (199 4) 49 TTJ (AHD) 537 (COPY OF JUDGMENT FILED). 39. ON THE OTHER HAND LD. DR RELIED ON THE ORDER O F CIT(A). 40. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND DO NOT AGREE WITH THE SAME. IN THE CASE BEFORE US CLEARLY THE ASSESS EE HAD DEPOSITED CASH IN A BANK ACCOUNT FOR WHICH ASSESSEE HAS NOT BEEN ABLE T O GIVE ANY SOURCE AND CORRECTLY THE INCOME HAS BEEN ADDED. NOW THE QUEST ION IS WHETHER SECTION 68 COULD BE INVOKED. THE LD. CIT(A) AGREED WITH THE CO NTENTION OF THE ASSESSEE THAT SECTION 68 COULD NOT BE INVOKED. THE LD. CIT(A ) HAS DECIDED THIS ISSUE VIDE PARA 7.3 AND 7.3.1 WHICH ARE AS UNDER:- 7.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSELS FOR THE APPELLANT. CASH HAS BEEN DEPOSITED ON SEVER AL DATES IN THE SAVINGS BANK ACCOUNT OF THE APPELLANT WITH THE CHAN DIGARH STATE CO-OP BANK., SECTOR 22-B, CHANDIGARH. OUT OF THE TO TAL ADDITION MADE OF RS. 19,50,644/-, ONLY RS. 18,56,644/- PERTA INS TO THE FINANCIAL YEAR 2007-08. THE APPELLANT HAD NOT GIVEN ANY EXPLANATION BEFORE THE ASSESSING OFFICER REGARDING SOURCE OF THE CASH INTRODUCED AND THE CASH ENTRIES DO NOT RECONCI LE WITH THE 18 ACCOUNTS OF ANY OF THE BUSINESS CONCERNS OF THE APP ELLANT. A PERUSAL OF THE CASH DEPOSITS, REPRODUCED IN PARA 5.2 OF THE ASSESSMENT ORDER REVEALS THAT IN ALL, THERE ARE 53 ENTRIES OF CASH DEPOSITS IN THE FINANCIAL YEAR 2007-08 AND MOST OF THE DEPOSITS ARE OF RS. 40,000/-. MAXIMUM DEPOSIT ENTRY IS OF RS. 49,000/-. A SUMMARY OF THE 53 CREDIT ENTRIES IS AS UNDER: TOTAL AMOUNT I) 38 ENTRIES RS. 40,000/- 15,20,000/- II) 1 ENTRY RS. 49,000/- 49,000/- III) 2 ENTRIES RS. 45,000/- 90,000/- IV) 2 ENTRIES RS. 35,000/- 70,000/- V) 3 ENTRIES RS. 30,000/- 90,000/- VI) SMALL AMOUNTS (7 ENTRIES) 37,644/- 18,56,644/- 7.3.1 IN THE APPELLATE PROCEEDINGS, THE LD. COUNSE LS FOR THE APPELLANT HAVE MERELY SUBMITTED THAT SECTION 68 IS NOT ATTRACTED ON CREDIT ENTRIES IN THE SAVINGS BANKS ACCOUNT, SINCE BANK PASS BOOK IS NOT BOOKS OF ACCOUNTS OF THE APPELLANT. NO EXPLANAT ION REGARDING THE SOURCE OF THESE DEPOSITS HAS BEEN FILED. THE CO NTENTION OF THE APPELLANT IS CORRECT BUT THE FACT IS THAT THE SOURC E OF THESE DEPOSITS REMAINS UNEXPLAINED AND SO THE ENTIRE AMOUNT OF DEP OSIT OF RS. 18,56,644/- IS TO BE TREATED AS UNEXPLAINED INVESTM ENT U/S 69 A OF THE ACT. THE LD. COUNSELS HAVE RELIED UPON A NUMBER OF JUDGMENTS IN SUPPORT OF THEIR CONTENTION ON THE ISSUE BUT THE SE JUDGMENTS ARE NOT APPLICABLE IN THE INSTANT SITUATION, BECAUSE TH E POWERS OF COMMISSIONER OF INCOME TAX (APPEALS) ARE COTERMINOU S WITH THOSE OF THE ASSESSING OFFICER AND SO THE COMMISSIONER OF INCOME TAX (APPEALS) CAN APPLY THE CORRECT PROVISIONS OF LAW, IF THEY HAVE NOT BEEN SO APPLIED BY THE ASSESSING OFFICER WAS NOT TH E CORRECT SECTION AND PROVISIONS OF SECTION 292 B WILL BE APPLICABLE. IN VIEW OF THIS DISCUSSION OUT OF THE ADDITION MADE OF RS. 19,50,64 4/- ON THE ISSUE, ADDITION OF RS. 18,56,644/-, PERTAINING TO CREDIT E NTRIES OF FINANCIAL YEAR 2007-08 IS UPHELD. REST OF THE AMOUNT OF RS. 9 4,000/- PERTAINS TO FINANCIAL YEAR 208-09 AND THE ASSESSING OFFICER IS DIRECTED TO TAKE REMEDIAL ACTION TO TAX THIS AMOUNT IN A.Y. 200 9-10. GROUND OF APPEAL NO. 7 IS PARTLY ALLOWED. 