Dynamic Engineers, Kota V. Dy. CIT, Kota

ITA 268/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5358 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY MALIK CIT DHK
• Assessee Lawyers: DEVENDRA KUMAR
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Source of fund
• Section: 143(3); 246

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH YFYR DQEKJ]] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIKRAM SINGH YADAV, AM & SHRI LALIET K UMAR, JM VK;DJ VIHY LA-@ ITA NO.268/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 DYNAMIC ENGINEERS , E-20 CHAMBAL INDUSTRIAL AREA, KOTA. CUKE VS. THE DCIT, CIRCLE-1, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAFD 9332 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO.269/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 DYNAMIC ENGINEERS , E-20 CHAMBAL INDUSTRIAL AREA, KOTA. CUKE VS. THE DCIT, CIRCLE-1, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAFD 9332 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI DEVENDRA KUMAR (ADV.) JKTLO DH VKSJ LS@ REVENUE BY :S HRI AJAY MALIK (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14.03.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : /03/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST THE ORDERS OF LD CIT(A) KOTA OF EVEN DATE I.E, 31.01.2014 FOR A.YS. 2005-06 AND 2006-07 WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 2 A.Y. 2005-06 (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING THE TRADING ADDITION OF RS. 2,8 5,569/- OUT OF THE TOTAL TRADING ADDITION OF RS. 5,21,409/- MADE BY THE A.O. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS.11,814/- ON A/C OF CONVEYANCE EXPENSES MADE BY THE AO. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS. 15,000/- OU T OF THE DISALLOWANCE OF RS. 25,000/- MADE BY THE AO ON A/C OF TRAVELLING EXPENSES. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS.1100/- ON A/ C OF DONATION TO PRIME MINISTERS NATIONAL RELIEF FUND MADE BY THE A O. (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS.973/- MADE B Y THE AO ON A/C OF DELAYED PAYMENT OF ESI AND PF. (6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS.2763/- OUT O F DISALLOWANCE OF RS.5527/- MADE BY THE AO ON A/C OF WELCOME EXPENS ES. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE APPEL LANT IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING/FAB RICATION OF GLUED INSULATED RAIL JOINTS AND CHANNEL SLEEPER AND EXECUTING WORKS CONTRACT AWARDED BY RAILWAY FOR SUPPLY OF MATERIAL AND EXECUTION OF WOR K THROUGH LABOUR EMPLOYED BY IT AND ONLY BY LABOUR CONTRACT. THE CONTRACT S ARE AWARDED BY RAILWAY THOUGH OPEN TENDER OR ON RATES FIXED BY THE RAILWAY S. 2.1 DURING THE PERIOD UNDER CONSIDERATION, THE APPE LLANT WAS AWARDED VARIOUS TENDER CONTRACTS AND THERE WAS ALSO ON- GOI NG CONTRACTS. FURTHER APPELLANT WAS ALSO AWARDED SHORT TERM CONTRACTS. S INCE THE APPELLANT WAS EXECUTING TENDER CONTRACTS, APPELLANT SUB-CONTRACTE D THE CONTRACTS TO OTHER CONCERNS FOR EXECUTION OF THOSE CONTRACTS. IT WAS NOTICED BY THE AO THAT THE APPELLANT HAS DECLARED ONLY G.P RATE OF 8.2% IN RES PECT OF MAHI, AHMEDABAD ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 3 AND RAJASTHAN CONTRACTS AS AGAINST 11.10% DECLARED BY THE RELATED CONCERN M/S SSRT WHICH HAS EXECUTED SIMILAR NATURE OF CONTR ACTS AND A SHOW-CAUSE WAS ISSUED TO THE APPELLANT. AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLANT, THE AO ESTIMATED GP RATE OF 10.5% ON THE CONTRACT RECEIPTS OF RS 2,19,07,938 IN RESPECT OF ABOVE STATED CONTRACTS AN D MADE A TRADING ADDITION OF RS 521,409. 2.2 BEING AGGRIEVED THE APPELLANT CARRIED THE MATTE R IN APPEAL BEFORE THE LD CIT(A) WHO HAS GIVEN HIS FINDINGS AS UNDER: CONSIDERING THE ABOVE AND THE FACT THAT THE ASSESS EE HAD SURRENDERED CASH CREDITS OF RS. 1,26,300/- IT CAN BE CONCLUDED THAT ASSESSEE WAS EARNING MORE THAN WHAT IT SHOWED. IT WAS ALSO SURPRISING THAT O N THE SAME PROJECT SUBCONTRACTORS SHOWED MUCH HIGHER PROFIT (16.75% B Y DC MITTAL) EVEN AFTER SHARING PART OF THE PROFIT WITH ASSESSEE. THEREFOR E REJECTION OF BOOKS OF ACCOUNTS IS UPHELD. HOWEVER, THE AO IN A.Y. 2006-0 7 HAS ESTIMATED THE PROFIT @10% G.P. THEREFORE, IT WOULD BE FAIR TO APPLY G.P. RATE OF 10%. THIS RESULTS INTO ADDITION OF RS. 4,11,869/- (2190793-1778924). IN MY OPINION THE SURRENDERED CASH CREDITS WERE ALSO FROM THIS ADDIT IONAL PROFIT. THEREFORE I ALLOW TELESCOPING OF RS. 1,26,300/- SURRENDERED AS UNEXPL AINED CASH CREDITS. IN THE RESULT NET ADDITION OF RS. 2,85,569/- (411869-12630 0) IS CONFIRMED. THE AO IS DIRECTED TO DELETE ADDITION OF RS. 2,35,840/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 2.3 REGARDING AOS COMPARISON OF G.P. RATE WITH SUB -CONTRACTOR, THE LD AR SUBMITTED AS UNDER: REASONS GIVEN BY APPELLANT OBSERVATIONS OF AO 1. ADMITTEDLY IN THE OPEN TENDERS DUE TO COMPETITION FROM MANY PLAYERS IN THE MARKET THE RATE IS ALWAYS DOWN RESULTING INTO LOW G.P RATE. (THE ASSESSEE HAS EXECUTED ONLY OPEN TENDERS BY SELF). WHEREAS THE SPECIAL TENDERS ARE GIVEN TO SELECTED PARTIES ONLY AND IN THE CASE OF ASSESSEE THESE TENDERS WERE EXECUTED BY SUB-CONTRACTORS. A.O. HAS NEITHER REFUTED NOR MAY ANY OBSERVATIONS IN THIS REGARD. ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 4 2. OUT OF TOTAL WORK EXECUTED BY SELF AGGREGATING TO RS. 2,19,07,938/- RECEIPTS OF RS. 80,37,509/- PERTA INS TO AHMEDABAD WORK AGAINST WHICH ONLY MATERIAL WAS SUPPLIED ON 11.3.05 AND 17,3,2005 AND THE EXECUTION AT SITE WAS PENDING AS ON 31.3.2005. THE EXECUTION WORK TOOK PLACE IN THE NEXT FINANCIAL YEAR 2005- 06. DUE TO INCREASE IN THE STEEL PRICES, THE WORK REL ATING TO SUPPLY OF MATERIAL RESULTED INTO LOWER GP. HOWEVER DUE TO EXECUTION OF WORK IN THE NEXT FINANCIAL YEAR, THE GP RATE ON SELF EXECUTED WORK INCREASED TO 11.92% THE FACT OF SUPPLIES MADE ON 11.3.05 AND 17.3.2005 WERE VERIFIABLE FROM THE BOOKS OF ACCOUNTS PRODUCED BEFORE THE ASSESSING AUTHORITY. THE AO HAS NOT DISPUTED THE FACTS. 3. OUT OF TOTAL WORK EXECUTED BY SELF AGGREGATING T O RS. 2,19,07,938/- WORKS OF RS. 8,50,000/- WERE CONTRACT OF 2002 WHICH INVOLVED LOSS AS THE STEEL PRICES INCREASED BY MORE THAN 40% AS COMPARED TO THE PRICES PREVAILING IN THE YEAR 2002 WHEN THESE CONTRACTS/TENDERS WERE PROCURED. AO HAS STATED THAT PRICES HAVE INCREASED FOR THE SUB-CONTRACTORS ALSO. HE HAS NOT CONSIDERED THAT IN THE CASE OF APPELLANT THE CONTRACT WERE AWARDED IN THE YEAR 2002 AND IN THE CASE OF SUB CONTRACTOR THE CONTRACTS WERE AWARDED INSTANTLY BIN THE 2004. THE PRICE RISE HAS TAKEN PLACE IN BETWEEN THE PERIOD 2002 TO 2004 THE REASONS MENTIONED ON PAGE 5 OF ASSESSMENT ORDER ARE MERELY ON SURMISES, CONJECTURES, ASSUMPTION AND PRESUMPTIONS. AO HAS GI VEN MUCH RELIANCE ON THE SUB-CONTRACT OF SHRI D.C. MITTAL. HE HAS NOT APPRE CIATED THE SUBMISSIONS OF THE APPELLANT THE CONTRACTS GIVEN ON SUB-CONTRACT ARE N OT TENDER CONTRACT BUT ARE ALLOTTED CONTRACT AND THEREFORE MARGIN IS LESS. AO HAS ALSO NOT CONSIDERED THAT CONTRACT EXECUTED BY THE APPELLANT WERE OLD CONTRAC TS INCLUDING CONTRACT FOR AHMEDABAD OF 2002 AND SUB-CONTRACTED CONTRACT WAS INSTANT CONTRACT. THUS BOTH COULD NOT BE COMPARED . THE CIT HAS NOT PASSED A SPEAKING ORDER ON THE SUBMISSIONS AND EXPLANATIONS OF THE APPELLANT. THE APPELLANT PRAYS THAT ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 5 TRADING RESULT DECLARED BY APPELLANT BE ACCEPTED AN D ADDITION MAY PLEASE BE DELETED. 2.4 THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER OF LOWER AUTHORITIES. 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE LIMITED ISSUE UNDER DISPUTE RELATES TO ESTIMATION OF G.P PURSUANT TO REJECTION OF BOOKS OF ACCOUNTS. THE AO HAS COMPARED THE G.P OF THE APPELLANT VIS-A-VIS ITS SUBCONTRACTORS WHO HAVE EXECUTED SIMILAR PROJECTS AND HAS DONE A BROAD MACRO LEVEL COMPARISON IN TERM S OF PROFITABILITY ON SPECIFIED CONTRACTS. AS FAR AS APPELLANT IS CONCER NED, WE FIND FORCE HIS ARGUMENTS THAT THE COMPLEXITY OF TENDERING PROCESS IN TERMS OF OPEN TENDER, SPECIFIC/LIMITED TENDERS AND COMPETITIVE MARKET DYN AMICS IN TERMS OF COMPETITION, COST OF RAW MATERIAL SUCH AS STEEL ETC PLAY A KEY ROLE IN OVERALL PROFITABILITY OF EACH CONTRACT AND THE SAME CANNOT BE NEGATED. FURTHER, THE APPELLANT HAS SUBMITTED ITS EXPLANATION REGARDING P ROFITABILITY OF ITS AHMEDABAD PROJECT AND STATED THAT ONLY PART WORK HA S BEEN DONE THIS YEAR AND THE BALANCE WORK HAS BEEN DONE IN THE SUBSEQUEN T FINANCIAL YEAR. THOUGH THE APPELLANT HAS DECLARED A GP OF 8.2% THIS YEAR, GP OF 11.92% HAS BEEN DECLARED IN THE SUBSEQUENT FINANCIAL YEAR WHICH HAS BEEN ACCEPTED BY THE REVENUE. THE COMPARISON OF PROFITABILITY IN PARTIC ULAR CONTRACT SHOULD THEREFORE BE CONSIDERED OVER THE PERIOD OF EXECUTIO N OF THE CONTRACT AND DEPENDING UPON THE MILESTONES ACHIEVED IN PARTICULA R FINANCIAL YEAR, REVENUES ARE OFFERED TO TAX AND IT MAY SO HAPPEN THAT IN A P ARTICULAR FINANCIAL YEAR, THE PROFITABILITY IS LOW AND IN SUBSEQUENT YEARS, THE P ROFITABILITY MAY BE HIGHER. SO, A STANDALONE COMPARISON IN A PARTICULAR YEAR OF PRO FITABILITY WITHOUT CONSIDERING THE COMPARATIVE MILESTONES IN RESPECTIV E CONTRACTS IS NOT A RATIONAL BASIS. IN ENTIRETY OF FACTS AND CIRCUMSTANCES OF TH E CASE, WE ARE OF THE BELIEF THAT THE TRADING ADDITIONS OF RS 2,85,569/- ARE NOT JUSTIFIABLE AND THE SAME IS HEREBY DELETED. THE APPELLANTS GROUND NO 1 IS ACC ORDINGLY ALLOWED. 