Pawan Kumar Jain, Ghaziabad V. ITO, Ward- 2(1), Ghaziabad

ITA 6578/DEL/2018

AI Insights

The case involves Smt. Nirmla Jain, the appellant, contesting the order of the Commissioner of Income Tax (Appeals), Ghaziabad, which confirmed an addition made by the Assessing Officer under section 69 of the Income Tax Act, 1961, by changing it to section 69C. The appellant challenged this conversion and the subsequent additions as illegal and incorrect. The ITAT examined the legal validity of the CIT(A)'s action in changing the section under which the addition was made and found it to be unsupported by law, leading to the decision to allow the appeal on these grounds.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113360 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 23-01-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 14-10-2018
• Other Referred Cases: M/s Toffee Agricultural Farms P. Ltd. vs. ITO, CIT vs. Aar Pee Apartments P. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Question of law; TDS
• Section: 69; 69C; 69B; 250; 69A

Judgement Text

I.T.A.No.6578/Del/2018 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC” NEW DELHI SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER आ.अ.स ं /.I.T.A No.6578/Del/2018 /Assessment Year: 2015-16 Smt. Nirmla Jain, W/o Late Sh. Pawan Kr. Jain, L.M. Agarwal & Co., CAs, KA-32, Kavi Nagar, Ghaziabad, Uttar Pradesh. ब म Vs. ITO Ward 2(1), CGO complex-2, Kamla Nehru Nagar, Ghaziabad, Uttar Pradesh. PAN No. ACCPJ8057G अ Appellant /Respondent िनधा रतीक ओरसे /Assessee by S/Sh. L.M. Agarwal Deepanshu Agarwal, CAs राज वक ओरसे /Revenue by Shri Hemand Gupta, Sr. DR स ु नवाईक तारीख/ Date of hearing: 24.01.2023 उ ोषणाक तारीख/Pronouncement on 14.03.2023 आदेश /O R D E R This appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals), Ghaziabad dated 31.08.2018 for AY 2015-16. The grounds of assessee read as under: - 1. “That having regard to the facts and circumstances of the case, The finding and order of the learned CIT(A) that addition make by the AO U/s 69 is confirmed by Changing the section to section 69C of i. Tax Act as demand in the grounds of appeal by the assessee. While the assessee never raised any grounds of appeal for conversion of addition made by AO to section 69C instead of section 69. The Assessee only challenge the wrong and illegal addition U/s 69 of I. Tax Act as unexplained and undisclosed Investment. I.T.A.No.6578/Del/2018 2 2. That a legal question of law arise whether the action of CIT(A) justified for conversion of addition as made by AO under any wrong section which is challenge by the appellant by way of grounds of appeal. 3. That the Learned CIT(A) has not serious to disposed off the assessee ground no. 3 to 8 & 11 which are reproduced as under- I. That the action of AO to make addition of Rs. 2577794.00 has lead to the disallowance of legitimate business loss incurred by the assessee on account of securities & commodity transactions indirectly which is not permissible under the provisions of the Income Tax Act, 1961 and the assessee is eligible for set off of such business losses under the law. II. That the learned ITO very much prejudice with the assessee for the reasons best known to him and due to that reasons he wait for more than 5 month in framing proposal for conversion of case from limited security to complete scrutiny for harassment of the assessee. III. That the action of the Id AO to convert the case from limited scrutiny to complete scrutiny to investigate the case of the assessee for back years also is wrong, illegal and beyond jurisdiction. The said action undertaken by the Id AO to harass the assessee for the reason best known to him. IV. That the learned AO wrongly mentioned in the order that ITI has been deputed to record the statement of the assessee but the assessee not available while suffering from many ailments, while the ITI comes to the house of assessee only for service of paper dt. 24.12.2017 on dt. 26.12.2017 and there was no evidence on the file that ITI has been deputed for statement and no questionnaire available on the office records file. V. That the assessee submit all the evidence of Income and securities and commodity losses which is verified by the ITO in long period of time of more than 5 months with available books of accounts. I.T.A.No.6578/Del/2018 3 VI. That the learned ITO framed the assessment order completely against the contents of the questionnaire cum show cause dt. 05.12.2017. The learned ITO has completely made up his mind and reached definite conclusion about the alleged guilt of the assessee. The assessment order which is not based on questionnaire cum show cause notice is wrong, illegal and void- ab-initio. VII. That the Id AO further erred on the facts of the case in ignoring the fact that the assessee earned commission income of Rs. 2,20,200.00 on which I. Tax TDS of Rs. 22,020.00 was deducted at source which was duly shown by the assessee in the records. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 2. Ground No. 1 & 2 of assessee Apropos these grounds, the ld. Assessee’s Representative (AR) submitted that having regards to the facts and circumstances of the case, the findings and order of the Ld.CIT(A) that addition made by the Assessing Officer u/s 69 of the Income Tax Act, 1961 (for short “the Act”) was confirmed by changing the section 69C of the Act particularly when the assessee never raised any ground of appeal for conversion of addition made by the AO to Sec. 69C of the Act instead of Sec. 69 of the Act. The Ld. AR vehemently pointed out that the assessee only challenged the wrong and illegal addition u/s 69 of the Act as unexplained and undisclosed investment. The Ld. AR submitted that as per order of ITAT Delhi Bench dated 18.04.2022 in the case of M/s Toffee Agricultural Farms P. Ltd. vs. ITO in ITA No. 4903/Del/2019 for AY 2006-07, wherein I.T.A.No.6578/Del/2018 4 by referring to the judgment of Hon’ble Jurisdictional High Court of Delhi, rendered in the case of CIT vs. Aar Pee Apartments P. Ltd. 319 ITR 276 (Del.) it was held that the Ld.CIT(A) in treating the addition made by the AO u/s 69C of the Act instead of 69B was not found to be validly sustainable. The Ld. AR specially drew our attention towards para 5 & 6 of the Tribunal in the case of M/s Toffee Agricultural Farms P. Ltd. (supra). 3. Replying to the above, the Ld. Sr. DR submitted that merely because there was an error in writing Sec. 69 by the AO, would not vitiates the entire proceedings. The Ld. DR also submitted that the AO was duly in substance with the subject matter relating to undisclosed investments and by mistake the AO stated Sec. 69 of the Act then the Ld.CIT(A) was right in confirming the addition u/s 69C of the Act by applying right section as the Ld. First Appellate Authority enjoys coterminous powers with the AO. Therefore, the legal contention of the assessee may kindly be dismissed being devoid of merits. 4. On careful consideration of submissions of both the sides, first of all I may point out that identical controversy was adjudicated by the Tribunal in the case of M/s Toffee Agricultural Farms P. Ltd. (supra) by holding as under: “5. I have heard rival submissions, perused the material available on record and gone through the orders of authorities below. The objection of the assessee regarding I.T.A.No.6578/Del/2018 5 erroneous reference to the DVO, it was submitted that the Assessing Officer was not empowered to refer the matter to DVO, where the assessment was being made u/s 69C of the Act. In support of this contention, learned counsel for the assessee has placed reliance on various case laws. There is no dispute with regard to the fact that the Assessing Officer in the assessment order has stated addition regarding unexplained expenditure u/s 69C of the Act. The Revenue has not brought on record that mentioning of Section 69C was on account of any typographical error. It is also clear from the assessment order that the Assessing Officer had referred the issue of market value of the property in question u/s 142A of the Act. However, as per Section 142A such reference can be made to ascertain the value of any investment referred to in Section 69 or Section 69B or the value of any bullion, jewellery or any other valuable article referred to in section 69A or Section 69B of the Act. There is conspicuous exclusion of Section 69C. In the present case, reference u/s 142A was not made regarding ascertaining the correct market value of the investment in property. But, it was in fact for the purpose of ascertaining expenditure which the assessee made on the purchases. I find merit into the contention of the assessee that the reference to DVO u/s 142A for the purpose of Section 69C is not valid. 6. Now coming to the question regarding action of the learned CIT(Appeals) to treat the reference u/s 142 for the purpose of Section 69B, I find merit into the contention of the assessee that there is no power conferred upon the learned CIT(Appeals) to assess a particular item under different provision of the Act what the Assessing Officer had done without giving a specific notice to the assessee regarding such action. The Revenue has not brought any material to suggest that the assessee was put to notice by the learned CIT(Appeals) before taking such action. I am of the considered view that law does not permit for such change of provision of law. As per Section 250 of the Act, the learned CIT(Appeals) is empowered to make further inquiry as he thinks fit or may direct the Assessing Officer to make further inquiry and report to the learned CIT(Appeals). As per Section 251(l)(a), in appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment, but there is no such power provided by the law that learned CIT(Appeals) could change the provision of law qua the item of which assessment was made. Therefore, in the absence of such power, learned I.T.A.No.6578/Del/2018 6 CIT(Appeals) could not have treated the addition made u/s 69C as the addition made u/s 69B and the same is contrary to the spirit of the Act. Reliance placed by the learned counsel for the assessee on the judgment of the Hon' bie Delhi high Court, rendered in the case of CIT Vs. Aar Pee Apartments (P) Ltd. (supra), has held that from the reading of sub-section (1) of Section 142A, it is clear that legislature referred to the provisions of Section 69, 69A and 69B but specifically excluded 69C. The principle of casus omissus becomes applicable in a situation like this. What is not included by legislature and rather specifically excluded, cannot be interpreted by the Court through the process of interpretation. The only remedy is to amend the provision. It is not the function of the Court to legislate or to plug the loopholes in the law. In the light of the above binding precedent the action of the learned CIT(Appeals) in treating the addition made by the Assessing Officer u/s 69C as have been made u/s 69B is contrary to the law laid down by the Hon’bie Jurisdictional High Court. I, therefore, respectfully following the decision of the Hon’ble Jurisdictional High Court in the case of CIT Vs. Aar Pee Apartments (P) Ltd. (supra), the impugned order is therefore set aside. The addition made u/s 69C on the basis of the report of the DVO by the Assessing Officer deserves to be deleted. Hence, impugned addition is hereby deleted. Grounds of appeal taken by the assessee are allowed accordingly.” 5. After careful consideration of rival submissions of both the sides and facts and circumstances of the present case coupled with proposition rendered by the Hon’ble Jurisdictional High Court of Delhi under identical circumstances in the case of CIT vs. Aar Pee Apartments P. Ltd. (supra), I respectfully note that from the reading of sub-section (1) of Sec. 142A of the Act, it is clear that the legislature referred to the provisions of Sec. 69, 69A and 69B of the Act but specifically excluded the provisions of Sec. 69C of the Act. In such a situation the well known principle of casus omissus becomes applicable. In my humble understanding what is not included by the legislature in its wisdom and I.T.A.No.6578/Del/2018 7 rather specifically excluded as per legislative intention, the only remedy is to amend the provision. I am cautious that it is not come within the ambit and purview of jurisdiction of this Bench to legislate or to plug the loop holes in the law. Thus, in the light of above binding precedent rendered by the Hon’ble Jurisdictional of Delhi High Court in the case of CIT vs. Aar Pee Apartments P. ltd. (supra) which was followed by the coordinate bench of the Tribunal in the case of M/s Toffee Agricultural Farms P. Ltd. (supra), I hold that the addition made by the AO u/s 69 of the Act cannot be converted into Sec. 69C of the Act by the Ld.CIT(A) while upholding the addition. Action of the Ld.CIT(A) in this regard cannot be held as valid and sustainable being bad in law. Therefore, ground no. 1 & 2 of assessee are allowed and AO is directed to delete the addition. Since, the grievance of assessee has been allowed in view of findings recorded by me in the earlier part of this order. Therefore, other grounds of assessee on merits are not being adjudicated upon as having become academic. 6. In the result, appeal of the assessee is partly allowed on ground no. 1 & 2. 7. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 14/03/2023 Sd/- (C.M. GARG) JUDICIAL MEMBER I.T.A.No.6578/Del/2018 8 Dated: 14.03.2023 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi