Appeal details
Counselvise Citation
[2021] 108 COUNSELVISE.COM (IT) 6540 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 year(s) 2 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-04-2021
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Assessment Year
2009-2010
Appeal Filed On
03-02-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, B: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.673/DEL/2015 ASSESSMENT YE AR : 2009-10 M/S GINNI GOLD LIMITED, 2606/4, SHOP NO.105, 1 ST FLOOR,SOLITAIRE PLAZA, GURUDWARA RAOD, KAROL BAGH, NEW DELHI-110005 PAN-AACCG9728Q VS. ADDITIONAL COMMISSIONER OF INCOME TAX, CIRCLE-12(1), NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SH. HIREN MEHTA, CA RESPONDENT BY : SH. JAGDISH SINGH, SR. DR DATE OF HEARING : 09.02.2021 DATE OF PRONOUNCEMENT : .04.2021 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 28.11.2014 OF THE LEARNED CIT(A)-4, NEW DELHI, RELATING TO ASS ESSMENT YEAR- 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY, ENGAGED IN THE BUSINESS OF TRADING IN BUSINESS OF BULLIONS A ND MANUFACTURE AND TRADING OF SILVER AND GOLD ORNAMENTS. THE ASSESSEE FILE D ITS RETURN OF INCOME ON 29.09.2009 DECLARING TOTAL INCOME OF RS.65,59,963/ -. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE PRO DUCED BOOKS OF ACCOUNT, WHICH WERE TEST CHECK BY THE ASSESSING OFFICER. T HE ASSESSING ITA NO.673/DEL/2015 2 OFFICER ON THE BASIS OF VARIOUS DETAILS FILED BEFORE HIM NOTED T HAT THE ASSESSEE COMPANY HAS ADVANCED AN AMOUNT OF RS.2,20,00,00 0/- TO ITS SUPPLIERS M/S LAKSHYA OVERSEAS FOR TWO DAYS. HE NOTED T HAT THE NATURE OF THE BUSINESS OF THE ASSESSEE COMPANY DOES NOT REQUIRE TO LENDING SUMS FOR PROCURING GOODS FROM ITS SUPPLIERS. HE, THEREFORE, INVOKING THE PROVISIONS OF SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) MADE ADDITION OF RS.14,194/- BEING INTEREST @12% PER ANNUM. 3. HE FURTHER NOTED THAT THE ASSESSEE HAS GIVEN DONA TION OF RS.13,000/-TO TWO TRUSTS NAMELY PREM LAL PRAKSH TRUST RS.10,000/- AND UDANTIKA MANAV SEWA SANSTA OF RS.3,000/-. SINCE, THE ASSES SEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE SAME, THE ASSESS ING OFFICER DISALLOWED RS.13,000/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF DONATION . 4. THE ASSESSING OFFICER SIMILARLY MADE ADDITION OF RS.1,05,484 /- BEING FILING FEES PAID TO THE ROC ON THE GROUND THAT THE A MOUNT IS PAID TOWARDS INCREASING ITS AUTHORIZED SHARE CAPITAL, WHICH IS NO T AN ALLOWABLE EXPENDITURE U/S 37(1) OF THE ACT. 5. THE ASSESSING OFFICER FURTHER NOTED FROM THE STOCK RE CORDS OF THE ASSESSEE THAT THE ASSESSEE GETS THE GOLD ORNAMENTS MANUFACTURED ON JOB WORK BASIS. FOR THE SAME PURPOSE, THE GOLD BARS ARE ISSUED TO JOB WORK CONTRACTORS AND RECORDED IN ISSUE SIDE OF STOCK REGISTER OF GOLD BARS THROUGH STOCK JOURNAL AND VALUE IS RECORDED AT NOTIONAL RATES. SIMILARLY, UPON RECEIPT OF MANUFACTURED GOODS FROM JOB WORKERS, THE GOODS ARE RECORDED IN GOLD JEWELLERY ITEM IN STOCK REGISTER AT NOTIONAL VALUE. ITA NO.673/DEL/2015 3 6. THE ASSESSING OFFICER FOUND FROM THE STOCK DETAILS THAT THE ASSESSEE COMPANY HAD ISSUED GOLD BARS WEIGHING 87000 GR AMS AND RECORDED THEM AT VALUE OF RS. 10,72,03,710/- AND PAID A SU M OF RS.9,17,115/- AS JOB CHARGES IN RESPECT OF THE SAME (TO TAL RS. 10,81,20,825/-). UPON RECEIPT OF THESE GOODS, THE SAME HAVE BEEN RECORDED IN RECEIPT SIDE OF THE STOCK REGISTER IN GOLD JEWELLERY ITEM. HOWEVER, AS PER STATEMENTS SUBMITTED DURING COURSE OF PROCEEDINGS, THE A MOUNT OF GOLD JWELLERY (MANUFACTURED/PRODUCTION) HAS BEEN RECORDED AT R S. 10,67,92,970/-. NO REASON FOR DECREASE IN VALUE OF GOLD HAS BEEN GIVEN BY THE ASSESSEE IN THE PROCESS OF MANUFACTURING THE ORNAME NTS. SINCE, THE VALUE OF CLOSING STOCK AT THE END OF THE YEAR IN ARRIVED AT WITH THE HELP OF COMPUTER AT VALUES RECORDED, THE CLOSING STOCKS OF MANUFA CTURED JEWELLERY THUS, IS UNDER VALUED BY A SUM OF RS. 13,27,855/- AND THUS , THE PROFITS OF THE COMPANY ARE UNDERSTATED TO THAT EXTENT. HENCE, T HE ASSESSING OFFICER MADE ADDITION OF RS. 13,27,855/- TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER, ACCORDINGLY DETERMINED THE TOTAL INCOME O F THE ASSESSEE AT RS.80,20,500/-. 7. THE ASSESSEE APPROACHED THE LEARNED CIT(A) WHO SUS TAINED THE ADDITION OF RS.14,194/- ON ACCOUNT OF DISALLOWANCE U/S 36(1 )(III) OF THE ACT, DISALLOWANCE OF RS.13,000/- ON ACCOUNT OF DONATION, DISALLOWANC E OF RS.1,05,484/- ON ACCOUNT OF FILLING FEES PAID TO ROC. SO FAR AS, THE DISALLOWANCE OF RS.13,27,855/- ON ACCOUNT OF VALUATION CLOSIN G STOCK IS ITA NO.673/DEL/2015 4 CONCERNED, THE LEARNED CIT(A) SUSTAINED THE ADDITION OF RS.6 ,27,165/- AND DELETED THE BALANCE ADDITION. 8. THE LEARNED CIT(A), DURING THE COURSE OF APPEAL PROCE EDINGS, NOTED THAT THE ASSESSEE COMPANY IS A TRADER IN GOLD BA R, GOLD JEWELLERY AND BULIIONS. FROM THE SAME PREMISE OTHER RELATED CONCERN S ALSO TRADE IN GOLD:, BULLION AND GOLD JEWELLERY. DURING THE COURSE OF APPELLATE PROCEEDING, THE LEARNED CIT(A) FURTHER OBSERVED THAT THE ASSESSEE COMPANY HAD ENTERED INTO FREQUENT TRANSACTIONS OF PURCHASE AND SALE OF GOLD BAR 995, GOLD BAR 999 AND FINISHED GOLD JEWELLERY WITH ITS SISTER CON CERNS. SEVERAL OPPORTUNITIES WERE EXTENDED TO THE ASSESSEE TO PRODUC E THE COPY OF THE LEDGER ACCOUNT OF THE SISTER CONCERNS OF THE ASSESSEE IN ITS BOOKS TO JUSTIFY WHETHER SUCH TRANSACTIONS WERE AT ARM'S LENGTH BASIS. T HE ASSESSEE FURNISHED THE FOLLOWING DETAILS OF PURCHASES WITH PERSONS SPE CIFIED U/S 40A(2)(B): SL. NO. NAME OF CO. AMOUNT IN RS. DESIGNATION NAME OF PERSON 1 GOEL EXIM INDIA PVT. LTD. 111,243,140 DIRECTOR ASHOK GOEL, RRAVEEN GUPTA 2 GOEL IMPEX 227,423,145 PROPRIETOR PRAVEEN GUPTA 3 PRIYANSH GOLD 30,049,505 PROPRIETOR PRADEEP GOEL 4 ROYAL GOLD 12,807,644 PROPRIETOR JAI PRAKASH GUPTA 5 BNAVYA GOLD 184,453,619 PARTNER JAI SINGH GOEL, CHETEN G UPTA 6 GINNI HOLDINGS 58,818,238 PARTNER PRADEEP GOEL, PRAVE EN GUPTA 7 L P OVERSEAS 156,913,690 PARTNER JAI PRAKASH GUPTA, SAND EEP GUPTA 8 SHREE BALAJI COMMODITIES 37,178,972 PARTNER ASHOK GOEL, REENA GOEL 9 SHREE GANPATI IMPEX 296,474,012 PARTNER JAI SINGH GOEL, ASHOK GOEL 10 SPARSH GOLD 17,029,703 PARTNER ASHOK GOEL, REENA GOEL 11 SHREE RAJ MAHAL JEWELLERS 12,717,000 PARTNER GINNI DEVI, PRADEEP GOEL G. TOTAL 1,145,108,666 ITA NO.673/DEL/2015 5 9. THE LEARNED CIT(A) MADE COMPARISON OF THE PURCHASE P RICE AND SALE PRICE OF SUCH ITEMS FROM RELATED PARTIES VIS-A-VIS OUTSIDE PARTIES AND NOTED THAT THE ASSESSEE HAD PAID EXCESSIVE PURCHASE PRICE IN RESPECT OF THE SAME ITEM AS COMPARED TO OUTSIDE PARTIES ON THE SAME D AY OR WITHIN 1 OR TWO DAYS. SIMILARLY, THE TRANSACTION OF THE SALES MADE TO SISTER CONCERN IN RESPECT OF SAME ITEM, ON THE SAME DAY OR WITHIN 1-2 DAYS , WHICH ARE UNDER VALUED, AS COMPARED WITH SALES MADE TO OUTSIDE PARTIES. H E ACCORDINGLY ISSUED AN ENHANCEMENT NOTICE TO THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE IN RESPECT OF PURCHASES MADE FROM RELATED CON CERN U/S 40A(2)(B) SHOULD NOT BE MADE AND WHY DEMAND SHOULD NOT B E ENHANCED. THE RELEVANT EXTRACT OF THE SAID NOTICE READS AS UNDER:- '2. DURING THE COURSE OF THE APPELLATE PROCEEDING YOUR REPRESENTATIVE WAS ASKED TO FURNISH THE QUANTITY-WI SE AND VALUE- WISE DETAILS OF PURCHASE, SALE OF CLOSING STOCK AND STOCK ISSUED FOR JOB WORK PURPOSE OF GOLD BAR 995, GOLD BAR 999 AND GOLD JEWELLARY. 3. IN RESPECT OF THE DETAILS FURNISHED RELATING TO GOLD BAR 999, I OBSERVE THAT IN RESPECT OF PURCHASE OF 4500 GRAM OF GOLD BAR 999 ON 1.12.2008 FROM BHAVYA GOLD, THE PURCHASES WERE S HOWN AT RS.1245 PER GRAM, WHEREAS FROM 23.10.2008 TILL 5.12 .2008, THE GOLD BAR 999 WAS SOLD WITHIN THE RANGE OF 1207.92 ( AS ON 23.10.2008) TO RS.1216 PER GRAM (AS ON 5.12.2008). I WAS INFORMED BY THE ID. COUNSEL THAT THE BHAVYA GOLD WAS COVERED U/S 40A(2)(B). HOWEVER, IN THE TAX AUDIT REPORT IN THE ITEM NO. 10 RELATED TO NOTES OF ACCOUNTS,, IT WAS REPORTED THAT THERE WAS NO REL ATED PARTY DISCLOSURE. 3.2 FURTHER, GOLD BAR 999 WAS PURCHASED @ RS.1263.5 0 GRAM IN RESPECT OF 5,000 GRAM GOLD BAR 999 PURCHASED ON 20. 10.2008 FROM SHREE GANPATI IMPEX, WHEREAS AS MENTIONED ABOVE, TH E PREVAILING RATE USED FOR SELLING THE SAME ITEM HAS BEEN WITHIN THE RANGE OF 1207.92 TO 1216 PER GRAM. YOU ARE REQUIRED TO EXPLA IN AS TO WHETHER ANY OF THE PURCHASES WERE MADE FROM RELATED PARTIES OR ANY SALES WERE MADE TO RELATED PARTY U/S 40A(2)(B). ALSO IN CASE OF ITA NO.673/DEL/2015 6 SUCH TRANSACTION RELATED TO SUCH RELATED PARTY, YOU ARE REQUIRED TO EXPLAIN AS TO WHY EXCESSIVE PURCHASE PRICE MAY NOT BE DISALLOWED U/S 40A(2)(B). IN THE SIMILAR FORMAT, YOU ARE REQU IRED TO FURNISH THE DETAILS OF GOLD BAR 995 AND FINISHED GOLD JEWELLERY PURCHASED OR SOLD TO THE RELATED CONCERN WITH THE EXPLANATION AS TO WHY ANY AMOUNT WHICH IS NOT AT ARMS LENGTH MAY NOT BE TAKE N TOWARDS ADDITION TO THE TOTAL INCOME. 10. REJECTING THE VARIOUS EXPLANATION GIVEN BY THE ASSES SEE THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE BEING A BULLION DEALER, ALL TRANSACTIONS WERE TO BE AT FAIR MARKET VALUE AND THERE IS NO REASON AS TO WHY MOST OF THE PURCHASES MADE FROM RELATED CONCERN WE RE AT A HIGHER RATE THAN MARKET RATE WHICH IS TAKEN FROM THE RATE OF PURCHA SES MADE FROM UNRELATED CONCERNS. FURTHER, ON MANY OCCASIONS ON THE SAME DATE, SALES OF SOME ITEM WERE MADE TO RELATED CONCERN AT A MUCH LOWER PRICE AS CO MPARED WITH THE PURCHASE PRICE FROM OTHER (RELATED OR UNRELATED) CONCERN. T HUS, THE ASSESSEE HAS INFLATED PURCHASE PRICE FROM RELATED CONCERN AND SOLD AT LESSER PRICE TO RELATED CONCERNS TO SUPPRESS ITS PROFIT. S INCE, ACCORDING TO HIM THE ASSESSEE COULD NOT OFFER ANY JUSTIFICATION AS TO WH Y SALES WERE MADE TO RELATED CONCERN OPERATING FROM THE SAME PREMISE AT BELOW THE RATE AT WHICH SALES WERE MADE TO OUTSIDE PARTIES AND PURCHAS ES MADE AT HIGHER PRICE FROM RELATED CONCERNS, THEREFORE, HE ENHANCED THE ASSESSMENT TO THE EXTENT OF RS.3,57,53,276/-. 11. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(A), THE A SSESSEE IS IN APPEAL BEFORE US BY RAISING FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A) ERRED IN HOLDING THAT NECESSARY DETAILS AND EXPLANATION AS TO BULLION TRANSACTIONS WERE NOT PLA CED BEFORE HIM WHILE THE IMPUGNED ORDER IS REPLETE WITH SUCH D ETAILS; 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW ITA NO.673/DEL/2015 7 THE CIT (A) ERRED IN REJECTING THE BOOKS OF ACCOUNT S U/S 145 OF THE ACT; 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE CIT(A) ERRED IN MAKING AN ENHANCEMENT OF THE AS SESSED INCOME BY MAKING AN ADDITION OF RS.2,19,63,025/- U/ S 40A(2)(B) OF THE ACT IN RESPECT OF PURCHASES MADE F ROM SISTER CONCERNS EVEN THOUGH THE SAME HAD BEEN MADE AS PER THE CURRENT GOLD RATE; 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE CIT(A) ERRED IN MAKING AN ENHANCEMENT IN RESPEC T OF ALLEGEDLY SUPPRESSED SALE IN A SUM OF RS.1,37,90,25 1/- EVEN THOUGH THE DETAILS AS TO FAIR MARKET VALUE WERE ADM ITTEDLY BEFORE HIM. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE CIT (A) ERRED IN CONFIRMING THE APPLICATION OF SECTION 36 (L)(III) OF THE ACT IN RESPECT OF THE SUMS ADVANCED TO THESE SISTER CONCERNS; 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE CIT (A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS.L3,000/-IN RESPECT OF DONATION; 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE CIT (A) ERRED IN SUSTAINING THE DISALLOWANCE ON ACCOUNT OF VALUATION OF CLOSING STOCK IN A SUM OF RS. 13,27,85 5/-. 12. THE ASSESSEE HAS ALSO TAKEN FOLLOWING ADDITIONAL GROUND:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE CIT(A) ERRED IN ENHANCING THE INCOME OF THE APP ELLANT AS HE DID NOT HAVE JURISDICTION U/S 251(1)(A) OF THE I NCOME TAX ACT TO ENHANCE INCOME IN THE FORM OF A NEW SOURCE O F INCOME WHICH HAD NOT BEEN CONSIDERED BY ASSESSING OFFICER AND WAS THEREFORE NOT SUBJECT MATTER OF APPEAL AGAINST THE PROPOSITION SETTLED BY THE FULL BENCH OF DELHI HIGH COURT IN THE CASE OF CIT VS. 13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ABOVE ADDITIONAL GROUND IS PURELY A LEGAL GROUND AND DOES NOT REQUIRE VERIFICATION OF NEW FACTS. RELYING ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF NTPC VS CIT 229 ITR 383 (SC) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS PARABOLICS PRINT PVT. LT D. 276 ITR 42 (DEL.), HE SUBMITTED THAT ADDITIONAL GROUND RAISED BY THE ASSESS EE SHOULD BE ITA NO.673/DEL/2015 8 ADMITTED FOR ADJUDICATION. 14. AFTER HEARING THE LEARNED DR AND AFTER CONSIDERING TH E FACT THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS PURELY A LEGAL GROUND AND DOES NOT REQUIRE VERIFICATION OF ANY NEW FACTS, THE ADDITIONA L GROUND RAISED BY THE ASSESSEE IS ADMITTED FOR ADJUDICATION. 15. GROUND OF APPEAL NO.1 AND 2 BEING GENERAL IN NATURE A RE DISMISSED. 16. GROUND OF APPEAL NO. 3 AND 4 AND THE ADDITIONAL GROUN D RAISED BY THE ASSESSEE RELATE TO THE ORDER OF THE LEARNED CIT (A) IN ENHANCING THE INCOME OF THE ASSESSEE U/S 40A(2)(B) OF RS.3,57,53,276/- WHICH COMPRISES OF ENHANCEMENT OF RS.2,19,63,025/- IN RESPECT OF PURCHASES MADE FROM SISTER CONCERN AND AN AMOUNT OF RS.1,37,90,251/- BEING EN HANCEMENT ON ACCOUNT OF SUPPRESSED SALE TO THE SISTER CONCERN. 17. THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE LEARNED CIT(A) IN ISSUING THE ENHANCEMENT NOT ICE ON THE GROUND THAT THE FIRST APPELLATE AUTHORITY IS NOT EMPOWER ED TO MAKE ENHANCEMENT IN RESPECT OF A NEW SOURCE OF INCOME, WHICH IS NOT SUBJECT MATTER OF THE ASSESSMENT ORDER AND WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. REFERRING TO THE LATEST DECISION OF THE CO -ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF HARI MOHAN SHARMA VS ACIT REPORTED IN 110 TAXMANN.COM 119 (DELHI ITAT), COPY OF WHICH IS PLACED AT PAGE 57 TO 75 OF THE CASE LAW COMPILATION, THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED ITA NO.673/DEL/2015 9 THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL AFTER CONSIDER ING VARIOUS DECISIONS INCLUDING DECISIONS OF HONBLE SUPREME COURT AND V ARIOUS HONBLE HIGH COURTS HAS HELD THAT ENHANCEMENT U/S 251(1 )(A) OF THE ACT IS PROHIBITED ON THE ISSUE WHICH HAS NOT AT ALL BEEN CONSID ERED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEE DINGS. THEREFORE, THE LEARNED CIT(A) COULD NOT HAVE ENHANCED THE INCOME OF THE ASSESSEE ON ACCOUNT OF ALTOGETHER A NEW SOURCE OF INCOME, SINCE, HE IS NOT COMPETENT TO ENHANCE THE ASSESSMENT TAKING AN INCOME WHICH INCOME WA S NOT CONSIDERED EXPRESSLY OR BY NECESSARY IMPLICATION BY THE ASSESSING OFFICER. HE SUBMITTED THAT IF SUCH POWER WOULD HAVE GIVEN TO THE LEARNED CIT(A) THEN THE POWERS U/S 263 OF THE CIT OR THE POWER OF TH E ASSESSING OFFICER U/S 147 WILL BECOME REDUNDANT. HE, ACCORDINGLY, SUBMITTED THAT THE LEARNED CIT(A) SHOULD NOT HAVE AND COULD NOT HAVE ENHAN CED THE INCOME OF THE ASSESSEE ON ALTOGETHER A NEW SOURCE OF INCOME WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS:- I. CIT VS SARDARI LAL & CO. 120 TAXMAN 595 (DEL.)(FB) II. CIT VS UNION TYERS 107 TAXMAN 447 (DEL) III. CIT VS SHAPOORJI PALLONJI MISTRY 44 ITR 891 (SC) IV. CIT VS RAI BAHADUR HARDUTREY MOTILAL CHAMARIA 66 ITR 443 (SC) V. CIT, THRISSUR VS. B.P. SHARAFUDIN 252 TAXMAN 326 (KER) VI. BIKRAN SINGH VS DCIT 82 TAXMANN.COM 230(DEL.) VII. RAM INFRASTRUCTURE LTD. VS JCIT, JALGAON, ITA NO.764/PN/2013 ITA NO.673/DEL/2015 10 18. THE LEARNED DR, ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE LEARNED CIT(A). 19. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF ASSESSING OFFICER AND LEARNED CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CO NSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ONLY ISSUE T O BE DECIDED IN THE ABOVE GROUNDS RELATES TO THE ORDER OF THE LEARNED CIT(A) IN ENHANCING THE INCOME OF THE ASSESSEE BY RS.3,57,53,276/-, ON AN ISSUE WHICH WAS NOT CONSIDERED BY THE ASSESSING OFFICER BUT WAS CONSIDERED BY THE LEARNED CIT(A) THROUGH ENHANCEMENT NOTICE. IT IS THE SUBMISSION O F THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE LEARNED CIT(A) IS NOT E MPOWERED TO MAKE ENHANCEMENT IN RESPECT OF A NEW SOURCE OF INCOME WHICH IS NOT THE SUBJECT MATTER OF THE ASSESSMENT ORDER AND WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. A PERUSAL OF THE ASSESSMENT ORDER SHOW S THAT THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION ON ACCOUNT OF PURCHASE FROM OR SALES MADE TO THE RELATED CONCERNS. THEREFORE, THE QUESTION THAT ARISES IS AS TO WHETHER THE LEARNED CIT(A) IS COMPETENT TO ENHA NCE ASSESSMENT BY TAKING AN INCOME WHICH WAS NOT CONSIDERED EXPRESSLY OR BY NECESSARY IMPLICATION BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. 20. WE FIND AN IDENTICAL ISSUE HAD COME UP FOR BEFORE CO-OR DINATE BENCH OF THE TRIBUNAL IN THE CASE OF HARI MOHAN SHARMA VS ACIT REPORTED IN 179 ITD 310. WE FIND THE TRIBUNAL AFTER CONSIDERING VARIO US DECISIONS INCLUDING THE DECISION OF THE HONBLE SUPREME COURT HELD TH AT THE ITA NO.673/DEL/2015 11 COMMISSIONER (APPEALS) HAS EXCEEDED HIS JURISDICTION IN ENHAN CING THE INCOME OF THE ASSESSEE CONSIDERING THE NEW SOURCE OF INC OME NOT AT ALL CONSIDERED BY THE ASSESSING OFFICER AND ACCORDINGLY SET-A SIDE THE ORDER OF THE LEARNED CIT(A). THE RELEVANT OBSERVATIONS OF THE TRIB UNAL FROM PARA 14 ONWARDS READ AS UNDER:- 14. COMING TO THE FIRST ISSUE OF CHALLENGE TO POWERS OF ENHANCEMENTS BY THE LD CIT (A), POWERS OF LD CIT (A) ARE ENSHRINED U/S 251 OF THE ACT AS UNDER :- 251. POWERS OF THE(...)COMMISSIONER (APPEALS). (1) IN DISPOSING OF AN APPEAL, THE COMMISSIONER (APP EALS) SHALL HAVE THE FOLLOWING POWERS-- (A) IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT, HE MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT ; (AA) IN AN APPEAL AGAINST THE ORDER OF ASSESSMENT I N RESPECT OF WHICH THE PROCEEDING BEFORE THE SETTLEMENT COMMISSION ABAT ES UNDER SECTION 245HA, HE MAY, AFTER TAKING INTO CONSIDERAT ION ALL THE MATERIAL AND OTHER INFORMATION PRODUCED BY THE ASSE SSEE BEFORE, OR THE RESULTS OF THE INQUIRY HELD OR EVIDENCE RECORDE D BY, THE SETTLEMENT COMMISSION, IN THE COURSE OF THE PROCEEDING BEFORE I T AND SUCH OTHER MATERIAL AS MAY BE BROUGHT ON HIS RECORD, CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT ; (B) IN AN APPEAL AGAINST AN ORDER IMPOSING A PENALT Y, HE MAY CONFIRM OR CANCEL SUCH ORDER OR VARY IT SO AS EITHER TO ENH ANCE OR TO REDUCE THE PENALTY; (C) IN ANY OTHER CASE, HE MAY PASS SUCH ORDERS IN T HE APPEAL AS HE THINKS FIT. (2) THE COMMISSIONER (APPEALS) SHALL NOT ENHANCE AN ASSESSMENT OR A PENALTY OR REDUCE THE AMOUNT OF REFUND UNLESS THE A PPELLANT HAS HAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUC H ENHANCEMENT OR REDUCTION. EXPLANATION IN DISPOSING OF AN APPEAL, THE COMMISSIO NER (APPEALS) MAY CONSIDER AND DECIDE ANY MATTER ARISING OUT OF THE P ROCEEDINGS IN WHICH THE ORDER APPEALED AGAINST WAS PASSED, NOTWITHSTANDING THAT SUCH MATTER WAS NOT RAISED BEFORE THE COMMISSIONER (APPEALS) BY THE APPELLANT. ITA NO.673/DEL/2015 12 15. HONOURABLE DELHI HIGH COURT IN [2012] 348 ITR 170 (DEL) GURINDER MOHAN SINGH NINDRAJOG V. COMMISSIONER OF I NCOME- TAX HAS VISUALIZED IN PARA NO 19 AND 20 HAS LAID DOWN THE GUIDANCE WHEN THE POWERS OF THE ENHANCEMENT BY THE LD CIT (A ) ARE VALIDLY INVOKED. THE HONOURABLE HIGH COURT HELD THAT 19. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES. THERE IS NO DOUBT ABOUT THE FACT THAT WHILE FRAMING THE A SSESSMENT EVEN UNDER SECTION 143(3) OF THE ACT, THE ASSESSING OFFI CER MAY OMIT TO MAKE CERTAIN ADDITIONS OF INCOME OR OMIT TO DISALLO W CERTAIN CLAIMS WHICH ARE NOT ADMISSIBLE UNDER THE PROVISIONS OF TH E ACT THEREBY LEADING TO ESCAPEMENT OF INCOME. THE INCOME-TAX ACT PROVIDES FOR REMEDIAL MEASURES WHICH CAN BE TAKEN UNDER THESE CI RCUMSTANCES. WHILE FRAMING AN ASSESSMENT UNDER SECTION 143(3) OF THE ACT, ANY OF THE FOLLOWING SITUATIONS MAY OCCUR : (A) THE ASSESSING OFFICER MAY ACCEPT THE RETURN OF INCOME WITHOUT MAKING ANY ADDITION OR DISALLOWANCE ; OR (B) THE ASSESSMENT IS FRAMED AND THE ASSESSING OFFI CER MAKES CERTAIN ADDITION OR DISALLOWANCE AND IN MAKIN G SUCH ADDITIONS OR DISALLOWANCES, HE DEALS WITH SUCH ITEM OR ITEMS OF INCOME IN THE BODY OF ORDER OF ASSESSMENT BUT HE UNDER ASSESSED SUCH SUMS ; OR (C) HE MAKES NO ADDITION IN RESPECT OF SOME OF THE ITEMS, THOUGH IN THE COURSE OF HEARING BEFORE HIM HOLDS A DISCUSSION OF SUCH ITEMS OF INCOME ; (D) YET, THERE CAN BE ANOTHER SITUATION WHERE THE A SSESSING OFFICER INADVERTENTLY OMITS TO TAX AN AMOUNT WHICH OUGHT TO HAVE BEEN TAXED AND IN RESPECT OF WHICH HE DOES NOT MAKE ANY ENQUIRY ; (E) FURTHER ANOTHER SITUATION MAY ARISE, WHERE AN I TEM OR ITEMS OF INCOME OR EXPENDITURE, INCURRED AND CLAIME D IS NOT AT ALL CONSIDERED AND AN ASSESSMENT IS FRAMED, AS A RESULT THEREOF, A PREJUDICE IS CAUSED TO THE REVENUE, OR (F) WHERE AN ITEM OF INCOME WHICH OUGHT TO HAVE BEE N TAXED REMAINED UNTAXED, AND THERE IS AN ESCAPEMENT OF INC OME, AS A RESULT OF THE ASSESSEE'S FAILURE TO DISCLOSE F ULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPUTATION OF INC OME. 20. TO ENSURE FOR EACH OF SUCH SITUATIONS, AN INCOM E WHICH OUGHT TO HAVE BEEN TAXED AND REMAINED UNTAXED, THE LEGISLATU RE HAS PROVIDED DIFFERENT REMEDIAL MEASURES AS ARE CONTAINED IN SEC TIONS 251(1)(A), 263, 154 AND 147 OF THE ACT. 21. IN THE CATEGORY STATED IN (A), OBVIOUSLY IF AN INCOME ESCAPES AN ASSESSMENT, THE PROVISIONS OF SECTION 147 OF THE AC T CAN BE INVOKED, ITA NO.673/DEL/2015 13 SUBJECT TO THE CONDITION STATED IN THE PROVISO TO T HE SAID SECTION. IN THE CATEGORY OF CASES FALLING IN CATEGORY (B), SECT ION 251(1)(A) PROVIDES THE COMMISSIONER OF INCOME-TAX (APPEALS) COULD ENHA NCE SUCH AN ASSESSMENT QUA THE UNDER ASSESSED SUM, I.E., WHERE THE ASSESSING OFFICER HAD DEALT WITH THE ISSUE IN THE ASSESSMENT AND WAS THE SUBJECT-MATTER OF APPEAL. IN CATEGORY FALLING IN ( C) AND (E), THE COMMISSIONER OF INCOME-TAX HAS BEEN EMPOWERED TO TA KE AN APPROPRIATE ACTION UNDER SECTION 263 OF THE ACT IN THE CATEGORY OF CASES FALLING UNDER CLAUSES (D) AND (F), APPROPRIAT E ACTION UNDER SECTION 147 OF THE ACT CAN BE TAKEN TO TAX THE INCO ME WHICH HAS ESCAPED ASSESSMENT OR HAD REMAINED TO BE TAXED. THE RE CAN BE SITUATIONS WHERE AN ITEM HAS BEEN DEALT WITH IN THE BODY OF THE ORDER OF ASSESSMENT AND THE ASSESSEE BEING AGGRIEVED FROM THE ADDITION OR DISALLOWANCES SO MADE, HAD PREFERRED AN APPEAL BEFO RE THE COMMISSIONER OF INCOME-TAX (APPEALS) AGAINST THE SA ID ADDITION AND DISALLOWANCE, THE SAID DISALLOWANCE AND ADDITION BE ING THE SUBJECT- MATTER OF APPEAL BEFORE THE COMMISSIONER OF INCOME- TAX (APPEALS) IN SUCH CASES, THE COMMISSIONER OF INCOME-TAX (APPEALS ) HAS BEEN EMPOWERED UNDER SECTION 251(1)(A) OF THE ACT TO ENH ANCE SUCH AN INCOME WHERE THE ASSESSING OFFICER HAD PROCEEDED TO MAKE ADDITION OR DISALLOWANCE BY DEALING WITH THE SAME IN THE BOD Y OF ORDER OF ASSESSMENT BY UNDER ASSESSING THE SAME AS THE SAME WAS THE SUBJECT-MATTER OF THE APPEAL AS PER THE GROUNDS OF THE APPEAL RAISED BEFORE HIM. IN OTHER WORDS, THE COMMISSIONER OF INC OME-TAX (APPEALS) HAS A POWER OF ENHANCEMENT IN RESPECT OF SUCH ITEM OR ITEMS OF INCOME WHICH HAS BEEN DEALT WITH IN THE BO DY OF THE ORDER OF THE ASSESSMENT, AND AROSE FOR HIS CONSIDERATION AS PER THE GROUNDS OF APPEAL RAISED BEFORE HIM, BEING THE SUBJECT-MATT ER OF APPEAL. 16. ON THE BASIS OF THE ABOVE DECISION FOLLOWIN G REMEDIAL MATRIX AS PER THE LAW IS AS UNDER :- SR NO SITUATION REMEDIAL MEASURES UNDER THE INCOME TAX ACT A ASSESSING OFFICER MAY ACCEPT THE RETURN OF INCOME WITHOUT MAKING ANY ADDITION OR DISALLOWANCE ; OR U/S 147 OF THE ACT SUBJECT TO LIMITATIONS CONTAINED THEREIN B THE ASSESSMENT IS FRAMED AND THE ASSESSING OFFICER MAKES CERTAIN ADDITION OR DISALLOWANCE AND IN MAKING SUCH ADDITIONS OR DISALLOWANCES, HE DEALS WITH SUCH ITEM OR ITEMS OF INCOME IN THE BODY OF ORDER OF ASSESSMENT BUT HE UNDER ASSESSED SUCH SUMS ; U/S 251 (1) (A) WHERE THE ASSESSING OFFICER HAD DEALT WITH THE ISSUE IN THE ASSESSMENT AND WAS THE SUBJECT-MATTER OF APPEAL C AO MAKES NO ADDITION IN RESPECT OF SOME OF THE ITEMS, THOUGH IN THE COURSE OF HEARING BEFORE HIM HOLDS A DISCUSSION OF SUCH ITEMS OF INCOME U/S 263 OF THE ACT D WHERE THE ASSESSING OFFICER U/S 147 OF THE ACT ITA NO.673/DEL/2015 14 INADVERTENTLY OMITS TO TAX AN AMOUNT WHICH OUGHT TO HAVE BEEN TAXED AND IN RESPECT OF WHICH HE DOES NOT MAKE ANY ENQUIRY E WHERE AN ITEM OR ITEMS OF INCOME OR EXPENDITURE, INCURRED AND CLAIMED IS NOT AT ALL CONSIDERED AND AN ASSESSMENT IS FRAMED, AS A RESULT THEREOF, A PREJUDICE IS CAUSED TO THE REVENUE, U/S 263 OF THE ACT F WHERE AN ITEM OF INCOME WHICH OUGHT TO HAVE BEEN TAXED REMAINED UNTAXED, AND THERE IS AN ESCAPEMENT OF INCOME, AS A RESULT OF THE ASSESSEE'S FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPUTATION OF INCOME U/S 147 OF THE ACT 17. IN THE SAME DECISION HONOURABLE DELHI HIGH CO URT AFTER CONSIDERING THE PROVISION OF SECTION 251(1) (A) OF THE ACT FURTHER HELD THAT 25. IN CIT V. RAI BAHADUR HARDUTROY MOTILAL CHAMAR IA [1967] 66 ITR 443 (SC) WHERE THE SUPREME COURT INTERPRETED THE CORRE SPONDING PROVISION UNDER THE OLD INCOME-TAX ACT, 1922, THE L EGAL POSITION WAS STATED AS UNDER (PAGE 450) : 'THE PRINCIPLE THAT EMERGES AS A RESULT OF THE AUTH ORITIES OF THIS COURT IS THAT THE APPELLATE ASSISTANT COMMISSIONER HAS NO JURISDICTION, UNDER SECTION 31(3) OF THE ACT, TO AS SESS A SOURCE OF INCOME WHICH HAS NOT BEEN PROCESSED BY THE INCOME-T AX OFFICER AND WHICH IS NOT DISCLOSED EITHER IN THE RETURNS FILED BY THE ASSESSEE OR IN THE ASSESSMENT ORDER, AND, THEREFORE, THE APPELL ATE ASSISTANT COMMISSIONER CANNOT TRAVEL BEYOND THE SUBJECT-MATTE R OF THE ASSESSMENT. IN OTHER WORDS, THE POWER OF ENHANCEMEN T UNDER SECTION 31(3) OF THE ACT IS RESTRICTED TO THE SUBJE CT-MATTER OF ASSESSMENT OR THE SOURCES OF INCOME WHICH HAVE BEEN CONSIDERED EXPRESSLY OR BY CLEAR IMPLICATION BY THE INCOME-TAX OFFICER FROM THE POINT OF VIEW OF THE TAXABILITY OF THE ASSESSEE. IT WAS ARGUED BY MR. VISHWANATH IYER ON BEHALF OF THE APPELLANT THAT BY APPLYING THE PRINCIPLE TO THE PRESENT CASE, THE APPELLATE ASSIST ANT COMMISSIONER HAD JURISDICTION TO ENHANCE THE QUANTUM OF INCOME O F THE ASSESSEE. IT WAS POINTED OUT THAT THE FACT OF ALLEGED TRANSFE R OF RS. 5,85,000 TO FORBESGANJ BRANCH WAS NOTED BY THE INCOME-TAX OFFIC ER AND ALSO THE FACT THAT IT DID NOT REACH FORBESGANJ ON THE SA ME DAY. SO IT WAS ARGUED THAT IN THE APPEAL THE APPELLATE ASSISTANT C OMMISSIONER HAD JURISDICTION TO DEAL WITH THE QUESTION OF THE T AXABILITY OF THE AMOUNT OF RS. 5,85,000 AND TO HOLD THAT IT WAS TAXA BLE AS UNDISCLOSED PROFITS IN THE HANDS OF THE ASSESSEE. W E ARE UNABLE TO ACCEPT THE ARGUMENT PUT FORWARD ON BEHALF OF THE AP PELLANT AS CORRECT. IT IS TRUE THAT THE INCOME-TAX OFFICER HAS REFERRED TO THE REMITTANCE OF RS. 5,85,000 FROM THE CALCUTTA BRANCH , BUT THE INCOME- TAX OFFICER CONSIDERED THE DISPATCH OF THIS AMOUNT ONLY ITA NO.673/DEL/2015 15 WITH A VIEW TO TEST THE GENUINENESS OF THE ENTRIES RELATING TO RS. 4,30,000 IN THE BOOKS OF THE FORBESGANJ BRANCH. IT IS MANIFEST THAT THE INCOME-TAX OFFICER DID NOT CONSIDER THE REMITTA NCE OF RS. 5,85,000 IN THE PROCESS OF ASSESSMENT FROM THE POIN T OF VIEW OF ITS TAXABILITY. IT IS ALSO MANIFEST THAT THE APPELLATE ASSISTANT COMMISSIONER HAS CONSIDERED THE AMOUNT OF REMITTANC E OF RS. 5,85,000 FROM A DIFFERENT ASPECT, NAMELY, THE POINT OF VIEW OF ITS TAXABILITY. BUT SINCE THE INCOME-TAX OFFICER HAS NO T APPLIED HIS MIND TO THE QUESTION OF THE TAXABILITY OR NON-TAXAB ILITY OF THE AMOUNT OF RS. 5,85,000 THE APPELLATE ASSISTANT COMM ISSIONER HAD NO JURISDICTION, IN THE CIRCUMSTANCES OF THE PRESEN T CASE, TO ENHANCE THE TAXABLE INCOME OF THE ASSESSEE ON THE B ASIS OF THIS AMOUNT OF RS. 5,85,000 OR OF ANY PORTION THEREOF. A S WE HAVE ALREADY STATED, IT IS NOT OPEN TO THE APPELLATE ASS ISTANT COMMISSIONER TO TRAVEL OUTSIDE THE RECORD, I.E., TH E RETURN MADE BY THE ASSESSEE OR THE ASSESSMENT ORDER OF THE INCOME- TAX OFFICER WITH A VIEW TO FIND OUT NEW SOURCES OF INCOME AND THE PO WER OF ENHANCEMENT UNDER SECTION 31(3) OF THE ACT IS RESTR ICTED TO THE SOURCES OF INCOME WHICH HAVE BEEN THE SUBJECT-MATTE R OF CONSIDERATION BY THE INCOME-TAX OFFICER FROM THE PO INT OF VIEW OF TAXABILITY. IN THIS CONTEXT 'CONSIDERATION' DOES NO T MEAN 'INCIDENTAL' OR 'COLLATERAL' EXAMINATION OF ANY MATTER BY THE IN COME-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 PARTIC ULAR SOURCE OF INCOME WITH A VIEW TO ITS TAXABILITY OR TO ITS NON TAXABILITY AND NOT TO ANY INCIDENTAL CONNECTION. IN THE PRESENT CASE, IT IS MANIFEST THAT THE INCOME-TAX OFFICER HAS NOT CONSIDERED THE ENTRY OF RS. 5,85,000 FROM THE POINTS OF VIEW OF ITS TAXABILITY AND, THER EFORE, THE APPELLATE ASSISTANT COMMISSIONER HAD NO JURISDICTION IN AN AP PEAL UNDER SECTION 31 OF THE ACT, TO ENHANCE THE ASSESSMENT.' 26. TO THE SAME EFFECT IS THE JUDGMENT OF ANOTHER D IVISION BENCH OF THIS COURT IN CIT V. UNION TYRES [1999] 240 ITR 556 (DELHI) REITERATING THAT THE FIRST APPELLATE AUTHORITY CANNOT CONSIDER NEW SCOPE OF INCOME UNDER SECTION 251(1) OF THE ACT. THE FOLLOWING QUES TION FROM THE SAME JUDGMENT CAN APTLY BE (PAGE 559) : 'SECTION 251 OF THE ACT PRESCRIBES THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER, NOW THE COMMISSIONER (APPEA LS). SECTION 251(1)(A) OF THE ACT EMPOWERS THE APPELLATE ASSISTANT COMMISSIONER IN DISPOSING OF AN APPEAL BY THE ASSES SEE AGAINST AN ORDER OF ASSESSMENT TO CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT OR TO SET ASIDE AND REFER THE CASE BACK TO THE INCOME-TAX OFFICER FOR MAKING FRESH ASSESSMENT IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE APPELLA TE ASSISTANT COMMISSIONER. THE EXPLANATION TO SECTION 251 PROVID ES THAT THE APPELLATE ASSISTANT COMMISSIONER MAY HEAR AND D ECIDE ANY MATTER ARISING OUT OF THE PROCEEDINGS IN WHICH THE ORDER APPEALED AGAINST WAS PASSED NOTWITHSTANDING THAT SU CH A MATTER WAS NOT RAISED BEFORE THE APPELLATE ASSISTAN T COMMISSIONER BY THE APPELLANT. ITA NO.673/DEL/2015 16 THE ISSUE WITH REGARD TO THE SCOPE OF POWERS OF THE FIRST APPELLATE AUTHORITY IN DISPOSING OF AN APPEAL HAS C OME UP BEFORE THE COURTS UMPTEEN TIMES BUT WE DO NOT PROPO SE TO BURDEN THE JUDGMENT BY MAKING REFERENCE TO ALL THE DECISIONS ON THE POINT. WE WILL NOTICE A FEW DECISIONS WHICH WE CONSIDER ARE RELEVANT TO ANSWER THE QUESTION REFERRED. IN CI T V. SHAPOORJI PALLONJI MISTRY [1962] 44 ITR 891 (SC), WHILE CONSTRUING THE CORRESPONDING PROVISIONS OF THE INDI AN INCOME- TAX ACT, 1922, RELATING TO THE JURISDICTION OF THE APPELLATE ASSISTANT COMMISSIONER IN SUCH AN APPEAL, THE SUPRE ME COURT HELD THAT, IN AN APPEAL FILED BY THE ASSESSEE, THE APPELLATE ASSISTANT COMMISSIONER HAS NO POWER TO ENHANCE THE ASSESSMENT BY DISCOVERING A NEW SOURCE OF INCOME, N OT CONSIDERED BY THE INCOME-TAX OFFICER IN THE ORDER A PPEALED AGAINST. SIMILAR VIEWS WERE EXPRESSED BY THE APEX C OURT IN CIT V. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA [1967] 66 ITR 443 (SC). IT WAS HELD THAT THE POWER OF ENHANCEMENT UND ER SECTION 31(3) OF THE 1922 ACT WAS RESTRICTED TO THE SUBJECT -MATTER OF THE ASSESSMENT OR THE SOURCE OF INCOME WHICH HAD BE EN CONSIDERED EXPRESSLY OR BY CLEAR IMPLICATION BY THE INCOME-TAX OFFICER FROM THE POINT OF VIEW OF TAXABILITY AND TH AT THE APPELLATE ASSISTANT COMMISSIONER HAD NO POWER TO AS SESS A SOURCE OF INCOME WHICH HAD NOT BEEN PROCESSED BY TH E ASSESSING OFFICER.' 27. AT THE SAME TIME, THE COURT ALSO CLARIFIED THAT THE POWER OF THE FIRST APPELLATE AUTHORITY IS NOT RESTRICTED TO EXAMINE ON LY THOSE ASPECTS OF ASSESSMENT ABOUT WHICH THE ASSESSEE MAKES A GRIEVAN CE BUT IT COVERS THE WHOLE ASSESSMENT TO CORRECT THE ORDER OF THE AS SESSING OFFICER NOT ONLY WITH REGARD TO THE MATTER RAISED BY THE ASSESS EE IN APPEAL BUT ALSO WITH REGARD TO ANY OTHER MATTER WHICH HAS BEEN CONS IDERED BY THE ASSESSING OFFICER AND DETERMINED IN THE COURSE OF A SSESSMENT. THIS PRINCIPLE CAN BE TRACED TO THE FOLLOWING DISCUSSION IN THE SAID JUDGMENT (PAGE 561) : 'THUS, THE PRINCIPLE EMERGING FROM THE AFORENOTED PRONOUNCEMENTS OF THE SUPREME COURT IS, THAT THE FI RST APPELLATE AUTHORITY IS INVESTED WITH VERY WIDE POWE RS UNDER SECTION 251(1)(A) OF THE ACT AND ONCE AN ASSESSMENT ORDER IS BROUGHT BEFORE THE AUTHORITY, HIS COMPETENCE IS NOT RESTRICTED TO EXAMINING ONLY THOSE ASPECTS OF THE ASSESSMENT A BOUT WHICH THE ASSESSEE MAKES A GRIEVANCE AND RANGES OVE R THE WHOLE ASSESSMENT TO CORRECT THE ASSESSING OFFICER N OT ONLY WITH REGARD TO A MATTER RAISED BY THE ASSESSEE IN A PPEAL BUT ALSO WITH REGARD TO ANY OTHER MATTER WHICH HAS BEEN CONSIDERED BY THE ASSESSING OFFICER AND DETERMINED IN THE COURSE OF ASSESSMENT. HOWEVER, THERE IS A SOLITARY BUT SIGNIFICANT LIMITATION TO THE POWER OF REVISION, VI Z., THAT IT IS NOT OPEN TO THE APPELLATE ASSISTANT COMMISSIONER TO INT RODUCE IN THE ASSESSMENT A NEW SOURCE OF INCOME AND THE ASSES SMENT HAS TO BE CONFINED TO THOSE ITEMS OF INCOME WHICH W HERE THE SUBJECT-MATTER OF ORIGINAL ASSESSMENT.' ITA NO.673/DEL/2015 17 28. THE AFORESAID VIEW TAKEN BY THE DIVISION BENCH WAS CONFIRMED BY THE FULL BENCH OF THIS COURT IN CIT V. SARDARI LAL AND CO. [2001] 251 ITR 864 (DELHI) [FB] OBSERVING AS UNDER (PAGE 871) : 'LOOKING FROM THE AFORESAID ANGLES, THE INEVITABLE CONCLUSION IS THAT WHENEVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BEEN C ONSIDERED BY THE ASSESSING OFFICER, THE JURISDICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEALT WITH UNDER SECTIO N 147/148 OF THE ACT AND SECTION 263 OF THE ACT, IF REQUISITE CONDITIONS ARE FULFILLED. IT IS INCONCEIVABLE THAT IN THE PRESENCE OF SUCH SPECIFIC PROVISIONS, A SIMILAR POWER IS AVAILABLE T O THE FIRST APPELLATE AUTHORITY. THAT BEING THE POSITION, THE D ECISION IN UNION TYRES' CASE [1999] 240 ITR 556 (DELHI) OF THIS COURT EXPRESSES THE CORRECT VIEW AND DOES NOT NEED RECONS IDERATION. THIS REFERENCE IS ACCORDINGLY DISPOSED OF.' [ UNDERLINE SUPPLIED BY US] 18. FURTHER HONOURABLE KERALA HIGH COURT IN B P SHE RAFUDINS CASE [ SUPRA) WHILE EXAMINING THE POWERS OF CIT (A) U/ S 251 (1) (A) OF THE ACT ON ENHANCEMENT HAS EXAMINED THE WHOLE JUDICIAL PR ECEDENT AS UNDER :- PRECEDENTIAL POSITION : 39. A FULL BENCH OF THIS COURT IN CIT V. BEST WOOD INDUSTRIES AND SAW MILLS [2011] 331 ITR 63 (KER) [FB] HAS EXAMINED THE POWERS OF THE ASSESSING OFFICER, BUT NOT THE APPELLATE AUT HORITY. IT HAS HELD THAT ONCE THE ASSESSMENT IS REOPENED FOR ANY V ALID REASON RECORDED UNDER SECTION 148(2), THEN THE ENTIRE ASSE SSMENT IS OPEN FOR THE ASSESSING OFFICER TO BRING TO TAX ANY ITEM OF ESCAPED INCOME WHICH COMES TO HIS NOTICE IN SUCH REASSESSME NT. 40. UNDER THE OLD INCOME-TAX ACT, THE CORRESPONDING PROVISION IS SECTION 31. INTERPRETING THAT PROVISION, THE SUPREM E COURT IN CIT V. KANPUR COAL SYNDICATE [1964] 53 ITR 225 (SC) HAS HELD THAT UNDER SECTION 31(3)(A), IN DISPOSING OF AN APPEAL, THE APPELLATE AUTHORITY MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT ; UNDER CLAUSE (B), HE MAY SET ASIDE THE ASSESSMENT AND DIRECT THE INCOME-TAX OFFICER NOW AO TO MAKE A FRESH ASSES SMENT. THE APPELLATE AUTHORITY HAS, THEREFORE, PLENARY POWERS IN DISPOSING OF AN APPEAL. 'THE SCOPE OF HIS POWER IS CONTERMINOUS WITH THAT OF THE INCOME-TAX OFFICER. HE CAN DO WHAT THE INCOME-T AX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO'. 41. AS WE CAN SEE, CIT V. P. MOHANAKALA [2007] 291 ITR 278 (SC) DEALS WITH THE POWERS OF THE HIGH COURT IN INTERFER ING WITH THE FINDINGS OF FACTAND CONCURRENT FINDINGS, AT THAT B Y RE- APPRECIATING THE EVIDENCE. THE SUPREME COURT HAS HE LD IN THE NEGATIVE. THE SUPREME COURT IN JUTE CORPORATION OF INDIA LTD. V. CIT [1991] 187 ITR 688 (SC) HAS STATED THAT THE DECLARATION OF LAW IS CLEAR THAT THE POWER OF THE APPELLATE AUTHOR ITY IS CO- ITA NO.673/DEL/2015 18 TERMINUS WITH THAT OF THE INCOME-TAX OFFICER, AND I F THAT IS SO, THERE APPEARS TO BE NO REASON WHY THE APPELLATE AUT HORITY CANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE INCOME-TAX OFFICER. NO EXCEPTION COULD BE TAKEN, HELD THE SUPREME COURT IN CIT V. NIRBHERAM D ALURAM [1997] 224 ITR 610 (SC) TO THIS VIEW AS THE ACT PLACES NO RESTRICTION OR LIMITATION ON EXERCISING APPELLATE P OWER. EVEN OTHERWISE, AN APPELLATE AUTHORITY WHILE HEARING THE APPEAL AGAINST THE ORDER OF A SUBORDINATE AUTHORITY, HAS A LL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING T HE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATION , IF ANY, PRESCRIBED BY THE STATUTORY PROVISIONS. ABSENT ANY STATUTORY PROVISION, THE APPELLATE AUTHORITY IS VESTED WITH A LL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE. 42. IN CIT V. SHAPOORJI PALLONJI MISTRY [1962] 44 ITR 891 (SC), THE ASSESSMENT YEAR WAS 1947-48, AND THE CASE WAS FINAL LY DECIDED IN FEBRUARY 14, 1962. SO THE ACT CONSIDERED WAS PRE - INDEPENDENCE ENACTMENT. EXAMINING SECTION 31 OF THE OLD ACT, THE SUPREME COURT HAS HELD THAT THERE IS NO DOUBT T HAT THE APPELLATE AUTHORITY CAN 'ENHANCE THE ASSESSMENT'. T HIS POWER MUST, AT LEAST, FALL WITHIN THE WORDS 'ENHANCE THE ASSESSMENT', IF THEY ARE NOT TO BE RENDERED WHOLLY NUGATORY. 43. NOW, WE MAY EXAMINE THE AUTHORITIES THAT ALSO H AVE DEALT WITH THE POWERS OF THE APPELLATE AUTHORITY BUT SEEM TO HAVE TAKEN A DIVERGENT PATH. 44. IN CIT V. RAI BAHADUR HARDUTROY MOTILAL CHAMARI A [1967] 66 ITR 443 (SC) A THREE-JUDGE BENCH OF THE SUPREME COURT HAS OBSERVED THAT IT IS ONLY THE ASSESSEE WHO HAS A RIG HT CONFERRED UNDER SECTION 31 TO PREFER AN APPEAL AGAINST THE OR DER OF ASSESSMENT MADE BY THE INCOME-TAX OFFICER. IF THE A SSESSEE DOES NOT APPEAL THE ORDER OF ASSESSMENT BECOMES FINAL SU BJECT TO ANY POWER OF REVISION THAT THE COMMISSIONER MAY HAVE UN DER SECTION 33B OF THE ACT. THEREFORE, IT WOULD BE WHOLLY ERRON EOUS TO COMPARE THE POWERS OF THE APPELLATE AUTHORITY WITH THE POWERS POSSESSED BY A COURT OF APPEAL, UNDER THE CIVIL PRO CEDURE CODE. THE APPELLATE ASSISTANT COMMISSIONER IS NOT AN ORDI NARY COURT OF APPEAL. IT IS IMPOSSIBLE TO TALK OF A COURT OF APPE AL WHEN ONLY ONE PARTY TO THE ORIGINAL DECISION IS ENTITLED TO APPEA L AND NOT THE OTHER PARTY, AND BECAUSE OF THIS PECULIAR POSITION THE STATUTE HAS CONFERRED VERY WIDE POWERS UPON THE APPELLATE AUTHO RITY ONCE AN APPEAL IS PREFERRED TO HIM BY THE ASSESSEE. 45. CHAMARIA GOES ON TO HOLD THAT THE APPELLATE AUT HORITY HAS NO JURISDICTION UNDER SECTION 31(3) OF THE ACT TO ASSE SS A SOURCE OF INCOME NOT PROCESSED BY THE INCOME-TAX OFFICER 'AND WHICH IS NOT DISCLOSED EITHER IN THE RETURNS FILED BY THE AS SESSEE OR IN THE ASSESSMENT ORDER,' AND THEREFORE THE APPELLATE AUTH ORITY CANNOT TRAVEL BEYOND THE SUBJECT-MATTER OF THE ASSESSMENT. IN OTHER WORDS, THE POWER OF ENHANCEMENT UNDER SECTION 31(3) OF THE ACT ITA NO.673/DEL/2015 19 IS RESTRICTED TO THE SUBJECT-MATTER OF ASSESSMENT O R THE SOURCES OF INCOME CONSIDERED EXPRESSLY OR BY CLEAR IMPLICATION BY THE INCOME-TAX OFFICER FROM THE VIEWPOINT OF THE TAXABI LITY OF THE ASSESSEE. 46. A QUESTION REGARDING POWERS OF THE FIRST APPELL ATE AUTHORITY CAME UP FOR CONSIDERATION BEFORE THE SUPREME COURT RECENTLY IN CIT V. NIRBHERAM DALURAM [1997] 224 ITR 610 (SC). FOLLOWING THE EARLIER DECISIONS IN KANPUR COAL SYNDICATE AND JUTE CORPORATION OF INDIA, THE SUPREME COURT REITERATED THAT THE APPELLATE POWERS CONFERRED ON THE APPELLATE COMMISS IONER UNDER SECTION 251 COULD NOT BE CONFINED TO THE MATTER CON SIDERED BY THE INCOME-TAX OFFICER, AS THE APPELLATE COMMISSION ER IS VESTED WITH ALL THE PLENARY POWERS WHICH THE INCOME-TAX OF FICER MAY HAVE WHILE MAKING THE ASSESSMENT. 47. INDEED, EXAMINING DALURAM'S HOLDING, A DIVISION BENCH OF THE DELHI HIGH COURT IN CIT V. UNION TYRES, DELHI [ 1999] 240 ITR 556 (DELHI) HAS OBSERVED THAT DALURAM DID NOT COMMENT WHETHER THESE WIDE POWERS ALSO INCLUDE THE POWER TO DISCOVE R A NEW SOURCE OF INCOME. SO, UNION TYRES CONCLUDES THAT TH E PRINCIPLE OF LAW LAID DOWN IN SHAPOORJI AND CHAMARIA STILL HOLDS THE FIELD. 48. THE PRINCIPLE EMERGING FROM VARIOUS PRONOUNCEME NTS OF THE SUPREME COURT, UNION TYRES OBSERVES, IS THAT THE FI RST APPELLATE AUTHORITY IS INVESTED WITH VERY WIDE POWERS UNDER S ECTION 251(1)(A) OF THE ACT AND ONCE AN ASSESSMENT ORDER I S BROUGHT BEFORE THE AUTHORITY, HIS COMPETENCE IS NOT RESTRIC TED TO EXAMINING ONLY THOSE ASPECTS OF THE ASSESSMENT ABOU T WHICH THE ASSESSEE MAKES A GRIEVANCE AND RANGES OVER THE WHOL E ASSESSMENT TO CORRECT THE ASSESSING OFFICER NOT ONL Y REGARDING A MATTER RAISED BY THE ASSESSEE IN APPEAL BUT ALSO RE GARDING ANY OTHER MATTER CONSIDERED BY THE ASSESSING OFFICER AN D DETERMINED IN ASSESSMENT. 49. THERE IS A SOLITARY BUT SIGNIFICANT LIMITATION, ACCORDING TO UNION TYRES, TO THE POWER OF REVISION : IT IS NOT O PEN TO THE APPELLATE COMMISSIONER TO INTRODUCE IN THE ASSESSME NT A NEW SOURCE OF INCOME AND THE ASSESSMENT MUST BE CONFINE D TO THOSE ITEMS OF INCOME WHICH WERE THE SUBJECT-MATTER OF TH E ORIGINAL ASSESSMENT. 50. IN COURSE OF TIME, UNION TYRES WAS DOUBTED. IN CIT V. SARDARI LAL AND CO. [2001] 251 ITR 864 (DELHI) [FB], THE SAME ISSUE WHETHER THE APPELLATE AUTHORITY HAS THE POWER UNDER SECTION 251 TO DISCOVER A NEW SOURCE OF INCOME WAS REFERRED TO A FULL BENCH. AFTER EXAMINING THE AUTHORITIES HOLDING THE FIELDIN G ON THAT ISSUE, THE LEARNED FULL BENCH HAS HELD THAT THE INEVITABLE CONCLUSION IS THAT WHENEVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BEEN C ONSIDERED ITA NO.673/DEL/2015 20 BY THE ASSESSING OFFICER, THE JURISDICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEALT WITH UNDER SECTION 1 47, OR SECTION 148, OR EVEN SECTION 263 OF THE ACT IF REQU ISITE CONDITIONS ARE FULFILLED. IT IS INCONCEIVABLE, ACCORDING TO SA RDARI LAL, THAT IN THE PRESENCE OF SUCH SPECIFIC PROVISIONS, A SIMILAR POWER IS AVAILABLE TO THE FIRST APPELLATE AUTHORITY . EVENTUALLY, SARDARI LAL UPHELD THE DECISION IN UNION TYRES. 51. UNDENIABLY, THE PRECEDENTIAL POSITION ON THE PO WERS OF THE FIRST APPELLATE AUTHORITY UNDER SECTION 251 UNDULAT ES. THERE ARE SEEMING CONTRADICTIONS. BUT, AS HELD BY UNION TYRES , AND AS AFFIRMED ON REFERENCE BY SARDARI LAL, THERE IS A CO NSISTENT JUDICIAL ASSERTION THAT THE POWERS UNDER SECTION 251 ARE, IN DEED, VERY WIDE ; BUT, WIDE AS THEY ARE, THEY DO NOT GO TO THE EXTENT OF DISPLACING POWERS UNDER, SAY, SECTIONS 147, 148, AN D 263 OF THE ACT. 52. THEREFORE, WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEW TAKEN BY THE FULL BENCH OF THE HIGH COURT OF DELHI IN SAR DARI LAL. AS A COROLLARY, WE HOLD THAT THE TRIBUNAL'S DELETING THE ENHANCEMENT OF RS. 22,15,116 AND CANCELLING THE ORDER OF THE CO MMISSIONER OF INCOME-TAX (APPEALS) ON THAT ISSUE CALL FOR NO INTE RFERENCE. [UNDERLINE SUPPLIED BY US] 19. THE PRINCIPLE CULLED OUT FROM THE ABOVE JUDICI AL PRECEDENTS CLEARLY SHOWS THAT WORDS 'ENHANCE T HE ASSESSMENT' ARE CONFINED TO THE ASSESSMENT REACHED THROUGH A PA RTICULAR PROCESS. IT CANNOT BE EXTENDED TO THE AMOUNT WHICH OUGHT TO HAVE BEEN COMPUTED. THERE BEING OTHER PROVISIONS WH ICH ALLOW ESCAPED INCOME FROM NEW SOURCES TO BE TAXED AFTER F OLLOWING A CERTAIN PRESCRIBED PROCEDURE. SO LONG AS A CERTAIN ITEM OF INCOME HAD BEEN CONSIDERED AND EXAMINED BY THE ASSESSING O FFICER FROM THE POINT OF VIEW OF ITS ASSESSABILITY AND SO LONG AS THE CIT(A) DOES NOT TRAVEL BEYOND THE RECORD OF THE YEAR, THERE HAS NEVER BEEN ANY DOUBT AS TO HIS POWERS OF REDOING THE CATEGORIZATIO N AND BRINGING THE ASSESSMENT WITHIN THE TRUE DESCRIPTION OF THE L AW 20. IN THE FACTS OF THE PRESENT CASE ONLY ISSUE C ONSIDERED AND DISCUSSED BY THE ASSESSING OFFICER IS WITH RESP ECT TO CLAIM OF THE ASSESSEE U/S 54F OF THE ACT WHICH WAS REJECTE D AFTER INQUIRY AND FURTHER CLAIM ALTERNATIVELY MADE U/S 54 OF THE ACT WAS ALSO REJECTED RELYING UP ON THE DECISION OF THE HONOUR ABLE SUPREME COURT. THE ISSUE OF VERIFICATION OF CAPITAL GAIN WAS NOT THE ISSUE WHICH WAS AT ALL DEALT WITH BY THE ASSESSING OFFI CER, OR EVEN A QUESTION OF VERIFICATION MADE BY LD AO. THERE WAS NO INQUIRY MADE BY THE LD AO ON THE ISSUE OF CAPITAL GAIN SHOW N BY THE ASSESSEE. THE LD AO HAS NOT AT ALL CONSIDERED THE I SSUE OF SALES CONSIDERATION RECEIVED BY THE ASSESSEE ON SALE OF HOUSE AS AN ISSUE OF DISPUTE BEFORE HIM. THEREFORE ACCORDING T O US, LD CIT (A) COULD NOT HAVE MADE ENHANCEMENT ON THE ISSUE HOL DING THAT CAPITAL GAIN SHOWN BY THE ASSESSEE ITSELF IS NOT IN ACCORDANCE WITH THE LAW AND GIVEN A FINDING THAT NO CAPITAL GAIN HA S ACCRUED TO ITA NO.673/DEL/2015 21 THE ASSESSEE. CIT (A) FURTHER HELD THAT FUNDS REC EIVED BY THE ASSESSEE IS UNACCOUNTED INCOME OF THE ASSESSEE AN D CHARGEABLE TO TAX U/S 68 OF THE ACT. ON THE MATRIX AS HELD BY THE HONORABLE DELHI HIGH COURT THE ABOVE ISSUE FALLS WITHIN THE SCOPE OF THE PROVISION OF SECTION 147 OF THE ACT AND NOT U/S 251 (1) (A) OF THE ACT. FURTHER THE HONOURABLE DELHI HIGH COURT IN PAR A NO 27 HAS ALSO HELD THAT POWER OF THE FIRST APPELLATE AUTHOR ITY IS NOT RESTRICTED TO EXAMINE ONLY THOSE ASPECTS OF ASSESSM ENT ABOUT WHICH THE ASSESSEE MAKES A GRIEVANCE BUT IT COVERS THE WHOLE ASSESSMENT TO CORRECT THE ORDER OF THE ASSESSING OF FICER NOT ONLY WITH REGARD TO THE MATTER RAISED BY THE ASSESSEE IN APPEAL BUT ALSO WITH REGARD TO ANY OTHER MATTER WHICH HAS BEEN CONSIDERED BY THE ASSESSING OFFICER AND DETERMINED IN THE COUR SE OF ASSESSMENT. THEREFORE FOR THE PURPOSE OF ENHANCEME NT OF INCOME BY CIT (A) , IT IS NECESSARY THAT EITHER THE MATTE R SHOULD BE RAISED IN THE APPEAL BY THE ASSESSEE OR EVEN OTHERWISE T HE MATTER SHOULD LD HAVE BEEN CONSIDERED AND DETERMINED IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS NOT AT ALL NECESSARY THAT AO SHOULD HAVE MADE ANY ADJUSTMENT TO THE TOTAL INCOME OF THE ASSESSEE. HENCE, ENHANCEMENT U/S 251 (1) (A) OF THE ACT IS PROHIBITED ON THE ISSUES WHICH HAVE NOT AT ALL BEEN CONSIDERED BY THE AO DURING ASSESSMENT PROCEEDINGS. THIS GIVES THE COMMON UNDER STANDING THAT THE LD CIT (A) CANNOT ENHANCE INCOME O F THE ASSESSEE ON ALTOGETHER NEW SOURCE. THEREFORE IT IS CLEAR THAT THEREFORE, THE CIT(A) IS NOT COMPETENT TO ENHANCE THE ASSESSME NT TAKING AN INCOME WHICH INCOME WAS NOT CONSIDERED EXPRESSLY OR BY NECESSARY IMPLICATION BY THE ASSESSING OFFICER AT A LL. SUCH IS THE MANDATE OF THE DECISIONS OF VARIOUS HIGH COURTS S UCH AS IN CIT VS. NATIONAL COMPANY LTD. (1993) 199 ITR 445 (CAL), SAIT BANSILAL AND RAGGISETTI VEERANNA VS. CIT (1972) 83 ITR 750 ( AP), STERLING CONSTRUCTION & TRADING CO. VS. ITO (1975) 99 ITR 23 6 (KAR) AND LOKENATH TOLARAM VS. CIT (1986) 50 CTR (BOM) 237 : (1986) 161 ITR 82 (BOM). HENCE ISSUE NO 1 I ENLISTED IN PARA N O 13 OF THE ORDER IS DECIDED IN FAVOUR OF THE ASSESSEE. IN VIEW OF OUR DECISION ON ISSUE NO (I), ISSUE NO (II) DOES NOT SURVIVE AND ISSUE NO (III) IS DEALT WITH SEPARATELY. IN VIEW OF THIS WE ALLOW GR OUND NO 1,2,3,14,15 AND 16 OF THE APPEAL OF THE ASSESSEE. 21. SINCE, THE FACTS OF THE INSTANT CASE ARE IDENTICAL TO T HE CASE DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE C ASE OF HARI MOHAN SHARMA CITED (SUPRA), THEREFORE, RESPECTFULLY FOLLOWING THE SAM E, WE HOLD THAT THE LEARNED CIT(A) IN THE INSTANT CASE WAS NOT JUST IFIED IN ENHANCING THE INCOME OF THE ASSESSEE IN THE FORM OF NEW SOURCE OF INCOME WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER AND THUS H E HAD EXCEEDED HIS JURISDICTION U/S 251(1)(A) OF THE ACT. ACCORDINGLY, GROUNDS NO . 3, 4 AND ITA NO.673/DEL/2015 22 ADDITIONAL GROUNDS ARE ALLOWED. 22. GROUNDS OF APPEAL NO.5 RAISED BY THE ASSESSEE RELATE S TO ORDER OF THE LEARNED CIT(A) IN SUSTAINING ADDITION OF RS.14,194/- U/S 36(1)(III) OF THE ACT. 23. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESSING OFFIC ER INVOKED PROVISIONS OF SECTION 36(1)(III) OF THE ACT AND MADE ADD ITION OF RS.14,194/- BEING INTEREST @12% PER ANNUM FOR TWO DAYS O N ACCOUNT OF ADVANCE OF RS.2,20,00,000/- GIVEN TO ONE OF ITS SUPPLIER M/S LAKSHYA OVERSEAS. WE FIND THE THAT LEARNED CIT(A) SUSTAINED THE AD DITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE IS NOT INTO BUSINESS OF LENDING OF MONEY. IT IS THE SUBMISSION OF THE LEARNED COU NSEL FOR THE ASSESSEE THAT IN VIEW OF THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. REPORTED IN (313 IT R 340)(BOM.) WHEREIN, IT HAS BEEN HELD THAT WHERE AN ASSESSEE HAS OW N FUNDS AS WELL AS BORROWED FUNDS, A PRESUMPTION CAN BE MADE THAT THE ADV ANCES FOR NON BUSINESS PURPOSE HAVE BEEN MADE OUT OF OWN FUNDS AND T HAT THE BORROWED FUNDS HAVE NOT BEEN USED FOR THE BUSINESS PURPOSE. ACC ORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, SINCE, OWN CAPITAL AND FRE E RESERVES OF THE ASSESSEE COMPANY, WHICH IS MORE THAN THE ADVANCE OF RS.2 ,20,0000/- GIVEN TO THE SUPPLIER M/S LAKSHYA OVERSEAS FOR THE PERIOD OF T WO DAYS, NO DISALLOWANCE IS CALLED FOR. WE FIND MERIT IN THE ABOVE ARGUMENT S OF THE LEARNED COUNSEL FOR THE ASSESSEE. A PERUSAL OF THE AUDITE D BALANCE SHEET, COPY OF WHICH IS PLACED AT PAGE 18 OF THE PAPER BOOK SHO WS THAT THE SHARE ITA NO.673/DEL/2015 23 CAPITAL AND RESERVES AND SURPLUS OF THE ASSESSEE COMPAN Y AT THE BEGINNING OF THE YEAR WAS RS.11,93,456.12/- AND AT THE CLOSE OF THE YEAR WAS RS.11,67,33,870/-. THUS, OWN CAPITAL AND FREE RESERVES OF THE ASSESSEE COMPANY THROUGHOUT DURING THE YEAR WAS MUCH MORE THA N THE INTEREST FREE ADVANCE OF RS.2,20,00,000/- GIVEN TO M/S LAKSHYA OVERSEAS . WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE B OMBAY HIGH COURT IN THE CASE OR RELIANCE UTILITIES AND POWER LTD. CITE D (SUPRA) HOLD THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.14,194/- MADE BY THE ASSESSING OFFICER U/S 36(1)(III) OF THE ACT. ACCORDINGLY, THE GROUND NO.5 RAISED BY THE ASSESSEE IS ALLOWED. 24. GROUND OF APPEAL NO. 6 WAS NOT PRESSED BY THE LEARN ED COUNSEL FOR THE ASSESSEE FOR WHICH THE LEARNED DR HAS NO OBJECT ION. ACCORDINGLY, GROUND OF APPEAL NO. 6 FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 25. GROUND OF APPEAL NO. 7 RELATES TO THE ORDER OF THE LE ARNED CIT(A) IN PARTLY SUSTAINING THE DISALLOWANCE OF RS.6,27,165/- OUT OF ADDITION OF 13,27,855/-. 26. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE ASSESS ING OFFICER MADE ADDITION OF RS.13,27,855/- ON THE GROUND THAT THE AS SESSEE HAS UNDERVALUED ITS CLOSING STOCK. WE FIND THAT THE LEARNED CIT (A) SUSTAINED AN AMOUNT OF RS.6,27,165/- BY OBSERVING AS UNDER:- 6.7.2. I FIND THAT THE LD. AO HAD OBSERVED THAT T HE APPELLANT HAD ISSUED GOLD BAR 995 (72,500 GM) AND GOLD BAR 999 (1 4,500 GM) TO CERTAIN ARTISANS, AGGREGATING TO 87,500 GMS, HAVING AGGREGATE PURCHASE PRICE OF RS. 10,72,03 ,710/-. THE APPELLANT HAD PAID AN AMOUNT OF RS.9,17,115/- IN RESPECT OF THE JOB WORK CHARGES FO R FINISHING GOLD BAR ITA NO.673/DEL/2015 24 INTO FURNISHED GOLD JEWELLERY. HOWEVER, ON RETURN, IT HAD RECORDED THE. VALUE OF GOLD JEWELLERY MANUFACTURED AT RS.10,67,92 ,970/- IN ITS BOOKS, WHICH FORM PART OF CLOSING STOCK. ACCORDINGLY, DIFF ERENCE OF RS.13,27,855/- WAS HELD AS UNDERVALUATION OF CLOSIN G STOCK BY THE LD. AO. 6.8. ON PERUSAL OF AGGREGATE QUANTITATIVE DETAILS FILED BY THE APPELLANT VIDE LETTER DATED 10.2.2014,1 FIND THAT T HE APPELLANT HAD OPENING STOCK OF FINISHED GOLD JEWELLERY OF RS.3,28,27,856/- (VAL UED AT RS.1197.78 PER GM). IT HAD PURCHASED FINISHED JEWELLERY HAVING WORTH RS.57,60,55,957/- (VALUED AT RS.1149.20 GM.). FURTHER, DURING THE YEAR, THE APPELLANT HAD ISSUED FOR JOB WORK GOLD BAR 995 (WEIGHING 72,500 GM.) (VALUED AT RS.1232 PER GM.) AND GOLD BAR (WEIG HING 14,500 GM.) (VALUED AT RS.1223.25 PER GM.) FOR JOB WORK. THE AG GREGATE VALUE OF SUCH GOLD BAR THAT WERE GIVEN FOR JOB WORK WAS RS.1 0,72,03,710/-. THE APPELLANT HAS PAID JOB WORK CHARGES OF RS.9,17,115/ - TO THE ARTISANS FOR THE PURPOSE OF JOB WORK FOR MANUFACTURING OF SUCH JEWELLERY. I FIND THAT THESE GOLD BARS WERE ISSUED TO THE ARTISAN ON DIFFERENT DATES START ING FROM 2.4.2008 TILL 23.2.2009 AND AFTER RECEIPT OF THE FINISHED GOODS JEWELLERY FROM SUCH ARTISAN, NONE OF THESE JEWELLERIES WERE SOLD AND ARE INCLUDED IN THE CLOSING STOCK AT A VALUE OF RS.10,6 7,92,970/-. 6.9. THE APPELLANT SUBMITTED BEFORE ME THAT THERE WAS NO UNDER- VALUATION IN THE CLOSING STOCK AND THERE WAS ONLY M IS-CALCULATION ON 2 INSTANCES OF ISSUE OF GOLD BAR TO ONE ARTISAN, MR. SURJEET, I N THE BULLION REGISTER AT THE TIME OF ISSUE. IT WAS SUBMITTED THAT THE SAME WAS I N THE NATURE OF A CLERICAL ERROR. ON CAREFUL CONSIDERATION OF THE ABOVE FACTS AND ON VERIFICATION OF THE COMPUTERIZED STOCK REGISTER PRODUCED BY THE APPELLANT AT THE TIME OF HEARING, I FIND NO MERIT IN THE SUBMISSION MADE BY THE APPELLANT ON FACTS. THE QUANTITY-WISE AND VALUE-WISE DETAILS OF PURCHASE, SALES, ISSUE OF JOB WORK AND OPENING AND CLOSING STOCK IN RESPECT OF GOLD BAR 995, GOLD BAR 999 AND FINISHED GOLD JEWELLERY WERE TAKEN FROM THE STOCK REGISTER OF THE APPELLANT AND EXAMINED ON AN EXCEL SHEET PREPARED AT THE TIME OF HEARING IN THE PRESENCE OF THE AR OF THE APPELLANT. THE SAID DETAILS ARE AS UNDER: ITA NO.673/DEL/2015 25 THE ABOVE DETAILS CLEARLY SHOW THAT THE APPELLANT H AD VALUED THE FINISHED GOLD JEWELLERY, WHICH SHOULD HAVE INCLUDED THE COST OF THE GOLD BAR AND THE JOB WORK CHARGES, AT BELOW THE COS T OF INPUTS ITSELF, FOR EXAMPLE, THE ACTUAL COST OF GOLD BAR 995 THAT W ERE ISSUED FOR JOB WORK WAS RS.1232 PER GRM., WHILE THE ACTUAL COST OF GOLD BAR 999 THAT WERE ISSUED FOR JOB WORK WAS RS.1233.25. HOWEV ER, THE APPELLANT HAS VALUED FINISHED GOLD JEWELLERY MADE W ITH THE HELP OF THE SAID GOLD BAR 999 @1231.49 PER GM. IN ADDITION, VALUE IN RESPECT OF THE JOB WORK CHARGES PAID SHOULD HAVE BE EN INCLUDED IN THE VALUATION OF CLOSING STOCK OF FINISHED JEWELLER Y. IT IS THUS EVIDENT THAT THE APPELLANT HAD UNDER-VALUED ITS CLOSING STO CK OF GOLD JEWELLARY ACCORDINGLY. AS THE APPELLANT HOLDS CLOSI NG STOCK OF GOLD JEWELLERY OF RS.5,04,49,302/- AS ON 31.3.2009 WHILE THE BALANCE AMOUNT OF SUCH JEWELLERY HAS BEEN SOLD OFF, THE PRO PORTIONATE ADDITION TO CLOSING STOCK IN THE RATIO OF 5,04,39,9 02: RS.10,67,92,970 OF THE ABOVE TOTAL UNDER-VALUATION OF RS,13,27,855/- IS SUSTAINED. ACCORDINGLY, THE ADDIT ION OF RS.6,27,165/- IS UPHELD. THE APPELLANT GETS RELIEF OF THE BALANCE AMOUNT. ACCORDINGLY, GROUND NO.6 IS PARTLY ALLOWED. KEEPING IN VIEW THE ABOVE, I HOLD THAT THE LD. AO WAS JUSTIFIE D IN MAKING ADDITION ON THIS AMOUNT TO THE INCOME OF THE APPELL ANT TO THE EXTENT OF RS.6,27,165/- MAKING ADDITION ON THIS AMOUNT TO THE INCOME OF THE APPELLANT TO THE EXTENT OF RS.6,27,165/-. 27. THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATT ENTION OF THE BENCH TO THE WRITTEN SUBMISSION FILED BEFORE THE LEARNED CI T(A) ON THIS ISSUE WHICH READS AS UNDER:- 6.2. AS TO THE DIFFERENCE IN RESPECT OF THESE ITEMS, YOU WOULD KINDLY NOTICE FROM THE GOLD BULLION ACCOU NT THAT ON 06.03.2009 GOLD WAS ISSUED TO THREE JOB WORKERS VID E VOUCHER NOS. 135, 137 AND 139. THEY WERE ISSUED TO JOB WORK ERS SURJIT, MOHAMMED AND SULEIMAN. DUE TO A CLERICAL ER ROR THE ISSUE MADE TO SURJIT VIDE VOUCHER NO. 135 WAS WRONG LY VALUED AT RS. 1574/- PER GRAM INSTEAD OF RS. 1388/- PER GR AM. AS TO THE OTHER TWO VIZ MOHAMMED AND SULEIMAN, THE VALUAT ION ON THAT DAY WAS CORRECTLY DONE AT RS. 1,388/- PER GRAM . ONCE AGAIN ON 09.03.2009 VIDE VOUCHER NOS. 141, 143 AND 145 ISSUES WERE MADE TO THE SAME THREE JOB WORKERS. IN THIS CASE TOO, IN THE CASE OF SURJIT THE VALUATION WAS WRONGL Y DONE AT RS.L574.74 PER GRAM INSTEAD OF RS. 1388/- PER GRAM. THESE ARE GENUINE CLERICAL MISTAKES. THE RATES ON THE RELE VANT DATES WERE AS PER THOSE TAKEN IN THE CASES OF MOHAMMED AN D SULEIMAN. WHEN THE ORNAMENTS WERE RECEIVED BACK ON 09.03.2009 IN 11.03.2009, THE VALUATION IN ALL THE THREE CASES WAS DONE AT RS. 1277/- PER GRAM. IN THIS WAY YOU WO ULD ITA NO.673/DEL/2015 26 KINDLY NOTICE THAT DUE TO THE ERROR IN RECORDING TH E CORRECT RATE AGAINST SURJIT IN THE GOLD BULLION ACCOUNT, THERE I S A RATE DIFFERENCE OF RS. 186.70 PER GRAM WHICH MULTIPLIED BY 2200 GRAMS COMES TO RS. 4,10,740/-. ADDED TO THIS THE MANUFACTURING EXPENSES OF RS.9,17,115/- THE TOTAL B ECOMES A SUM OF RS. 13,27,855/-, WHICH FHE AO ALLEGES IS ON ACCOUNT OF UNDER-VALUAFION. THERE IS NO SUCH UNDERVALUATION. T HERE IS ONLY MIS-CALCULATION IN THE TWO CASES OF SURJIT IN THE GOLD BULLION REGISTER AT THE TIME OF ISSUE. FURTHER THER E HAS BEEN A MISUNDERSTANDING ON THE PART OF THE AO WITH REGARD TO MAKING CHARGES. THESE TWO WRONG ADDITIONS HAVE CULMINATED IN TO AN ADDITION OF RS. 13,2 7,855/- WHICH IT IS PRAYED, BE DELETED. 28. HE SUBMITTED THAT THE LEARNED CIT(A) HAS NOT CONSIDE RED THE SUBMISSION OF THE ASSESSEE ON THIS ISSUE PROPERLY. HE SUB MITTED THAT GIVEN AN OPPORTUNITY, THE ASSESSEE IS IN A POSITION TO SUBSTANT IATE EITHER BEFORE THE ASSESSING OFFICER OR LEARNED CIT(A) THAT THERE IS NO U NDERVALUATION OF CLOSING STOCK. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THIS ISS UE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE FINAL OPPORTUN ITY TO THE ASSESSEE TO SUBSTANTIATE ITS CASE THAT THERE IS NO UND ERVALUATION OF CLOSING STOCK AND DECIDE THE ISSUE AS PER FACT AND LAW. WE HOLD AND DIRECT ACCORDINGLY. GROUND NO.7 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 29. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 15.04.2021. SD/- SD/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI/DATED- 15.04.2021 ITA NO.673/DEL/2015 27 F{X~{T COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSISTANT REGISTRAR, ITAT, DELHI