3. NOW COMING TO GROUND NO. 2 TO 6 WHICH RELATES TO VARIOUS DISALLOWANCES OF EXPENSES, THE LD AR SUBMITTED THAT THE EXPENSES INCURRED ARE GENUINE AN D REASONABLE LOOKING TO THE NATURE AND QUANTUM OF BUS INESS. LEARNED LOWER AUTHORITIES HAVE DISALLOWED THE PART OF EXPENSES WI THOUT ANY PROPER BASIS AND JUSTIFICATION. DISALLOWANCE MADE DESERVES TO BE DEL ETED AND ALL THE EXPENSES DESERVED TO BE ALLOWED. ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 6 3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL ON RECORD. FIRSTLY, REGARDING DISALLOWANCE OF CONVEYA NCE EXPENSES OF RS 11,814, THE AO HAS DISALLOWED THE SAME ON THE GROUND THAT P ERSONAL USE OF CAR CANNOT BE RULED OUT. THE LD AR HAS SUBMITTED THAT THE PAR TNER HAS A SEPARATE VEHICLE WHICH WAS USED FOR PERSONAL PURPOSES, HOWEVER THE S AME WAS NOT ACCEPTED BY THE LD CIT(A). AT THE SAME, SIMILAR DISALLOWANCE O N ACCOUNT OF TELEPHONE/MOBILE EXPENSES WHERE THE APPELLANT HAS S UBMITTED THAT IN ADDITION TO OFFICIAL TELEPHONE LINES, THE APPELLANT HAS AN EXCLUSIVE TELEPHONE, LD CIT(A) HAS DELETED THE ADDITION. APPLYING THE SAME ANALOGY AND THE FACT THAT THE APPELLANT HAS SUBMITTED THAT THERE IS A SEPARAT E VEHICLE WHICH IS USED FOR PERSONAL PURPOSES WHICH IS NOT CONTROVERTED BY THE REVENUE, THE DISALLOWANCE OF CONVEYANCE EXPENSES IS HEREBY DELETED. 3.2 REGARDING DISALLOWANCE OF TRAVELLING EXPENSES, LD CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS 15,000 OUT OF TOTAL DISALLOW ANCE OF RS 25,000 DONE BY AO ON ACCOUNT OF PERSONAL ELEMENT IN TRAVEL AND CON VEYANCE EXPENSES. HOWEVER, THERE IS NOTHING ON RECORD TO SUGGEST WHIC H ALL EXPENSES/TRANSACTIONS ARE PERSONAL IN NATURE. IT I S CLEARLY A CASE OF ADHOC DISALLOWANCE WHICH CANNOT BE SUSTAINED IN EYE OF LA W. THE DISALLOWANCE TRAVELLING EXPENSES IS HEREBY DELETED. 3.3 REGARDING DISALLOWANCE OF RS 1,100 TOWARDS CONT RIBUTION TO PRIME MINISTER NATIONAL RELIEF FUND, THE AO IS DIRECTED T O ALLOW THE SAME AFTER VERIFYING THE DONATION RECEIPTS. 3.4 REGARDING DISALLOWANCE OF ESI AND EPF PAYMENTS AMOUNTING TO RS 973, THE SAME IS HEREBY DELETED AS THE PAYMENT HAS BEEN MADE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. 3.5 REGARDING DISALLOWANCE OF WELCOME EXPENSES OF R S 2764, THE APPELLANT HAS SUBMITTED THAT THE SAME RELATES TO REFRESHMENTS AND PURCHASE OF COLD DRINKS, SNACKS ETC FROM SMALL TIME VENDORS WHO DO N OT ISSUE BILLS. GIVEN THE NATURE OF EXPENDITURE AND APPELLANT EXPLANATION, TH E SAID DISALLOWANCE IS HEREBY DELETED. 3.6 THE GROUNDS OF APPEAL NO. 2 TO 6 ARE DECIDED AC CORDINGLY. 3.7 THE APPEAL IS ACCORDINGLY ALLOWED. ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 7 4. NOW WE TAKE UP APPELLANTS GROUNDS OF APPEAL FOR A.Y. 2006-07 WHEREIN THE APPELLANT HAS TAKEN FOLLOWING GROUNDS OF APPEAL : (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN CONFIRMING THE TRADING ADDITION OF RS.3,64,677/- MA DE BY THE AO. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN MAKING FURTHER ENHANCEMENT OF RS.15,220/- TO THE T RADING ADDITION BY RS. 15220/- MADE BY THE AO. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.20,000/- OUT OF T HE DISALLOWANCE OF RS. 35,458/- MADE BY THE AO ON A/C OF TRAVELLING EXPEN SES. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2434/- ON A/C OF STAFF AND LABOUR WELFARE EXPENSES MADE BY THE AO. (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2572/- ON ACCOUN T OF WELCOME EXPENSES MADE BY THE AO. (6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 5430/- ON ACCOUN T OF FACTORY AND MESS EXPENSES MADE BY THE AO. 3. REGARDING GROUND NO. 1 & 2, BRIEFLY STATED THE F ACTS OF THE CASE ARE THAT THE APPELLANT DECLARED GROSS PROFIT OF RS.75,52,496 /- ON THE TURNOVER OF RS.51,95,656/- RESULTING IN G.P. RATE OF 8.86% AS C OMPARED TO G.P. RATE OF 5.97% IN THE PRECEDING YEAR. DURING THE COURSE OF HEARING BEFORE AO, THE AO RAISED OBJECTIONS REGARDING PAYMENTS MADE TO LABOUR ERS ON THE BASIS OF MUSTER ROLL AND WAGE REGISTER IN WHICH FATHERS NA ME AND ADDRESSES OF LABOUR ARE NOT MENTIONED, NEITHER CLOSING STOCK NOR WORK IN PROGRESS HAS BEEN SHOWN, SOME OF VOUCHERS OF TRANSPORT EXPENSE ARE IN TERNAL VOUCHERS IN WHICH COMPLETE ADDRESS OF RECIPIENT IS NOT MENTIONED. APP ELLANT SUBMITTED WRITTEN REPLY ON 12.12.2008 BEFORE AO. THE AO DISREGARDED T HE CONTENTION OF THE APPELLANT AND INVOKED PROVISIONS OF SECTION 145(3) OF THE ACT AND APPLIED G.P. RATE OF 10% AND MADE A TRADING ADDITION OF RS. 3,64 ,677/-. ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 8 3.1 BEING AGGRIEVED, THE APPELLANT PREFERRED APPEAL BEFORE THE LD CIT(A). THE LD CIT(A) AT PAGE 17 OF HIS ORDER HAS OBSERVED AS UNDER: I HAVE GONE THROUGH ASSESSING OFFICERS FINDINGS AND ASSESSEES SUBMISSIONS. I HAVE ALSO GONE THROUGH VARIOUS DETA ILS AND IT WAS SEEN THAT IN RELATION TO CONTRACT RECEIPTS ADK, THE LAST BILL WA S RAISED IN NOVEMBER, 2005 BUT ASSESSEE HAS INCURRED EXPENSES OF RS. 4,57,897/ - IN JANUARY, 2006. MOREOVER NIL CLOSING STOCK WAS SHOWN. THE ASSESSEE CLAIMED THAT LABOUR BILLS OF SEPTEMBER AND OCTOBER, 2005 WERE PAID IN JANUARY , 2006. THE ASSESSEE WAS ASKED TO EXPLAIN HOW THE ASSESSEE TRACED THESE LAB OURERS FOR MAKING PAYMENT WHEN THE PROJECT WAS OVER AND LABOUR HAS ALREADY LE FT THE SITE. THE ASSESSEE WAS ALSO ASKED TO PRODUCE LABOUR REGISTER OF JANUAR Y 2006 IF THE SAME LABOURERS WERE WORKING ON OTHER SITE. THE ASSESSEE SHOWED ITS INABILITY TO DO SO. THE ASSESSEE WAS ALSO ASKED TO GIVE MINI MUM CA SH BALANCE FOR THE MONTH OF SEPTEMBER, OCTOBER, 2005. THE AR STATED THAT TH E SAME WAS AROUND RS. 78,000/- THEREFORE IT COULD BE CONCLUDED THAT ASSE SSEE MADE PAYMENT OF RS. 4,57,897/- TO THE LABOURERS IN THE MONTH OF SEPTE MBER, OCTOBER, 2005 BUT AS SUFFICIENT CASH WAS NOT AVAILABLE IN BOOKS IT WAS A CCOUNTED IN THE MONTH OF JANUARY, 2006. THE PAYMENT WAS PARTLY FROM UNACCOU NTED SOURCES (RS. 4,57,897/--RS.78,000 =3,79,897/- AND PARTLY FROM AV AILABLE CASH (RS.78,000/- CIT ISSUED NOTICE U/S 251(2) FOR ENHANCEMENT OF INC OME. 3.2 IN THIS REGARD, LD AR SUBMITTED THAT THE FIRST APPELLATE AUTHORITY HAS NOT NEGATED THE SUBMISSIONS OF THE APPELLANT DURING THE HEARING AND ALSO WRITTEN SUBMISSIONS . THE AO HAS NOT DISPUTED THE TRADING RECEIPTS BY THE APPELLANT AND CIT APPEAL HAS ALSO ACCEPTED THE EXPENSES/PAYM ENTS MADE TO THE LABOUR. THUS THERE IS NO DISPUTE REGARDING TRADING RESULT O R TRADING ADDITION. HOWEVER, CIT HAS MADE OUT A NEW CASE OF PAYMENTS MADE FROM U NACCOUNTED SOURCES AND HAS REITERATED ITS SUBMISSIONS MADE BEFORE LD C IT(A) AS UNDER: YOUR HONOUR HAS TRIED TO MAKE THE PROPOSED ENHANCEM ENT MERELY ON THE SUSPICION. PAYMENT TO LABOURERS IS BACKED BY ENTRIE S IN BOOKS OF ACCOUNT AND MUSTER ROLL SHEETS. THE AO HAS NOT GIVEN ANY FINDIN G THAT THESE MUSTER ROLL SHEETS ARE BOGUS. NO INQUIRY OR INVESTIGATION HAS B EEN MADE TO ESTABLISH WITH THE DOCUMENTARY EVIDENCE THE PAYMENT TO LABOURERS W ERE MADE ON EARLIER DATE THAN DISCLOSED IN THE BOOKS OF ACCOUNT AND THE RE WAS ALLEGED CASH DEFICIT WHICH WAS NOT SHOWN IN THE BOOKS OF ACCOUNT. THERE IS NO MATERIAL ON RECORD ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 9 TO PROVE THAT THE ASSESSEE HAS MADE PAYMENT OF RS. 4,57,897/- TO LABOURERS ON EARLIER DATE (I.E. IN THE MONTH OF OCTOBER 2005) TH AN AS DISCLOSED IN THE BOOKS OF ACCOUNT (I.E. FEBRUARY 2006). THERE IS NO FINDING OF THE AO ABOUT THE ALLEGED CAS H DEFICIT. THUS THERE IS NO MATERIAL ON RECORD TO FORM A REASONABLE BELIEF THAT THE ACTUAL PAYMENT TO THE LABOURERS HAVE BEEN MADE ON EARLIER DATE THAN AS DI SCLOSED IN THE BOOKS OF ACCOUNT AND THERE WAS A CASH DEFICIT OF RS. 4,57,89 7/- WHICH WAS ALLEGED TO HAVE BEEN MET FROM THE UNDISCLOSED SOURCES. IT IS T RUE THAT THE FIRST APPELLATE AUTHORITY CAN ENHANCE THE ASSESSMENT BUT HE HAS NO POWER TO ENHANCE THAT ASSESSMENT BY DISCOVERING THE NEW SOURCE OF INCOME. THERE IS NO WHISPER IN THE ENTIRE ASSESSMENT ORDER AND THE ASSESSMENT PROC EEDINGS ABOUT THE ALLEGED CASH DEFICIT. SIMILARLY THE ALLEGED CASH DEFICIT IS ALSO NOT A SUBJECT MATTER OF APPEAL. THUS THE ALLEGED CASH DEFICIT IS IN FACT AN ALLEGED UNDISCLOSED INVESTMENT WHICH IS A NEW ALLEGED SOURCE OF INCOME DISCOVERED BY YOU DE HORS THE MATERIAL ON RECORD. ACCORDINGLY NECESSARY JURIS DICTIONAL FACTORS AS REQUIRED UNDER SECTION 251(2) OF THE ACT BEING ABSENT, THERE IS NO JURISDICTION UNDER THE SAID SECTION TO ENHANCE THE ASSESSED INCOME AND IN SUPPORT, REFERENCE IS PLACED ON THE FOLLOWING JUDGEMENTS: CIT VS. ASSOCIATED GARMENTS MAKERS (1992) 197 ITR 3 50 (RAJ.) CIT VS. SARDARI LAL & CO.(2002) 120 TAXMAN 595 (DEL HI) CIT VS. UNION TYRES (1998) 240 ITR 556 (DELHI) CIT VS. SHAPOORJI MISTRY PALLONJI (1962) 44 ITR 89 1(SC) RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (1967) 66 IT R 443 (SC) ADDL.CIT VS. GUJARGARAVURES P. LTD. (1978) 111 ITR 1 (SC) CIT VS. NATIONAL COMPANY LTD. (1993) 199 ITR 445 (C AL.) ON MERITS IT IS ARGUED THAT LABOURERS WERE EMPLOYED ON RAILWAY SITES WERE THRU JAMADAR (LABOUR GROUP LEADER) WHO WAS ASSURED OF PA YMENT FROM THE ASSESSEE FIRM EVEN IF THERE WAS DELAY OF 4 MONTHS. THE SAME LABOURERS WERE EMPLOYED BY OUR SUB-CONTRACTOR DYNAMIC POLYTECH ENG INEERS PVT. LTD AFTER THE IMPUGNED SITE WAS OVER. THESE LABOURERS WERE DOING RAILWAY WORK AT OUR SUB- CONTRACTORS SITE AND AS SUCH THE GROUP LEADER (JAM ADAR) AS WELL AS THE LABOURERS WERE VERY MUCH ASSURED OF PAYMENT AND IN CASE OF DELAY THE ASSESSEE DID NOT HAVE TO GO TO EACH AND EVERY LABOU RER TO MAKE PAYMENT.THE ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 10 ASSESSEE FIRM JUST CALLED THE JAMADAR AND THE JAMAD AR CALLED THE LABOURERS, OBTAINED SIGNATURE OF THE LABOURERS ON MUSTER-ROLL SHEETS AND THUS PAYMENT WAS TO THE LABOURERS EVEN AFTER THE SITE WAS OVER. IT IS INCORRECT TO STATE THAT DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSE SSEE SHOWED ITS INABILITY TO EXPLAIN HOW THE ASSESSEE TRACED THESE LABOURERS FOR MAKING PAYMENT WHEN THE LABOURERS HAS ALREADY LEFT THE SITE. ON THE CONTRAR Y IT WAS VERY MUCH IN THE KNOWLEDGE OF THE ASSESSEE AS TO THE COMPLETE ADDRES SES OF THE LABOURERS AND JAMADAR AFTER THE SITE WAS OVER. AS SUCH IN VIEW OF THE FINANCIAL CRISIS OF THE ASSE SSEE FIRM, THE LATE PAYMENT MADE TO THE LABOURERS WAS ACCEPTED BY THEM AND THER E IS NOTHING UNUSUAL OR ABNORMAL IN THE DELAY OF 4 MONTHS IN MAKING PAYMENT TO THE LABOURERS PARTICULARLY WHEN THE SAME LABOURERS WERE WORKING A T THE SUB-CONTRACTORS SITE. 3.3 THE LD.CIT(A) HAS GIVEN HIS FINDING IN HIS APPE LLATE ORDER DATED 31.1.2014 AS UNDER: CONSIDERING THE ABOVE, I AM OF THE OPINION THAT AS SESSEE HAD ACTUALLY MADE THE PAYMENT IN SEPTEMBER, OCTOBER 2005 BUT TO AVOID NEGATIVE CASH BALANCE IT SHOWED THE SAME IN JANUARY, 2006. HOWEVER, I ACCEP T THE ALTERNATE PLEASE OF ASSESSEE THAT ADDITION SHOULD BE RESTRICTED TO NEGA TIVE CASH ONLY. THEREFORE, AN ADDITION OF RS. 3,64,677/- IS CONFIRMED WHICH RESUL TS INTO ENHANCEMENT OF RS. 15,220/-. THIS GROUND OF APPEAL IS DISMISSED. 3.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED U/S 145(3) OF THE ACT. THE AO THEREFORE IS REQUIRE D TO ANALYSE THE INFORMATION ON RECORD AND ARRIVE AT THE RESULTS DETERMINING THE PROFITS WHICH CAN BE BROUGHT TO TAX. THE ESTIMATION OF PROFITS SHOULD H AVE A RATIONAL BASIS WITH INFORMATION AVAILABLE ON RECORD AND CANNOT BE ADHOC OR ARBITRARY IN NATURE. IN THE INSTANT CASE, THE AO AFTER REJECTION OF BOOKS O F ACCOUNTS HAS ESTIMATED G.P RATE OF 10% AS AGAINST G.P RATE OF 8.86% DECLARED B Y THE APPELLANT. NOTHING HAS BEEN SAID OR BROUGHT ON RECORD TO SUGGEST THE B ASIS WHICH HAS BEEN USED TO ARRIVE AT THE G.P RATE OF 10%. CLEARLY, THERE I S NO LINKAGE OF SUCH ESTIMATION WITH THE ISSUES THAT HAS BEEN RAISED BY THE AO WHIL E REJECTING THE BOOKS OF ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 11 ACCOUNTS. THE ESTIMATION OF G.P RATE OF 10% THEREFO RE IS CLEARLY ADHOC AND ARBITRARY IN NATURE. THE LD CIT(A) WHILE DISPOSING OFF THIS GROUND HAS NOT DISPUTED THE SALES OR THE CORRESPONDING EXPENSES IN CURRED BY THE APPELLANT AND ACCORDINGLY, TRADITION ADDITIONS ON ACCOUNT OF INCREASE IN GP RATE FROM 8.86% TO 10% IS HEREBY DELETED. 3.5 NOW COMING TO GROUND RELATING TO ENHANCEMENT, L D CIT(A) HAS FOUND CERTAIN DISCREPANCIES IN TERMS OF PAYMENTS TO LABOU RERS FROM UNACCOUNTED SOURCES AND HAS CONFIRMED AN ADDITION OF RS 3,79,89 7. IN THIS REGARD, LD AR HAS SUBMITTED THAT THERE IS NO FINDING OF THE AO ABOUT THE ALLEGED CASH DEFICIT AND THERE IS NO MATERIAL ON RECORD TO FORM A REASONABLE BELIEF THAT THE ACTUAL PAYMENT TO THE LABOURERS HAVE BEEN MADE ON EARLIER DATE THAN AS DISCLOSED IN THE BOOKS OF ACCOUNT AND THERE WAS A CASH DEFICIT O F RS. 4,57,897/- WHICH WAS ALLEGED TO HAVE BEEN MET FROM THE UNDISCLOSED SOURC ES. LD AR FURTHER SUBMITTED THAT THOUGH IT IS TRUE THAT THE FIRST APP ELLATE AUTHORITY CAN ENHANCE THE ASSESSMENT BUT HE HAS NO POWER TO ENHANCE THAT ASSESSMENT BY DISCOVERING THE NEW SOURCE OF INCOME. THERE IS NO W HISPER IN THE ENTIRE ASSESSMENT ORDER AND THE ASSESSMENT PROCEEDINGS ABO UT THE ALLEGED CASH DEFICIT. SIMILARLY THE ALLEGED CASH DEFICIT IS ALSO NOT A SUBJECT MATTER OF APPEAL. THUS THE ALLEGED CASH DEFICIT IS IN FACT AN ALLEGED UNDISCLOSED INVESTMENT WHICH IS A NEW ALLEGED SOURCE OF INCOME DISCOVERED BY LD CIT(A) DE HORS THE MATERIAL ON RECORD. ACCORDINGLY NECESSARY JURISDICTIONAL FAC TORS AS REQUIRED UNDER SECTION 251(2) OF THE ACT BEING ABSENT, THERE IS NO JURISDICTION UNDER THE SAID SECTION TO ENHANCE THE ASSESSED INCOME. 3.6 OUR ATTENTION WAS DRAWN TO THE DECISION OF COMMISSIONER OF INCOME-TAX V. ASSOCIATED GARMENTS MAKERS [1992] 64 TAXMAN 215 (RAJASTHAN) WHERE THE ISSUE BEFORE THE HONBLE HIGH COURT OF RAJASTHAN WA S WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TH E TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE AAC HAD WRONGLY ISSUED NOTICES FOR ENHANCEMENT OF INCOME ON NEW ITEMS OR SOURCES OF INCOME. THE HONBLE HIG H COURT HAS HELD AS UNDER: 7. APPEALS ARE PROVIDED UNDER SECTION 246 OF THE A CT BEFORE THE AAC AND THE COMMISSIONER (APPEALS). THESE APPEALS ARE BY THE AS SESSEE AGGRIEVED BY THE ORDERS MENTIONED THEREIN. ANY ORDER MADE UNDER SECT ION 143(3) IS APPEALABLE AND THE POWERS OF THE APPELLATE COURT ARE PROVIDED IN SECTION 251 OF THE ACT ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 12 WHEREIN APPELLATE AUTHORITY HAS POWER TO CONFIRM, R EDUCE, ENHANCE OR ANNUL THE ASSESSMENT OR HE MAY SET ASIDE THE ASSESSMENT A ND REFER THE CASE BACK TO THE ITO FOR MAKING FRESH ASSESSMENT IN ACCORDANCE W ITH DIRECTIONS GIVEN IN APPEAL AND AFTER MAKING SUCH FURTHER ENQUIRY AS MAY BE NECESSARY. THESE POWERS ARE, INTER ALIA, MENTIONED IN THE OTHER POWE RS. ACCORDING TO SUB-SECTION (2) OF SECTION 251, THE AAC HAS NO POWER TO ENHANCE ASSESSMENT OR A PENALTY, OR REDUCE THE AMOUNT OR REFUND UNLESS THE APPELLANT HAS A REASONABLE OPPORTUNITY FOR SHOWING CAUSE AGAINST SUCH ENHANCEM ENT OR REDUCTION. AN EXPLANATION HAS BEEN PROVIDED ACCORDING TO WHICH TH E AAC MAY CONSIDER AND DECIDE ANY MATTER ARISING OUT OF THE PROCEEDINGS IN WHICH THE ORDER APPEALED AGAINST WAS PASSED, NOTWITHSTANDING THE FACT THAT S UCH MATTER WAS NOT RAISED BEFORE HIM. A PERUSAL OF SECTIONS 246 TO 251 OF THE ACT MAKES IT CLEAR THAT ANY QUESTIONS ARISING OUT OF THE ASSESSMENT ORDERS IN A N APPEAL BY THE ASSESSEE CAN BE POSSIBLE AND WIDE POWERS ARE GIVEN TO THE APPELL ATE AUTHORITY, BUT THESE POWERS ARE CIRCUMSCRIBED BY THE ASSESSMENT ORDER IN THE MATTERS ARISING THEREOF OR A MATTER ARISING OUT OF THE PROCEEDINGS. EVEN THE APPELLATE AUTHORITY HAS SUO MOTU POWER TO CONSIDER THE QUESTIONS ARISIN G THEREOF BUT THERE IS NO PROVISION TO GO BEYOND THE MATTER ARISING OUT OF TH E PROCEEDINGS BEFORE THE ASSESSING AUTHORITY, MORE PARTICULARLY AS SEPARATE PROVISIONS FOR THAT ARE MADE IN THE ACT. THE TRIBUNAL HAS ELABORATELY DISCUSSED THE PROVISIONS OF THE ACT AND THE CASE LAW ON THE SUBJECT AND HAS RIGHTLY COME TO THE CONCLUSION THAT NEW SOURCES NOT MENTIONED IN THE RETURN OR CONSIDERED B Y THE ITO ARE BEYOND THE SCOPE OF POWERS OF THE AAC. THE CASE RELIED ON BY T HE LEARNED COUNSEL FOR THE PETITIONER ABOUT THE POWER OF SETTING ASIDE THE ASS ESSMENT ORDER REMANDING THE CASE FOR RE-CONSIDERATION OF THE WHOLE MATTER I NCLUDING THE EVASION BY THE ASSESSEE, IS NOT APPLICABLE TO THE FACTS OF THE PRE SENT CASE BECAUSE THE MATTER ARISING IN THAT CASE WAS ONE WHICH AROSE OUT OF THE PROCEEDINGS BEFORE THE ITO. THE QUESTION WAS NOT ABOUT NEW AND FRESH MATERIAL F OR THE PURPOSES OF ENHANCEMENT. ON THE CONTRARY, THE CASE IS CLEARLY C OVERED BY THE DECISIONS OF THE SUPREME COURT IN CIT V. SHAPOORJI PALLONJI MIST RYS CASE (SUPRA) WHEREIN IT HAS BEEN HELD THAT, IN AN APPEAL FILED BY THE ASSE SSEE THE APPELLATE ASSISTANT COMMISSIONER HAS NO POWER TO ENHANCE THE ASSESSMENT BY DISCOVERING NEW SOURCES OF INCOME NOT MENTIONED IN THE RETURN OF TH E ASSESSEE OR CONSIDERED BY THE INCOME-TAX OFFICER IN THE ORDER APPEALED AGAINS T, AND IN THE CASE OF RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (SUPRA) WHEREIN IT HAS BEEN HELD THAT, IT ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 13 IS NOT THEREFORE OPEN TO THE APPELLATE ASSISTANT CO MMISSIONER TO TRAVEL OUTSIDE THE RECORD, I.E., THE RETURN MADE BY THE ASSESSEE O R THE ASSESSMENT ORDER OF THE INCOME-TAX OFFICER, WITH A VIEW TO FINDING OUT NEW SOURCES OF INCOME AND THE POWER OF ENHANCEMENT UNDER SECTION 31(3) IS RESTRIC TED TO THE SOURCES OF INCOME WHICH HAVE BEEN THE SUBJECT-MATTER OF CONSID ERATION BY THE INCOME-TAX OFFICER FROM THE POINT OF VIEW OF TAXABILITY. THEI R LORDSHIPS CONSIDERED THE MEANING OF THE WORD CONSIDERATION AND HELD THAT, CONSIDERATION DOES NOT MEAN INCIDENTAL OR COLLATERAL EXAMINATION OF AN Y 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 OFFICE R 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. IN THE INSTANT CASE, THE AAC HAD HIMSELF, AFTER ISSUING NO TICE, CONSIDERED THE NEW MATERIAL AND HAD GONE INTO NEW SOURCES OF INCOME FO R THE CONSIDERATION OF WHICH HE HAD NO JURISDICTION. 3.7 OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF COMMISSIONER OF INCOME-TAX V. UNION TYRES [1999] 107 TAXMAN 447 (DE LHI) , WHERE BRIEFLY THE FACTS OF THE CASE BEFORE THE HONBLE HIGH COURT WAS THAT IN HIS RETURN FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE DECLARED A L OSS WHICH WAS COMPUTED BY APPLYING THE RATE OF GROSS PROFIT AT THE RATE OF 0. 9 PER CENT ON THE TOTAL SALES. THE ASSESSING OFFICER ESTIMATED THE SALES AT AN ENH ANCED FIGURE AND BY APPLYING A GROSS PROFIT RATE OF 3.5 PER CENT, HE MA DE CERTAIN ADDITION TO THE DECLARED LOSS. ON APPEAL, THE AAC HAD DOUBTS ABOUT THE CAPACITY OF THE ASSESSEE TO RAISE FINANCES FOR THE PURCHASE OF GOOD S AND SHOW A HUGE TURNOVER IN THE VERY FIRST YEAR OF HIS BUSINESS. ACCORDINGLY , HE DIRECTED THE ASSESSING OFFICER TO SUBMIT A REPORT, INTER ALIA, ON THE POIN TS : (1) FULL AND COMPLETE ANTECEDENTS OF THE ASSESSEE, (2) SOURCE OF INVESTME NT MADE IN THE PURCHASE OF GOODS, (3) THE BUSINESS CONNECTION OF THE ASSESSEE WITH ANY BUSINESS/BUSINESSES CARRIED ON BY THE ASSESSEES CL OSE RELATIVES, AND (4) A BANK RECONCILIATION STATEMENT TO BE OBTAINED. THE TRIBUN AL HELD THAT IN CALLING FOR THE REMAND REPORT IN RESPECT OF AFORENOTED FOUR POI NTS, THE AAC HAD TRAVELLED BEYOND HIS POWERS INASMUCH AS IT HAD THE EFFECT OF DIRECTING THE ASSESSING OFFICER TO MAKE THE ASSESSMENT ON AN ENTIRELY NEW F OOTING. THE TRIBUNAL DISMISSED THE REVENUES APPLICATION UNDER SECTION 2 56(1). IN THE CONTEXT OF ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 14 ABOVE FACTS, THE HONBLE HIGH COURT AFTER REFERRING TO DECISIONS IN CASE OF CIT V. SHAPOORJI PALLONJI MISTRY [1962] 44 ITR 891 (SC), CIT V. KANPUR COAL SYNDICATE [1964] 53 ITR 225, CIT V. RAI BAHADUR HARDUTROY MOT ILAL CHAMARIA [1967] 66 ITR 443, JUTE CORPN. OF INDIA LTD. V. CIT [1991] 187 I TR 688 /[1990] 53 TAXMAN 85 (SC), CIT V. NIRBHERAM DALURAM [1977] 224 ITR 610/ 91 TAXMAN 181 HAS HELD THAT THE PRINCIPLE OF LAW LAID DOWN IN SHAPOORJI PA LLONJI MISTRYS CASE (SUPRA) AND RAI BAHADUR HARDUTROY MOTILAL CHAMARIAS CASE ( SUPRA ) STILL HOLDS THE FIELD AND THE RELEVANT FINDINGS ARE AS UNDER: 12. THUS, THE PRINCIPLE EMERGING FROM THE AFORENOT ED PRONOUNCEMENTS OF THE SUPREME COURT IS, THAT THE FIRST APPELLATE AUTHORIT Y IS INVESTED WITH VERY WIDE POWERS UNDER SECTION 251(1)(A) AND ONCE AN ASSESSME NT ORDER IS BROUGHT BEFORE THE AUTHORITY, HIS COMPETENCE IS NOT RESTRIC TED TO EXAMINING ONLY THOSE ASPECTS OF THE ASSESSMENT ABOUT WHICH THE ASSESSEE MAKE A GRIEVANCE AND RANGES OVER THE WHOLE ASSESSMENT TO CORRECT THE ASS ESSING 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 THE ASSES SING OFFICER AND DETERMINED IN THE COURSE OF ASSESSMENT. HOWEVER, TH ERE IS A SOLITARY BUT SIGNIFICANT LIMITATION TO THE POWER OF REVISION, VI Z., THAT IT IS NOT OPEN TO THE COMMISSIONER TO INTRODUCE IN THE ASSESSMENT A NEW S OURCE OF INCOME AND THE ASSESSMENT HAS TO BE CONFINED TO THOSE ITEMS OF INC OME WHICH WERE THE SUBJECT-MATTER OF ORIGINAL ASSESSMENT. 13. APPLYING THE ABOVE WELL-SETTLED PRINCIPLES OF L AW TO THE FACTS OF THE INSTANT CASE, WE ARE OF THE VIEW THAT THE TRIBUNAL WAS JUST IFIED IN HOLDING THAT IN CALLING FOR A REMAND REPORT ON THE AFORENOTED FOUR POINTS, THE COMMISSIONER HAD EXCEEDED HIS JURISDICTION. WHILE COMPUTING THE TOTA L BUSINESS INCOME OF THE ASSESSEE, THE ASSESSING OFFICER HAD ESTIMATED THE S ALES AT AN ENHANCED FIGURE AND HAD APPLIED A HIGHER RATE OF GROSS PROFIT. THUS , THE ONLY MATTER DEALT WITH BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WA S THE ESTIMATION OF PROFITS AND GAIN OF THE BUSINESS OF THE ASSESSEE. NONE OF T HE AFORENOTED FOUR POINTS HAD ANY BEARING ON THE QUESTION OF ESTIMATION OF EI THER 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 T HE ASSESSEE TO RAISE FINANCES FOR THE PURCHASE OF GOODS AND SHOW A HUGE TURNOVER IN THE VERY FIRST ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 15 YEAR OF HIS BUSINESS. IN OTHER WORDS, THE ENQUIRY O RDERED BY THE COMMISSIONER WAS TO SATISFY HIMSELF ABOUT THE SOURCE OF INVESTME NT BY THE ASSESSEE. IT IS AXIOMATIC THAT FAILURE TO PROVE THE SOURCES OF INVE STMENT WILL RESULT IN ADDITION IN THE HANDS OF THE ASSESSEE UNDER A DIFFERENT PROV ISION 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 CONSTITUTE A NEW SOURCE OF INCOME WHICH WAS NOT THE SUBJECT-MATTER OF ASSESSMENT BEFORE THE ASSESSING O FFICER AND, THEREFORE, IT WAS NOT OPEN TO THE FIRST APPELLATE AUTHORITY TO DI RECT THE ASSESSING OFFICER TO CONDUCT ENQUIRY ON THE SAID FOUR POINTS. 3.8 IN OUR VIEW, THE FACTS OF THE CASE ARE PARI-MAT ERIA WITH THE FACTS OF THE CASE FROM THE HONBLE DELHI COURT IN CASE OF UNION TYRES (SUPRA) AND THE PRINCIPLES LAID DOWN THEREIN REGARDING THE POWERS O F ENHANCEMENT VESTED IN LD CIT(A) ARE CLEARLY APPLICABLE IN THE INSTANT CASE. IN THE INSTANT CASE, THE ISSUE BEFORE THE LD CIT(A) WAS ESTIMATION OF PROFITS AFTE R REJECTION OF BOOKS OF ACCOUNTS AND NOT THE ISSUE REGARDING CASH DEFICIT O F RS. 4,57,897/- AND LABOUR EXPENDITURE MET FROM THE UNDISCLOSED SOURCES. THER E HAS BEEN NO MATERIAL OR DISCUSSIONS REGARDING CASH DEFICIT IN THE HANDS OF THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD CIT(A) WH ILE EXAMINING THE MATTER HAS DISCOVERED CERTAIN DISCREPANCIES AND HAS STATED THAT PAYMENT TO LABOURERS HAVE BEEN MADE FROM UNDISCLOSED SOURCES. IN OUR VI EW, IT IS CLEARLY A CASE OF BRINGING TO TAX A NEW SOURCE OF INCOME BY WAY OF UN EXPLAINED INVESTMENT UNDER A DIFFERENT TAXING PROVISION WHICH WAS NOT PR EVALENT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. IN ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND IN LIGHT OF PRINCIPLES LAID DOWN BY HONBLE DELHI HIGH COURT AS WELL AS HONBLE RAJASTHAN HIGH COURT WHICH HAVE DULY CONSIDERED THE EARLIER DECISIONS OF HONBLE SUPREME COURT IN CASE OF SHAPOORJI PALLONJI MISTRY, KANPUR COAL SYND ICATE, BAHADUR HARDUTROY MOTILAL CHAMARIA, JUTE CORPN. OF INDIA LTD, WE ARE OF THE VIEW THAT LD CIT(A) HAS EXCEEDED HIS JURISDICTION OF DISCOVERING AND TAXING A NEW SOURCE OF INCOME IN THE HANDS OF THE APPELLANT. ACCORDINGLY, THE APPEL LANT DESERVE TO SUCCEED AND THE GROUND OF APPEAL IS ALLOWED. ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 16 3.9 IN RESULT, GROUND NO. 1 AND 2 ARE DECIDED IN F AVOUR OF THE APPELLANT. 4. NOW COMING TO GROUND NO. 3 TO 6 WHICH RELATE TO DISALLOWANCES OF VARIOUS EXPENSES, THE APPELLANT HAS SUBMITTED THAT THE EXPENSES INCURRED ARE GENUINE AND REASONABLE LOOKING TO THE NATURE AND QU ANTUM OF BUSINESS. LEARNED LOWER AUTHORITIES HAVE DISALLOWED PART OF E XPENSES WITHOUT PROPER BASIS AND JUSTIFICATION. IN THIS REGARD DETAILED S UBMISSIONS, EXPLANATION AND DOCUMENTS ARE CONTAINED IN PAPER BOOK PAGES 12 TO 1 5 AND PAGES 26 TO 64 WHICH MAY PLEASE BE CONSIDERED. THE DISALLOWANCE M ADE DESERVES TO BE DELETED AND ALL THE EXPENSES DESERVE TO BE ALLOWED. 4.1 REGARDING DISALLOWANCE OF TRAVELLING EXPENSES, THE LD CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS 20,000 OUT OF TOTA L DISALLOWANCE OF RS 35,458 DONE BY AO ON ACCOUNT OF NON-VERIFIABILITY OF THE S AID EXPENSES. HOWEVER, THERE IS NOTHING ON RECORD TO SUGGEST WHICH ALL EXP ENSES/TRANSACTIONS ARE NOT VERIFIABLE OR BOGUS IN NATURE. IT IS CLEARLY A CAS E OF ADHOC DISALLOWANCE WHICH CANNOT BE SUSTAINED IN EYE OF LAW. THE DISALLOWANC E TRAVELLING EXPENSES IS HEREBY DELETED. 4.2 REGARDING DISALLOWANCE OF STAFF AND LABOUR WELF ARE EXPENSES OF RS 2434, IT IS AGAIN A CASE OF ADHOC DISALLOWANCE WHICH IS H EREBY DELETED. 4.3 REGARDING DISALLOWANCE OF WELCOME EXPENSES OF R S 2572, THE APPELLANT HAS SUBMITTED THAT THE SAME RELATES TO REFRESHMENTS AND PURCHASE OF COLD DRINKS, SNACKS ETC FROM SMALL TIME VENDORS WHO DO N OT ISSUE BILLS. GIVEN THE NATURE OF EXPENDITURE AND APPELLANT EXPLANATION, TH E SAID DISALLOWANCE IS HEREBY DELETED. 4.4 REGARDING DISALLOWANCE OF RS. 5430 ON ACCOUNT O F FACTORY AND MESS EXPENSES IT IS AGAIN A CASE OF ADHOC DISALLOWANCE W HICH IS HEREBY DELETED. ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 17 4.5 THE GROUNDS OF APPEAL NO 3 TO 6 ARE DECIDED ACC ORDINGLY IN THE RESULT THE APPEAL FILED BY THE APPELLANT IS ALLOWED FOR BOTH THE YEARS. ORDER PRONOUNCED IN THE OPEN COURT ON /04/ 2016. ( LALIET KUMAR ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- / 04 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S DYNAMIC ENGINEERS, KOTA 2. THE RESPONDENT-THE DCIT, CIRCLE-1, KOTA 3. THE CIT(A) KOTA 4. THE CIT KOTA 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO.268 & 269 /JP/14) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR