MANMOHANSINGH S. RANAWAT, MUMBAI V. INCOME TAX OFFICER-2(5), Thane

ITA 5393/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2203 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 21-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Unexplained investment; Source of fund; Set aside
• Section: 37(1); 251; 68; 69; 148; 144; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.5393/M/2017 ASSESSMENT YEAR: 2012-13 MR. MANMOHAN SINGH S. RANAWAT, SHAKTI VIHAR BUNGLOW, RAMDEV PARK ROAD, NEAR SUBHASH NAGAR, MIRA ROAD (EAST), THANE - 401105 PAN: AAPPR2432L VS. INCOME TAX OFFICER-2(5), ROOM NO.16, B WING, 6 TH FLOOR, ASHAR IT PARK, WAGLE INDUSTRIAL ESTATE, ROAD NO.16-Z, THANE-400 604 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PRAKASH JHUNJHUNWALA, A.R. REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 06.06.2019 DATE OF PRONOUNCEMENT : 26.06.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 25.05.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN MAKING THE ENHANCEMENT OF INCOME U/S.251(1)(A) IN R ESPECT OF NEW SOURCE OF INCOME OF RS.1,32,78,592/- ON IGNORING THE FACT THA T SUCH MATTERS WERE NOT ARISING OUT OF THE PROCEEDINGS OF THE APPEALED ORDER; 2.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN ENHANCING THE INCOME ON MAKING THE ADDITION OF A NE W SOURCE OF INCOME U/S 68 OF UNSECURED LOANS OF RS.37,80,000/-; ITA NO.5393/M/2017 MR. MANMOHAN SINGH S. RANAWAT 2 3.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN ENHANCING THE INCOME ON MAKING THE ADDITION OF A NE W SOURCE OF INCOME U/S 41(1) OF THE OPENING-BALANCE OF THE ADVANCES RECEIVED AGA INST SALE OF LANDS OF RS.51,90,000/- AND U/S 68 OF THE ADVANCE RECEIVED A GAINST SALE OF LAND OF RS.9,70,000/- TOTALING TO RS.61,60,000/-; 4.0 ON FACTS AND CIRCUMSTANCES OF THE 'CASE AND IN LAW, LD. CIT(A) ERRED IN ENHANCING THE INCOME ON MAKING THE ADDITION OF A NE W SOURCE OF INCOME U/S 41(1) OF THE OPENING BALANCE OF SUNDRY CREDITORS OF RS.10 ,59,558/-; 5.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(A) ERRED IN ENHANCING THE INCOME ON MAKING THE ADDITION OF A NE W SOURCE OF INCOME U/S 41(1) OF PROVISION FOR EXPENSE OF RS.19,19,610/-; 6.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN ENHANCING THE INCOME ON MAKING THE ADDITION OF A NE W SOURCE OF INCOME OF DIFFERENCE IN BALANCE IN CAPITAL ACCOUNT OF RS.2,00 ,000/-; 7.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN ENHANCING THE INCOME ON MAKING THE DISALLOWANCE OF A NEW SOURCE OF INCOME U/S 37(1) OF MEMBERSHIP FEES PAID OF RS. 1,59,424/-. 8.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, LD. CIT(A) ERRED IN CONFIRMING THE ADDITION U/S 68 OF RS.63,63,280/- IN RESPECT OF CASH DEPOSITS MADE IN BANK ACCOUNT SOURCED OUT OF :- A) CONTRACT RECEIPTS CREDITED TO P & L A/C RS. 1 5,69,800/- B) RECOVERIES FROM OLD DEBTORS/ADVANCE RS. 9,53 ,480/- C) UNSECURED LOANS RS.38,40,000/- 8.1 THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION U/S 68 OF CASH DEPOSITS OF RS.63,63,280/- ON IGNORING THE FAVOURABLE REMAND RE PORT OF LD. AO AND DOCUMENTARY EVIDENCED FILED ON RECORD. 3. THE SOLE ISSUE IN GROUND NO.1 TO 7 IS AGAINST TH E ORDER OF LD. CIT(A) MAKING ENHANCEMENT OF INCOME UNDER SECTI ON 251(1)(A) OF THE ACT IN RESPECT OF NEW SOURCES OF I NCOME OF RS.1,32,78,592/- BY IGNORING THE FACT THAT THE ITEM OF ADDITIONS ARE NOT ARISING OUT OF THE ASSESSMENT ORDER AND CON STITUTED ALTOGETHER NEW SOURCES OF INCOME. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT IN TH IS CASE WAS FRAMED BY THE AO VIDE ORDER DATED 25.03.2015 PASSED UNDER ITA NO.5393/M/2017 MR. MANMOHAN SINGH S. RANAWAT 3 SECTION 144 OF THE ACT WHEREIN 4 ADDITIONS WERE MAD E TO THE INCOME OF THE ASSESSEE AS UNDER:- A. UNEXPLAINED CASH DEPOSITS OF RS.66,43,500/- B. UNEXPLAINED INVESTMENTS UNDER SECTION 69 OF RS.52,15,000/- C. UNEXPLAINED INVESTMENTS UNDER SECTION 69 OF RS.22,17,300/-. D. SHORT TERM CAPITAL GAIN OF RS.23,44,000/-. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) BY EXERCISING THE POWERS UNDER SECTION 251(1)(A) OF THE ACT ENHAN CED THE INCOME BY RS.1,32,78,592/- WHICH WERE FROM NEW SOU RCES OF INCOME AND WERE NOT APPEARING OR REFERRED TO OR DI SCUSSED BY THE AO IN THE ASSESSMENT ORDER. THE FIRST ADDITION MADE BY THE LD. CIT(A) WAS IN RESPECT OF LOANS OF RS.37,80,000 /-. ACCORDING TO THE LD. CIT(A) THE ASSESSEE DID NOT FURNISH ANY DETAIL EXCEPT STATING THAT MONEY WAS RECEIVED BY ACCOUNT PAYEE CH EQUE AND DIRECTED THE AO TO ADD THE SAME TO THE INCOME OF TH E ASSESSEE UNDER SECTION 68 OF THE ACT AS THE ASSESSEE FAILED TO OFFER ANY EXPLANATION ABOUT THE NATURE AND SOURCE OF THE SAME AS CREDITED IN THE BOOKS OF ACCOUNT. SIMILARLY, THE LD. CIT(A) ENHANCED THE INCOME BY RS.61,60,000/- TOWARDS ADVANCE RECEIVED AGAINST SALE OF LAND. OUT OF THE SAID AMOUNT RS.51,90,000/ - WAS RECEIVED IN THE EARLIER YEAR WHEREAS RS.9,70,000/- WAS RECEIVED DURING THE YEAR. THE LD. CIT(A) DIRECTED THE SAME TO BE ADDED UNDER SECTION 68 OF THE ACT AS THE ASSESSEE WAS NOT HAVING THE DETAILS OF THE PERSONS FROM WHOM THE ADVANCES WERE RECEIVED. SIMILARLY, RS.51,90,000/- WHICH WAS RECEIVED IN THE EARLIER YEAR AGAINST SALE OF LAND COULD NOT BE EXPLAINED BY THE ASSESSEE AND SAME WAS ADDED TO THE INCOME OF THE ASSESSEE AS BOG US LIABILITY OR CEASED LIABILITY U/S 41(1) OF THE ACT BY OBSER VING THAT SAME IS REQUIRED TO BE ENHANCED UNDER SECTION 251(2) OF THE ACT. ITA NO.5393/M/2017 MR. MANMOHAN SINGH S. RANAWAT 4 SIMILARLY, THE ADDITIONS OF RS.10,59,558/- AND RS.1 9,19,610/- WERE MADE ON ACCOUNT OF NON EXISTENT SUNDRY CREDITO RS UNDER SECTION 41(1) AND PROVISIONS FOR EXPENSES UNDER SEC TION 41(1) RESPECTIVELY. THE LD. CIT(A) HAS ALSO ADDED RS. 2, 00,000/- ON ACCOUNT OF DIFFERENCE IN LABOUR CHARGES WHICH WERE STATED TO BE WRONGED CHARGED IN THE PROFIT AND LOSS A/C RESULTIN G IN UNDERSTATEMENT OF PROFITS BY RS.2 LAKHS AND DISALLO WANCE OF MEMBERSHIP FEE OF RS.1,59,424/- AS BEING PERSONAL I N NATURE. 6. THE LD. A.R. VEHEMENTLY ARGUED BEFORE US THAT LD . CIT(A) HAS MADE THE ADDITIONS IN RESPECT OF NEW SOURCES OF INCOME/NEW ITEMS ALTOGETHER WHICH WERE NOT DISCUSSED OR APPEAR ED IN THE ASSESSMENT ORDER AND IT IS NOT OPEN TO LD. CIT(A) T O MAKE ANY ADDITION WHICH IS NOT ARISING OUT OF THE SOURCES/AD DITIONS AS DISCUSSED/REFERRED IN THE ASSESSMENT ORDER. IN DEF ENCE OF HIS ARGUMENTS THE LD. A.R. RELIED ON THE FOLLOWING DECI SIONS: 1. CIT VS. SARDARI LAL & CO. 251 ITR 864 (DEL-HC) 2. CIT VS. B.P. SHERAFUDIN 87 TAXMANN.COM 330 (KER- HC) 3. CIT VS. UNION TYRES 240 ITR 556 (DEL-HC) 4. CIT VS. NIRBHERAM DALURAM 5 TAXMAN 84 (MP-HC) 5. CIT VS. ASSOCIATED GARMENTS MAKERS 64TAXMAN215(RAJ- HC) 6. CIT VS. SHAPOORJI PALLONJI MISTRY 44 ITR 891 (SC ) (DECISION OF BOM-HC (344 ITR 342) 7. CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA 6 6 ITR 443 (SC) 8. ZUBERI ENGINNERING COMPANY VS. DCIT 103 TAXMANN. COM 196 (JAIPUR-ITAT) 9. GURINDER MOHAN SINGH NINDRAJOG VS. CIT 348 ITR 1 70 (DEL-HC) 7. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF LD. CIT(A) BY SUBMITTING THAT THE AO HAS FRAMED ASSESSMENT UNDER SECTION 144 OF THE ACT AND THERE WAS NO OCCAS ION TO DISCUSS AND INVESTIGATE THE VARIOUS ITEMS OF ADDITI ONS OR SOURCES OF INCOME DURING THE ASSESSMENT PROCEEDINGS AND THU S JUSTIFIED ITA NO.5393/M/2017 MR. MANMOHAN SINGH S. RANAWAT 5 THE ORDER PASSED BY THE LD. CIT(A) WHEREBY THE LD. CIT(A) ENHANCED THE INCOME BY RS.1,32,78,592/- ON VARIOUS ACCOUNTS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE AS SESSMENT ORDER, APPELLATE ORDER AND VARIOUS CASE LAWS RELIED UPON BY THE LD. A.R. WE OBSERVE THAT LD. CIT(A) HAS MADE/ENHAN CED THE INCOME BY RS.1,32,78,592/-. WE HAVE PERUSED THE OR DER OF AO CAREFULLY AND OBSERVED THAT NOWHERE IN THE ASSESSME NT ORDER THE NATURE OF ADDITIONS/SOURCES OF INCOME OF ADDITIONS AS MADE BY THE LD. CIT(A) WERE DISCUSSED OR REFERRED TO BY THE AO. THUS ALL THESE ADDITIONS WERE MADE ALTOGETHER ON NEW ITEMS O R NEW SOURCES OF INCOME WHICH IN OUR OPINION IS BEYOND TH E JURISDICTION OF THE LD. CIT(A). IN THE CASE OF CIT VS. SARDARI LAL & CO. (SUPRA) IT HAS BEEN HELD THAT WHENEVER THE QU ESTION OF TAXABILITY OF INCOME FROM NEW SOURCE OF INCOME IS C ONCERNED, WHICH HAD NOT BEEN CONSIDERED BY THE AO, THE JURISD ICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEAL T WITH UNDER SECTION 147/148 AND 263 OF THE ACT IF REQUISITE CO NDITIONS ARE FULFILLED. THUS THE HONBLE DELHI HIGH COURT HAS H ELD THAT THE FIRST APPELLATE AUTHORITY HAS NO POWER TO ENHANCE T HE ASSESSMENT BY DISCOVERING A NEW SOURCE OF INCOME NO T CONSIDERED BY THE AO IN THE ORDER APPEALED AGAINST. IN THE CASE OF CIT VS. B.P. SHERAFUDIN (SUPRA) THE HONBLE KERA LA HIGH COURT HAS HELD THAT POWERS UNDER SECTION 251 ARE VERY WID E BUT DO NOT GO TO THE EXTENT OF DISPLACING THE POWER SAY UNDER SECTION 147, 148 & 263 OF THE ACT. IN THE SAID DECISION, THE HO NBLE KERALA HIGH COURT HAS CONSIDERED THE DECISION IN THE CASE OF CIT VS. SARDARI LAL & CO. (SUPRA) AND CIT VS. UNION TYRES ( SUPRA) AND HELD THAT IT IS NOT OPEN TO THE APPELLATE COMMISSIO NER TO ITA NO.5393/M/2017 MR. MANMOHAN SINGH S. RANAWAT 6 INTRODUCE IN THE ASSESSMENT A NEW SOURCE OF INCOME AND ASSESSMENT MUST BE CONFINED TO THOSE ITEMS OF INCOM E WHICH WERE SUBJECT MATTER OF ORIGINAL ASSESSMENT. IN THE CASE OF CIT VS. UNION TYRES (SUPRA) THE HONBLE DELHI HIGH COUR T HAS HELD THAT FIRST APPELLATE AUTHORITY IS VESTED WITH VIDE POWERS UNDER SECTION 251(1) OF THE ACT. HOWEVER, THERE IS A SOL ITARY BUT SIGNIFICANT LIMITATION TO THE POWERS OF REVISION VI Z. THAT IT IS NOT OPEN TO AAC TO INTRODUCE IN THE ASSESSMENT A NEW SO URCE OF INCOME AND THE ASSESSMENT HAS TO BE CONFINED TO THO SE ITEMS OF INCOME WHICH WERE SUBJECT MATTER OF ORIGINAL ASSESS MENT. IN THE CASE OF CIT VS. NIRBHERAM DALURAM (SUPRA) THE HONB LE MADHYA PRADESH HIGH COURT HAS HELD THAT IT IS NOT OPEN TO THE AAC IN THE APPELLATE PROCEEDINGS TO CONSIDER NEW SOURCE OF INCOME AND TO ASSESS THE SAME. IT IS ABUNDANTLY CLEAR FROM TH E RATIO LAID DOWN IN THE VARIOUS DECISIONS THAT IT IS NOT OPEN TO THE FIRST APPELLATE AUTHORITY TO ENHANCE THE INCOME ON ALTOGE THER NEW SOURCE OF INCOME ON ITEMS WHICH ARE NOT SUBJECT MAT TER OF THE ASSESSMENT PROCEEDINGS. WE, THEREFORE, RESPECTFULL Y FOLLOWING THE SAME DIRECT THE AO DELETE THE SAME. GROUND RAI SED BY THE ASSESSEE IS ALLOWED. 9. THE SECOND ISSUE RAISED BY THE ASSESSEE IN GROUN D NO.8 IS IN RESPECT OF CONFIRMATION OF ADDITION OF RS.63,63, 280/- AS MADE BY THE AO UNDER SECTION 68 OF THE ACT COMPRISING CO NTRACT RECEIPT CREDITED IN P& L A/C OF RS.15,69,800/-, RE COVERIES FROM OLD DEBTORS/ADVANCES OF RS.9,53,480/- AND UNSECURED LOANS OF RS.38,40,000/-. 10. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED BEFORE THE BENCH THAT THE ASSESSEE COULD NOT FURNIS H THE DETAILS ITA NO.5393/M/2017 MR. MANMOHAN SINGH S. RANAWAT 7 AND INFORMATION IN RESPECT OF THESE ITEMS OF ADDITI ONS MADE BY THE AO DURING THE ASSESSMENT PROCEEDINGS AND THEREF ORE SAME WERE ALSO AFFIRMED BY LD. CIT(A) FOR THE WANT OF IN FORMATION AND EXPLANATION FROM THE ASSESSEE. THE LD. A.R. PRAYED BEFORE THE BENCH THAT ASSESSEE MAY BE GIVEN ONE MORE CHANCE TO EXPLAIN THE SAME AS THE ASSESSEE ALL THE NECESSARY DOCUMENT S IN THE FORMS OF BILLS, VOUCHERS AND EVIDENCES WHICH COUL D NOT BE PRODUCED BEFORE THE AO. 11. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF LD. CIT(A) AND GROUNDS OF APPEAL. 12. AFTER CONSIDERING THE FACTS BEFORE US AND HEARI NG THE RIVAL PARTIES, WE OBSERVE THAT IN RESPECT OF THESE ITEMS THE EVIDENCES COULD NOT BE VERIFIED IN THE ASSESSMENT PROCEEDINGS AS WELL AS IN THE APPELLATE PROCEEDINGS FOR VARIOUS REASONS. WE ARE, THEREFORE, OF THE VIEW THAT ASSESSEE MAY BE GIVEN ONE MORE OPP ORTUNITY BEFORE THE AO TO EXPLAIN THE SAME WITH EVIDENCES. ACCORDINGLY, WE SET ASIDE THIS ISSUE. THE ISSUE OF ADDITION IN GROUND NO.8 OF RS.63,63,280/- IS RESTORED TO THE FILE OF THE AO WI TH A DIRECTION THAT SAME MAY BE DECIDED AFRESH AS PER FACTS AND LA W AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO TH E ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 26.06.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 26.06.2019. * KISHORE, SR. P.S. ITA NO.5393/M/2017 MR. MANMOHAN SINGH S. RANAWAT 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.