19 41. THE ABOVE CLEARLY SHOWS THAT AFTER HAVING ACCEP TED THE CONTENTION ADDITION COULD NOT BE MADE U/S 68. THE LD. CIT(A) C OULD HAVE INVOKED THE PROVISIONS OF SECTION 69A TO CONFIRM THAT ISSUE. FO R THIS HE HAS OBSERVED THAT HE HAS THE PLENARY POWER AND ALSO THE ADDITION IS P ROTECTED BY PROVISION TO SECTION 292B OF THE ACT, WHICH READS AS UNDER:- RETURN OF INCOME, ETC., NOT TO BE INVALID ON CERTA IN GROUNDS.--NO RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING FURNISHED OR MADE OR ISSUED OR TAKEN OR PURPORTED TO HAVE BEEN FURNISHED OR MADE OR ISSUED OR TAKEN IN PURSUANCE OF ANY OF THE PROVISIONS OF THIS ACT S HALL BE INVALID OR SHALL BE DEEMED TO BE INVALID MERELY BY REASON OF ANY MISTAKE, DEFECT OR OMISSION IN SUCH RETURN OF I NCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING IF SUCH RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OT HER PROCEEDING IS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT. 42. THE ABOVE PROVISION CLEARLY SHOWS THAT ASSESSME NT EVEN IF MADE UNDER THE WRONG PROVISION IS PROTECTED BY THIS PROVISION. THE LD. COUNSEL BEFORE US HAD RELIED ON THE DECISION OF HON'BLE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF CIT(A) VS. NORTON MOTORS (SUPRA). IN THAT CASE THE ASSESSEE FIRM WAS CONSTITUTED ON APRIL 2, 1973. THERE WERE CHANGES IN ITS CONSTITUTION IN 1976 AND 1978. REGISTRATION WAS GRANTED TO THE FIRM. THE FIRM FILED ITS RETURN FOR THE ASSESSMENT YEAR 1978-79. THE ASSESSING OFFICER DETE RMINED THE INCOME OF THE FIRM. SUBSEQUENTLY THE COMMISSIONER ISSUED NOTICE T O THE ASSESSEE REQUIRING IT TO SHOW CAUSE AS TO WHY THE REGISTRATION MAY NOT BE WITHDRAWN ON THE GROUND THAT THE NEWLY INDUCTED PARTNERS HAD BEEN WRONGLY A LLOWED SHARES IN THE PROFITS FOR THE WHOLE OF THE YEAR. AFTER HEARING THE REPRES ENTATIVE OF THE ASSESSEE, THE COMMISSIONER HELD THAT DISTRIBUTION OF PROFITS FOR THE ENTIRE YEAR MADE BY THE FIRM AMONGST FIVE PARTNERS WAS NOT IN ACCORDANCE WI TH THE LAW. ACCORDINGLY, HE DIRECTED THE INCOME-TAX OFFICER TO REALLOCATE THE P ROFITS AMONG THE THREE 20 PARTNERS. THE TRIBUNAL HELD THAT THE COMMISSIONER C OULD NOT HAVE DIRECTED THE INCOME-TAX OFFICER TO CHANGE THE SHARE ALLOCATION A MONG THE PARTNERS WITHOUT ISSUING NOTICE UNDER SECTION 158 READ WITH SECTION 67. IT SET ASIDE THE ORDER OF THE COMMISSIONER. 43. ON THE ABOVE FACT IT WAS HELD AS UNDER;- THAT THE COMMISSIONER HAD ISSUED NOTICE TO THE ASS ESSEE PROPOSING TO CANCEL THE REGISTRATION OF THE FIRM ON THE GROUND OF ERROR IN THE ALLOCATION OF SHARES AMONG THE PART NERS BUT NO NOTICE WAS ISSUED UNDER SECTION 158 READ WITH SECTI ONS 187 AND 67 OF THE ACT PROPOSING TO CHANGE THE SHARE ALL OCATION AMONG THE PARTNERS AND THE ASSESSEE DID NOT GET OPP ORTUNITY TO MAKE REPRESENTATION IN THIS REGARD. THEREFORE, T HE COMMISSIONER DID NOT HAVE THE JURISDICTION TO DIREC T MODIFICATION OF THE ORDER PASSED BY THE INCOME-TAX OFFICER UNDER SECTION 158 OF THE ACT AND THE ORDER PASSED B Y HIM COULD NOT BE SUSTAINED BY RELYING ON SECTION 292B. 44. CLEARLY, THIS DECISION IS DISTINGUISHABLE BECAU SE SECTION 292B WILL NOT PROTECT THE BASIC JURISDICTIONAL DEFECT WHICH WAS A BSENT IN THIS CASE. WHEREAS IN CASE BEFORE US CLEARLY THE ASSESSING OFFICER HAD INFORMATION THAT ASSESSEE HAD DEPOSITED CERTAIN SUMS IN A BANK ACCOUNT AND AS SESSEE WAS DULY CONFRONTED WITH THIS INFORMATION BUT ASSESSEE HAD NO EXPLANATI ON AND THAT IS WHY THE ADDITION WAS MADE. MERELY BECAUSE THE BANK PASS BO OK CANNOT BE TREATED AS BOOKS OF ACCOUNT ON THE BASIS OF CERTAIN DECISIONS DOES NOT MEAN THAT ADDITION IS NOT PROTECTED U/S 292B AND HAS BEEN RIGHTLY CONF IRMED BY THE LD. CIT(A) U/S 69A OF THE ACT. 45. THERE IS ANOTHER ASPECT TO THE ISSUE THAT A LD. CIT(A) HAS ALSO OBSERVED THAT HE HAS PLENARY POWERS. IN THIS CONNECTION WE ARE REMINDED OF THE J UDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT V KANPU R COAL SYNDICATE 53 ITR 225 (SC) . IN THAT CASE AT PAGE 22 IN WAS OBSERVED AS UNDER: - 21 THE APPELLATE ASSISTANT COMMISSIONER HAS PLENARY P OWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWERS IS CONTERMINOUS WITH THAT OF THE INCOME-TAX OFFICER. H E CAN DO WHAT THE INCOME-TAX OFFICER CAN DO AND CAN ALSO DIR ECT HIM TO DO WHAT HE HAS FAILED TO DO. 46. FROM THE ABOVE, IT BECOME ABSOLUTELY CLEAR THAT CIT(A) HAS PLENARY POWERS AND THE SCOPE OF THE POWERS HAS BEEN HELD BY THE HON'BLE SUPREME COURT TO BE CO-TERMINUS WITH THAT OF INCOME TAX OFF ICER. THEREFORE, HE CAN DO WHATEVER CAN BE DONE BY THE ASSESSING OFFICER. THE LD. CIT(A) UNDER THESE POWERS HAS CORRECTLY UPHELD THE ADDITION UNDER THE CORRECT PROVISIONS. THE LD. COUNSEL HAD RELIED ON THE DECISION OF FULL BENCH OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V SARDARI LOWER AND CO. 2 51 ITR 864 (DEL). IN THAT CASE IT WAS OBSERVED AS UNDER:- IN CIT V. SHAPOORJI PALLONJI MISTRY [1962] 44 ITR 891 (SC) THE MATTER RELATD TO PROVISIONS OF THE INDIAN INCOM E-TAX ACT, 1922. IT WAS HELD, INTER ALIA, THAT IN AN APPEAL FI LED BY THE ASSESSEE, THE APPELLATE ASSISTANT COMMISSIONER HAS NO POWER TO ENHANCE THE ASSESSMENT BY DISCOVERING A NEW SOUR CE OF INCOME NOT CONSIDERED BY THE INCOME-TAX OFFICER IN THE ORDER APPEALED AGAINST. A SIMILAR VIEW WAS EXPRESSED IN C IT V. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA [1967] 66 ITR 44 3 (SC). THAT ALSO RELATED TO A CASE UNDER SECTION 31( 3) OF THE OLD ACT. IT WAS HELD THAT THE POWER OF ENHANCEMENT UNDER SECTION 31(3) OF THE OLD ACT WAS RESTRICTED TO THE SUBJECT MATTER OF THE ASSESSMENT OR THE SOURCE OF INCOME, W HICH HAD BEEN CONSIDERED EXPRESSLY OR BY CLEAR IMPLICATION B Y THE ASSESSING OFFICER FROM THE POINT OF VIEW OF TAXABIL ITY AND THAT THE APPELLATE ASSISTANT COMMISSIONER HAD NO POWER T O ASSESS A SOURCE OF INCOME, WHICH HAD NOT BEEN TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER. IN CIT V. N IRBHERAM DALURAM [ 1997] 224 ITR 610, IT WAS OBSERVED BY THE APEX COURT THAT THE APPELLATE POWERS CONFERRED ON TH FIR ST APPELLATE AUTHORITY UNDER SECTION 251 OF THE INCOME-TAX ACT, 1961, WERE NOT CONFINED TO THE MATTER, WHICH HAD BEEN CONSIDER ED BY THE 22 INCOME-TAX OFFICER, AS THE FIRST APPELLATE AUTHORIT Y IS VESTED WITH ALL THE WIDE POWERS THAT THE ASSESSING OFFICER MAY HAVE INCLUDE THE POWER TO DISCOVER A NEW SOURCE OF INCOM E WAS NOT COMMENTED UPON. CONSEQUENTLY, THE VIEW EXPRESSED IN CIT V. SHAPOORJI PALLONJI MISTRY [1962]44 ITR 891 (HON'BLE SUPREME COURT) AND CIT V. RAI BAHADUR HARDUTROY MOT ILAL CHAMARIA [1967] 66 ITR 443 (SC) STILL HOLDS GOOD. W HENEVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOU RE WHICH HAD NOT BEE CONSIDERED BY THE ASSESSING OFFICER IS CONCERNED, THE JURISDICTION TO DEAL WITH THE SAME IN APPROPRIA TE CASES MAY BE DEALT WITH UNDER SECTION 147/148 OF THE ACT AND SECTION 263 OF THE ACT, IF REQUISITE CONDITIONS ARE FULFILLED. IN THE PRESENCE OF SUCH SPECIFIC PROVISIONS A SIMILAR POWER IS NOT AVAILABLE TO THE FIRST APPELLATE AUTHORITY. CIT V. SHAPOORJI PALLONJI MISTRY [1962] 44 ITR 891(SC) AND CIT V. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA [1967] 66 ITR 443 (SC) EXPLAINED AND FOLLOWED. 47. FROM THE ABOVE OBSERVATION IT IS CLEAR THAT ABO VE OBSERVATION OPERATE IN ALTOGETHER DIFFERENT FIELD. THE HON'BLE COURT WAS C ONCERNED WITH THE ENHANCEMENT OF INCOME AND IT WAS OBSERVED THAT COMM ISSIONER (APPEALS) HAS POWER TO ENHANCE BUT ENHANCEMENT HAS TO BE RESTRICT ED ONLY TO THE SOURCE OF INCOME DISCOVERED BY THE ASSESSING AUTHORITY, THERE FORE, THE ABOVE JUDGMENT PLACED RESTRICTION ON THE ENHANCEMENT POWER. THIS C ASE IS TOTALLY DISTINGUISHABLE BECAUSE WE ARE NOT CONCERNED WITH T HE SITUATION WHERE LD. CIT(A) HAS ENHANCED THE INCOME. IN THE CASE BEFORE US THE ASSESSING OFFICER CLEARLY FOUND THAT ASSESSEE HAD DEPOSITED CASH FOR WHICH ASSESSEE HAD NO EXPLANATION AND THAT IS WHY ADDITION WAS MADE. THE LD. CIT(A) HAS NOT DISCOVERED ANYTHING NEW EXCEPT THAT HE AGREED WITH THE CONTENTION THAT ADDITION COULD NOT MADE U/S 68 AND MADE THE ADDITI ON U/S 69A OF THE ACT. THE OTHER DECISION RELIED ON IN THE CASE OF ACIT V LAXM I VISHNU SILK MILLS (SUPRA) IS ALSO DISTINGUISHABLE BECAUSE IN THAT CASE THE BE NCH HAS NOT CONSIDERED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T V KANPUR COAL SYNDICATE (SUPRA). 23 48. IN THESE CIRCUMSTANCES WE FIND NOTHING WRONG WI TH THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. 49. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.09.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 10 TH SEPTEMBER, 2014 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR