PRAMOD RATAN PATIL, THANE V. ASST CIT CIR 3, KALYAN

ITA 7329/MUM/2016

AI Insights

The case involves cross-appeals by the assessee, Pramod Ratan Patil, and the ACIT against the appellate order passed by the CIT (Appeals). The primary issues revolved around the validity of notices, the interpretation and application of Sections 40A(3) and 68 of the Income Tax Act, and the reliance on third-party statements without cross-examination. The Tribunal examined various additions and disallowances made by the ACIT and the enhancements made by the CIT (Appeals), particularly focusing on cash payments and undisclosed income. The Tribunal's decision involved a detailed analysis of the legal provisions and the factual matrix presented by both parties.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131309 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 24-11-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 12-12-2016
• Other Referred Cases: CIT v. Shapoorji Pallonji Mistry, CIT v. Sardari Lal and Co.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Set aside; Fuel Charges
• Section: 147; 131; 68; 148; 37; 263; 40A(3); 194C; 251; 13; 22

Judgement Text

Page | 1 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 I N THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM I TA No. 7329 /M um/ 2016 (Ass es smen t Y ea r 2011–12) S h ri P ra mo d R a tan Pa ti l A–1 , Ch an dresh Oa sis, L o dh a H eav en , Ka l yan Sh il roa d, Dombi v al i (ea st), T ha n e–421 20 1 Vs. ACIT Ci rc l e–3, Ka l yan , 2 nd F lo o r, R a ni M an si on , Mu rbad R o a d, Ka l yan w est–4 2 130 1 (Appellant) (Respondent) PAN No. AADPP6274F I TA No. 3851 /M um/ 2016 (Ass es smen t Y ea r 2 0 1 1–12) ACIT Ci rc l e–3, Ka l yan , 2 nd F lo o r, R a ni M an si on , Mu rbad R o a d, Ka l yan w est–4 2 130 1 Vs. S h ri P ra mo d R a tan Pa ti l A–1 , Ch an dresh Oa sis, L o dh a H eav en , Ka l yan Sh il roa d, Dombi v al i (ea st), T ha n e–421 20 1 (Appellant) (Respondent) Assessee by : M r. Sa ty a prak a sh S ing h , AR Revenue by : M r. Nih ar R an jan S ama l , DR Date of h ea r ing: 2 5/ 11/ 20 22 Date of pronouncement : 08/ 02/ 20 23 O R D E R PER PRASHANT MAHARISHI, AM: 01. ITA No. 7239/Mum/2016 is filed by Mr. Pramod Ratan Patil (assessee/appellant) and ITA No. 3851/Mum/2016 is filed by the Asst. Commissioner of Income-Tax, Circle 3, Kalyan (the learned AO) against Appellate order passed by the Commissioner of Income-tax (Appeals)-3, Nasik (The learned CIT (A)) dated 28 th March, 2016 for A.Y. 2011-12. Page | 2 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 02. Assessee has raised following grounds of appeal:- “1. On facts and circumstances of the case and in law, the fundamental requirement of serving notice is invalid. Hence, entire assessment is void ab initio. 2. On facts and circumstances of the case and in law, the assessment proceedings of learned AO and learned CIT (A) is invalid. Thus making entire assessment and appeal proceedings void and liable to be quashed. 3. On facts and circumstances of the case and in law, the learned AO and CIT (A) has erred in interpretation and it's application w.r.t. section 40A (3) and section 68. 4. On facts and circumstances of the case and in law, the learned AO and CIT (A) has erred in relying on third party statement without offering cross- examination. 5. On facts and in the circumstances of the case and in law, the learned CIT (A) has erred in enhancing income by wrongly applying treatment tax in relation to genuine transactions. 6. On facts and circumstances of the case and in law, the learned AO and CIT (A) has narrated modus operandi of transactions thereby based his order on assumptions and surmises rendering the order as null and void. The Appellant craves leave to add, amend, alter vary and / or withdraw any or all the above grounds of Appeal. PRAYER: The Appellant prays that the addition made to income as : Page | 3 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 a. Disallowance in respect of cash payments of Rs.9,98,000/- be deleted. b. Taxed as income in respect of Cash deposit of Rs. 5,25,000/- be deleted. c. Taxed as income in respect of receipts from Lodha Dwellers PL of Rs. 1,33,87,820/- be deleted. d. Taxed as income in respect of receipts from Luster engg Co of Rs. 92,400/- be deleted. e. Enhancements made by Hon CIT (A) in respect of following be deleted: i. Cash paymentfortransportRs.6,58,911/- ii. Cash payments to material (murmurm) suppliers Rs.54,33,800/- (LD AO had added Rs. 9,98,000/-) iii. Cashpurchases10,41,180/-. iv. CashpaymentsRs.85000/- v. Election receipts Rs. 97,83,899/- Vi. Cash depositRs.4,00,500/- vii. Other income Rs.5,16,277/-” 03. Ld Assessing Officer has raised following grounds of appeal: - “1.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the purchases disallowed u/s 37 of the three parties namely V.A. Inamdar, Lucky Enterprises and Geetesh & Co. amounting to Rs. 1,67,13,503 as per figures mentioned in para 8.5 of the CIT(A) order. Page | 4 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 1.2 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the above purchases despite the fact mentioned in the CIT(A) order that two parties i.e. V.A. Inamdar and Lucky Enterprises could not be found and the objection raised by the A.O. in respect of Geetesh & Co. in his remand report was not considered. 1.3 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the above purchases even though the Ld. CIT(A) has enhanced the technical disallowance u/s 40A(3) amounting to Rs. 54,33,800/- only in respect of two parties i.e. Lucky Enterprises and Geetesh & Co. 2. The order of the CIT(A) may be vacated and that of the Assessing Officer may be restored. 3. The appellant craves leave to add, amend, alter or delete any ground of appeal.” 04. Assessee is an individual engaged in the business of supply of soil, filed his return of income on 27 September 2011 at ₹22,28,870/-. The return of income was picked up for scrutiny and assessment order under Section 143(3) of the Income-tax Act, 1961 (the Act) was passed on 28 th February, 2014 at the total income of ₹5,84,12,807/-wherein following additions/disallowances were made:- i. of ₹44,35,916/- disallowed as unproved transportation charges under Section 37 of the Act. ii. Of ₹2,87,26,562/- unproved purchases under Section 37 of the Act. iii. Disallowance under Section 40A(3) of the Act of ₹9,98,000/- out of purchases. iv. Unproved hiring charges disallowed under Section 37 and under Section 40 (a)(ia) of the Act of ₹63,02,742/-. Page | 5 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 v. Addition under Section 68 of the Act on account of cash deposit of ₹10,50,000/-. vi. Undisclosed income from Lodha Dwellers Pvt. Ltd. of ₹1,44,76,220/- vii. Undisclosed income under Section 68 of the Act from Luster Engineering Company of ₹92,400/. 05. Thus the learned assessing officer has made the following addition to the total income of the assessee:- serial number Nature of addition on disallowance Amount rupees 1 Transportation charges under section 37 ₹ 4,435,916 2 Hiring charges under section 37 ₹ 6,302,742 3 Unproved purchases under section 37 2,87,26,562 4 Disallowance under section 40 (3) 9,98,000 5 Cash deposit under section 68 ₹ 1,050,000 6 Undisclosed income from Lodha dwellers private limited ₹ 14,476,200 7 Undisclosed income from Luster engineering under section 68 ₹ 92,400 Total 5,60,81,840 Page | 6 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 06. Assessee aggrieved with the order of the learned Assessing Officer preferred appeal before the learned CIT (A), who passed an order on 28 th March, 2016 partly allowing the appeal of the assessee and also enhancing the assessment by making certain fresh additions/disallowances as Under:- serial number Nature of addition on disallowance Addition made in the assessment order Addition confirmed by the learned CIT appeal Enhancement made by the learned CIT – A 1 Transportation charges under section 37 ₹ 4,435,916 Nil Disallowance by invoking the provisions of section 40 A (3) of Rs. 2,91,330/– 2 Hiring charges under section 37 ₹ 6,302,742 Nil Enhancement on account of cash payment under section 40A (3) in hiring charges ₹ 85,000/– 3 Unproved purchases under section 37 2,87,26,562 Rs. 2, 11,500 4 Disallowance 9,98,000 ₹ 998,800 Enhancement Page | 7 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 under section 40A (3) of ₹ 5,433,800 on account of cash payment and further disallowance of 25% of expenses of ₹ 4,164,720 on account of unverified purchases 5 Cash deposit under section 68 ₹ 1,050,000 ₹ 525,000/– Nil 6 Undisclosed income from Lodha dwellers private limited ₹ 14,476,200 ₹ 13,387,820 Nil 7 Undisclosed income from Luster engineering under section 68 ₹ 92,400 92,400 Nil 8 enhancement made by the learned CIT – A on account of personal balance sheet and profit Rs. 97,83,899 on account of deposit in bank accounts Page | 8 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 and loss account cash deposit of ₹ 4,00,500 in Kotak bank account on account of other income of ₹ 516,277 Total 5,60,81,840 07. Therefore, the order of the learned CIT (A) is challenged by the assessee on various additions confirmed as well as enhancement made by the learned CIT (A). The Ld AO is aggrieved with deletion of the addition/ disallowance made by the learned CIT (A).Thus, these cross appeals. 08. The learned Authorized Representative has filed detailed paper books containing two box files of various submissions and written submission made before the lower authorities. The learned Authorized Representative also refers issue wise submissions. 09. The ld Departmental representative has also filed a paper book and also written submission. The learned Departmental Representative supported the orders of the learned Assessing Officer with respect to the additions/ disallowances made by the learned Assessing Officer and supported the order of the learned CIT (A), where these additions are confirmed. The learned Departmental Representative also vehemently supported the order of the learned CIT (A), where he enhanced the income of the assessee. He submitted that the learned CIT (A) has properly assumed jurisdiction under Section 251 of the Act and after giving, an opportunity for hearing, enhanced the income. 010. The learned Authorized Representative vehemently submitted that the learned CIT (A) has made two types of enhancements. He submitted that the first set up enhancements are with respect to the examination of the details at the time of dealing with various disallowance by the learned Page | 9 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 Assessing Officer and second type of enhancements are by finding altogether a new source of income which were not considered and decided by the ld AO . He submitted that both these type of enhancements are not permitted. On the issue of new source of income, he submitted that it is beyond the power of the learned CIT (A). 011. We have carefully considered the rival contentions and perused he orders of the lower authorities. We have also carefully perused written submissions and paper books filed by both the parties. We have also carefully gone through various decisions cited by both parties. 012. First, we come to the appeal of the learned Assessing Officer. As per ground no. 1.1, the learned Assessing Officer is aggrieved where the learned CIT (A) has deleted the disallowance for purchase from three parties M/s VA Inamdar, Lucky Enterprise & Geetesh & Co. 013. The facts leading to the disallowance shows that assessee has made purchases from six different entities amounting to ₹2,87,26,562/–, which was disallowed by the learned Assessing Officer, as the notices sent under Section 136(6) of the Act to the parties were not served and the assessee submitted the ledger accounts which were not signed. During the course of appellate proceedings, the assessee submitted the signed ledger confirmation of all the parties that showed the details of purchases and mode of payment, the copies of the bills raised by these parties were also produced along with permanent account number of the supplier entities. All the suppliers also submitted an affidavit that they had supplied material to the assessee and his proprietary concerned M/s Yogiraj Enterprises. 014. These details were sent by the learned CIT (A) for the examination to the learned Assessing Officer and assessee was asked to reconcile the corresponding sales against the purchases. Assessee submitted such detail and based on this, the learned CIT (A) deleted the addition with respect to the above three parties. With respect to VA Inamdar, the Assessing Officer did not give any adverse comment. With respect to Geetesh & Co., the proprietor of the firm appeared before the learned Assessing Officer and confirmed the supply of goods. Similar is the case with respect to Lucky Page | 10 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 Enterprises. The learned CIT (A) noted that when there are sales, purchases are bound to be there and therefore, it cannot be disallowed. We do not find any infirmity in the order of the learned CIT (A) to that extent. Accordingly, ground no.1.1 and 1.2 of the appeal deserves to be dismissed. 015. Ground no. 1.3 is with respect to the action of the learned CIT (A) in allowing the deduction of above purchases and even though the learned CIT (A) enhanced the addition by invoking the provision of Section 40A(3) of the Act amounting to ₹54,33,800/-. We found that as per Para 9.3, the learned CIT (A) noted that though the purchases are genuine, however, the payments for such purchases have been made in violation of Section 40A (3) of the Act. We find that even in the genuine purchase if it violates the Provisions of Section 40A (3) of the Act, separate disallowance can be made despite allowing the deduction of purchase. In view of this, we do not find any infirmity in the order of the learned CIT (A) in invoking the provision of Section 40A (3) of the Act despite deleting the disallowance with respect to unverified purchases. Accordingly, ground no.1.3 of the appeal is dismissed. 016. In the appeal of the learned Assessing Officer, there are no other grounds. Accordingly, appeal of the learned Assessing Officer is dismissed. 017. Now we come to the appeal of the assessee. 018. The first ground of appeal is with respect to service of notice. No arguments were advanced; hence, it is dismissed. 019. Ground no.2 is with respect to challenge the assessment proceedings. No arguments were advanced; hence, this ground of appeal is also dismissed. 020. Ground no. 3 to 6 relates to various additions combined in these three grounds. Assessee has also challenged the enhancements made by the learned CIT (A).We deal with each of the issues. 021. The first addition relates to a sum of Rs 2, 91,330/– made under section 40A (3) and ₹ 367,581 for cash transportation expenses. Fact of the issue shows that the learned assessing officer has disallowed the transportation Page | 11 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 charges of ₹ 4,435,916 related to several parties out of the total expenditure incurred by the assessee of Rs. 1,01,77,516/–. The total amount was paid to 12 parties. However, the learned assessing officer disallowed the sum with respect to only 4 parties as the learned assessing officer has issued notices under section 133 (6) to the various parties and the notices returned by the postal authorities in some cases and in one case the concerned person did not file the reply. On examination of these details the learned CIT – A has deleted the addition with respect to the above sum. However, on verification of the details, he found that there are certain cash payments of more than ₹ 20,000 in transportation charges. He verified that out of the total cash payment of transportation of expenses of ₹ 1,761,657/–, Rs 291,330 are more than ₹ 20,000. Therefore, according to him as per the provisions of section 40 A (3) the above sum is disallowable. Accordingly, he issued notice under section 251 (2) as per letter dated 7/3/2016 that why the above amount should not be added. The assessee submitted that the amount of expenditure is incurred for various persons for diesel expenses, which was required to be paid at the petrol pump fulfilling fuels to heavy vehicles. The learned CIT – A went through the Ledger account and found that in the Ledger account it is simply mentioned that diesel and fuel charges and the appellant does not have any plausible explanation to justify cash payment of more than 20,000. Accordingly, he made an enhancement under section 251 of the act of Rs 2,91,330/–. 022. With respect to the balance sum of cash payment of ₹ 14,70,327/- , assessee produced cash vouchers, which were verified by the learned CIT appeal and noted that the assessee has not mentioned the truck number and quantity of goods transported. Further, some of the vouchers are unsigned. The learned CIT – A observed that some of the handwriting is similar though the names of the persons are different. Therefore, he disallowed 25% of such expenses of RS. 14,70,327/– calling for addition and enhancement. 023. Therefore, the original disallowance made by the learned assessing officer was with respect to Rs. 4,435,916/- on account of transportation charges. The learned CIT – A deleted the above disallowance. He found that assessee has made a cash payment of transportation expenditure Page | 12 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 amounting to Rs. 291,330/– which is disallowable under section 40 A (3). He further found that cash payment of Rs.14,70,327/- made by the assessee though the same is not disallowable under section 40 A (3) of the act but in view of inadequate details mentioned in the vouchers, he disallowed 25% of such expenditure. 024. The learned authorized representative submitted that enhancement is not proper as the learned CIT – A has made the disallowance under section 40 A (3) of the act which was not made by the learned assessing officer and further disallowed 25% of the expenditure which were not crossing the threshold provided under that section, for reason that the vouchers did not contain the signature, quantity etc. It was further stated that the disallowance at the rate of 25% of the expenditure is unwarranted. This proves that the learned CIT – A has also accepted 75% of the expenditure as genuine. Accordingly, it was stated that the addition made by the learned CIT – A is not correct 025. The learned departmental representative vehemently supported the orders of the lower authorities. It was further stated that it is the power of the learned CIT – A to enhance the addition. It was further stated that it is not the new source of income which has been discovered by the learned CIT – A. It was further stated that when the expenditure incurred is in clear-cut violation of the provisions of section 40A (3) of the act, there is no reason to not to disallow the same. 026. We have carefully considered the rival contention and perused the orders of the lower authorities. The facts are very clear that the learned assessing officer has made the addition because of transportation charges of Rs. 4,435,916 for the reason that some of the parties did not respond to the queries raised by the learned assessing officer. The learned CIT – A on remand report of the learned assessing officer on the submission of the assessee and thereafter held that disallowance made by the learned assessing officer on account of transportation expenditure is not sustainable. Accordingly, he deleted the addition of Rs. 4,435,916. However, during the course of appellate proceedings, he found the details submitted by the assessee contain cash payment of transportation charges. Therefore, he found that the provisions of section 251 (2) of the act are to Page | 13 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 be invoked. He invoked those provisions vide letter dated 7/3/2016 that why a sum of Rs. 291,330/– should not be disallowed under section 40 A (3) of the act. The assessee submitted his reply. Based on this he made a disallowance of the above sum under section 40 A (3) of the act. With respect to the balance cash payment of Rs. 4,070,317, he made a disallowance and the rate of 25% for inadequate details mentioned in the supporting vouchers. 027. On the objection of the learned authorized representative against the provisions of section 251 (2) of the act, we find that the learned CIT – A has not discovered any new source of income. He has examined the details and find that the provisions of section 40 A (3) of the act are violated by the assessee and therefore he invoked such provision. This was not seen by the ld AO. Therefore, he merely corrected an error. Therefore, we do not find any infirmity in the action of the learned CIT – A in invoking the provisions of enhancement of income. 028. Now we come to the enhancement of income of Rs. 291,330/- under section 40 A (3) of the act. We find that the learned CIT – A has noted that on 12 instances the assessee has made payment more than Rs. 20,000 for transportation expenditure in the month of January 2011 itself. The assessee before the learned CIT – A has also stated that assessee has made payment of amount more than Rs. 20,000/- in cash for the various drivers for diesel expenses, which was required to pay at the petrol pump filling fuel and other consumables. We find that there is no such exception given under the provisions of section 40 (A) (3) of the act and respective rules 6DD of IT Rules 1962. Accordingly we confirm disallowance of Rs. 291,313/– made under section 40 A (3) of the act. 029. Coming to the addition of Rs. 367,581/- for cash payment in transportation expenditure which is not in violation of the provisions of section 40 A (3) of the act but the payment are made in cash and the learned CIT – A has disallowed 25% of such expenses. We find that when learned CIT – A dealing with the addition made by the learned assessing officer has categorically deleted the complete disallowance of Rs. 4,435,916/– on account of transportation charges holding it to be completely genuine, he does not have any authority to disallow 25% of the Page | 14 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 part of such expenditure holding that it lacks the genuineness. Such finding of the learned CIT – A is contrary to the finding given by him while deleting disallowance made by the learned assessing officer. While deleting the addition, he confirmed that the expenses are genuine and while making ad hoc disallowance, he gave a reason that expenses are not verifiable. Accordingly we direct the learned assessing officer to delete the enhancement made by the learned CIT – A of Rs. 367,581/– on account of 25% disallowance of total expenditure of Rs. 14,70,327/– 030. Accordingly, The total addition made by the learned assessing officer of transportation charges of Rs. 4,435,916, which was completely deleted by the learned CIT – A, his order, is confirmed. Further, the enhancement made by the learned CIT – A of Rs 291,330/- is upheld and further the addition made by the learned CIT – A of Rs. 367,581/– is directed to be deleted and his order is reversed. Therefore out of the total transportation charges addition of Rs 291,330/– under section 40 A (3) of the act is sustained. 031. Now we come to the second issue of addition on account of cash payment of Rs. 998,000/- made by the learned assessing officer under section 40 A (3) of the act. The learned assessing officer noted that there are two parties namely lucky enterprises to whom payment of Rs. 298,000 has been made and M/S Geetesh & Co to which the payment of Rs. 7 lakhs have been made which are in violation of the provisions of section 40 A (3) of the act and same are required to be disallowed. 032. The learned CIT – A found the Ledger account of both these parties and noted that case of one of the entity assessee has made the payment of Rs. 4,750,000 in cash and with respect to lucky enterprises, the assessee has made the payment of Rs. 1,681,800 in cash. It was also noted that against the cash payment the assessee has mentioned the name of the employees of the assessee itself. Therefore, the learned CIT appeal noted that there are differences in the Ledger accounts submitted before the assessing officer and submitted before him. Otherwise how could the learned assessing officer would have noted the disallowance of Rs. 998,000/- only when the total cash payment made is amounting to Rs. 6,431,800/- with respect to these two parties. Page | 15 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 033. Assessee submitted before him that cash was paid to the employees of the assessee for purchase of the material. Those employees have in turn paid to the various parties for purchase of Morum. With respect to the difference between the Ledger account produced before the learned assessing officer and the learned CIT – A, it was explained before the first appellate authority that assessee has given the tally back up to his consultant and in what format he has printed the Ledger is not known. It was further stated that the Ledger produced before the learned CIT – A are also the same. 034. Based on this the learned CIT – A made an enhancement noting that actual cash payment is of Rs. 6,431,800 which is in violation of the provisions of section 40 A (3) whereas the learned assessing officer has made disallowance of Rs. 998,000/- only under that section. Therefore, he issued notice by the order sheet entry only for enhancement of income. Accordingly the total sum of Rs. 6,431,800 he applied the provisions of section 40 (A) (3) of the act. The total addition made by the learned assessing officer of Rs. 998,000/– he made an enhancement of Rs. 5,433,800 u/s 40 A (3) of the act. 035. He further verified the purchase expenditure of the assessee. He found that assessee has also made a cash purchases of Rs. 4,164,720 and therefore the provisions of section 40 A (3) of the act does not apply. He therefore noted that on such sum in absence of proper details on the vouchers for payment of transportation charges, he disallowed 25% of such expenditure. Accordingly, he made a further addition of Rs. 1,041,180/-. 036. The learned Authorized representative submitted that the Ledger account produced before the assessee and the Ledger account produced before the learned CIT – A are not different. In fact, during the course of assessment proceedings the assessee gave the tally back up to the person who represented the assessee. It is a different manner of taking the report of tally printout of the Ledgers. He submitted that there is no difference between the Ledger account produced before the assessing officer and the Ledger accounts produced before the learned CIT – A both are part of the same set of books of accounts Page | 16 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 037. With respect to the cash payment is submitted that assessee has only made the cash payment of Rs. 998,000 with respect to the two parties and has not made the cash payment of Rs. 4,750,000 and Rs. 1,681,800 to two different parties mentioned by the learned CIT – A.. 038. with respect to the cash payment it was submitted that for the purpose of disallowance under section 40 A (3) of the act, each amount of expenditure incurred by the assessee as well as the payment made by the assessee both should be in excess of Rs. 20,000. if anyone of them is less than Rs. 20,000 the disallowance under section 40 A (3) of the act cannot be made. It was further stated that the assessee has not made any cash payment to the parties for the purchase of the goods wherein the payment and the amount of Bill both are in excess of Rs. 20,000. Therefore the disallowance made by the learned AO and enhancement made by the learned CIT – A both are incorrect. He referred to the exhaustive details filed in the paper book before us and submitted that in all those instances, the bill and the cash payment both are not in excess of Rs. 20,000. He submitted that the learned CIT – A the learned assessing officer is merely looked at the Ledger account and did not see the amount of the bills given by those parties. He further referred to the Ledger account stating that against the amount paid by the assessee the name of the employees have been mentioned. Some of The entries are journal entries and ld CIT (A) has considered it as cash payments. He further referred that in case of lucky enterprises the name of the assessee himself is written with respect to Rs. 10 lakhs that is journal entry. He submitted that no such cash payments have been made in violation of the provisions of section 40 A (3) of the act. 039. The learned departmental representative vehemently supported the order of the learned CIT – M submitted that assessee has recorded cash payment in the cashbook with respect to the two parties. Therefore, the disallowance has been correctly made. 040. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that assessee has purchased material from M/s lucky enterprises and M/s Geetesh & Co. The learned assessing officer found that with respect to these two parties the assessee has made Page | 17 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 cash payment of Rs.998,000 which is in violation of the provisions of section 40 A (3) of the act for purchase of goods. Therefore, he disallowed the same. With respect to the learned CIT – A he found that Ledger account of the above parties shows cash payment with respect to first party of a sum of Rs. 47,50,000/- and in case of second party a sum of Rs. 1,651,800/- . Further, the claim of the assessee is also that that he has not made any payment in excess of Rs. 20,000 which could have been disallowed under section 40 A (3) of the act. Further, it was also contended that none of the bills that the payments have been made is in excess of Rs. 20,000/–. It is further the claim of the assessee is that there are several payments made by the employees and the assessee himself was named therein which are pertaining to several bills and none of the appeal is in excess of Rs. 20,000 warranting any disallowance under section 40 A (3) of the act. It was further claimed that there are two different version of the print out of the same Ledger of the tally books of accounts of the assessee, which were presented before the learned assessing officer as well as before the learned CIT – A which warranted invoking the provisions of section 251 (2) of the act by the learned CIT – A. It is also a fact that in one of the entries name of the assessee himself is mentioned. In some of the entries are its journal entries and not cash book entries. In view of the above facts where there is no clear cut answer available what kind of expenditure the assessee has incurred which is in violation of the provisions of section 40 A (3) of the act, whether all the bills of the expenditure and the cash payment related to those expenditure are in excess of the provisions of section 40 A(3) of the act are not, whether the amount of mentioned against the name of the employees in the respective account of those parties are comprising of several bills or not, whether the cash payment mentioning the name of the employees, stated to be bunch of cash payments less than the prescribed limit, is in excess of Rs. 20,000 not. Further how the journal entries can be considered as cash payments. In fact, the ld CIT (A) has tabulated the data from the ledger accounts of the parties, where as the cash payments needs to be verified on examination of cashbook. In view of all these facts we set aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to substantiate the payment with respect to the purchases whether they are in any violation of the provisions of section 40 A (3) of Page | 18 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 the act or not. Assessee is also directed to categorically show the amount of journal entries in the ledger considered by the ld CIT (A) are not cash payments. Accordingly, with respect to the addition of Rs. 5,433,800/– under section 40 A (3) of the act is remitted back to the file of the learned assessing officer for fresh verification and examination. The ld may decide applicability of section 40 A (3) and consequent disallowance thereafter. Needless to say the onus lies on the assessee to demonstrate that there is no disallowance called for u/s 40A 93) of the Act. 041. With respect to the disallowance made by the learned CIT – A by making an enhancement by disallowing 25% of the expenditure of Rs. 4,164,720/– which does not have the proper description for purchases made by the assessee, we find that it is not the new source of income which has been found by the learned CIT – A, therefore, the addition as such does arise from the assessment order and the details available before the learned assessing officer. Therefore, objection of Assessee against enhancement of income on this item is rejected. 042. Learned CIT – A has made an ad hoc disallowance of 25% of such expenditure where he did not find that the vouchers contain the proper details about the purchase of the goods. The learned CIT appeal found that a sum of Rs. 4,164,720 is a cash purchases made by the assessee wherein the details with respect to the truck number, quantity of goods transported is not mentioned on the vouchers. Some of the vouchers are unsigned and some of the vouchers contain the similar handwriting but in different names. We find that the learned CIT – A is disallowing the expenditure out of the purchases. The amount of expenditure incurred on the transportation of expenditure the learned CIT has categorically held that the amount of expenditure incurred on transportation of goods by the assessee is genuine. The finding of the learned CIT appeal was based on the fact that the amount of transportation expenditure incurred by the assessee was corresponding to the income shown by the assessee. Here in this case the transportation expenditure for the material was held to be genuine by ld CIT (A) , however he held that the material so purchased which were transported are not genuine. The reasons given by him are the inadequate details of transportation. The fact itself shows that when the transportation expenditure is held to be genuine by the learned CIT – A, Page | 19 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 how he can say that such transportation expenditure required for transportation of the goods purchased by the assessee, but such purchases are not genuine. Even otherwise if the learned CIT – A find that a sum of purchases made by the assessee amounting to Rs.4,164,720 is non genuine, there is no justification to allow balance 75% of such expenditure by the learned CIT – A – instead of 25% of such expenditure. If he did not find the detail adequate, he should made disallowance of 100 % of Rs. 4,164,720. Therefore, there is a dichotomy/contradiction in the findings of the learned CIT – A in disallowing 25% of Rs. 4,164,720/- out of purchases. Accordingly, the disallowance of Rs. 241,180 made by the learned CIT – A because of enhancement is deleted. 043. Accordingly, out of the purchases, disallowance made by the learned assessing officer of Rs. 998,000/– and enhancement of Rs. 5,433,800/- made by the learned CIT – A is restored back to the file of the learned AO for fresh verification. Further disallowance made by the learned CIT appeal of Rs. 1,041,180 is deleted. 044. The next addition is with respect to the hiring charges of Rs. 63,02,742/-. The learned CIT appeal deleted the above disallowance holding that the expenditure incurred by the assessee on hiring charges is genuine. However he invoked the provisions of section 251 (2) of the act with respect to the amount of hiring charges holding that assessee has made a cash payment of Rs. 85,000 out of those sum in violation of the provisions of section 40 (A) (3) of the act. 045. This issue is identical to the amount of the purchases where the learned CIT – A has made disallowance by invoking the provisions of section 251 (2) of the act. The disallowance contested here by the assessee is of Rs. 85,000 only wherein in case of one party the name of the employees of the assessee were mentioned. On 1/10/2010 a sum of Rs. 25,000 were alleged to be paid by the assessee’s employee in cash and further on 11/2/2011 a sum of Rs. 60,000 is paid by the employee of the assessee in cash, which resulted into the addition of Rs. 85,000/– under section 40 A (3) of the act. Page | 20 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 046. The argument of both the parties on this issue were similar to the arguments made while contesting disallowance under section 40 A (3) of the act with respect to the purchases of the material. The assessee’s claim is that there is no cash payment made by the assessee which is in violation of the provisions of section 40 A (3) of the act and the learned departmental representative has categorically relied upon the orders of the lower authorities. 047. We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that this issue is identical to the case of the assessee with respect to the purchases made by the assessee in violation of the provisions of section 40 A (3) of the act as alleged by the learned first appellate authority. We have already set aside that issue back to the file of the learned assessing officer to verify whether there is any violation of the provisions of section 40 A (3) of the act considering the explanation made by the assessee. Therefore for the similar reasons we set-aside this addition also back to the file of the learned assessing officer with similar direction. 048. We now come to the addition of Rs. 144,76,220/- on account of receipt from Lodha dwellers private limited. The learned assessing officer has noted that as per the details available with the Department the assessee has received above sum from Lodha dwellers private limited on tax deduction at source has also been made under section 194C and 194I of the act. The assessee has claimed the credit of the entire tax deduction at source appearing in form number 26 AS. During the course of assessment proceedings, the assessee was asked to reconcile the above sum. The learned assessing officer further made enquiry from Lodha dwellers private limited who answered by a letter dated 17/05/2013 confirming that an amount of Rs 1 44,76,220/– was paid to the assessee as a compensation to vacate the land. The assessee was confronted with this information. In the end, the learned assessing officer made the above addition. 049. The assessee contested the above addition before the learned CIT – A. The learned CIT – A also obtained the remand report on the submission of the assessee. The assessee contested that assessee has incurred expenditure of Rs. 10,919,000/- for removing encroachments on the above land by paying Page | 21 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 to various persons who encroached the land. Therefore, the above sum does not comprise the income of the assessee. The assessee submitted that above sum is not on unaccounted income but is disclosed in the personal Audited profit and loss account and personal balance sheet. The assessee has also submitted the copy of same. It was found that assessee has received a sum of Rs 122,65,461/- encroachments settlement of land from Lodha dwellers private limited against which the assessee has incurred the direct expenditure of settlement of Rs. 10,919,000/–. The assessee submitted the affidavit of 19 persons to whom the payment for compensation of settlement was made on behalf of the Lodha dwellers. All of them have confirmed on affidavit that they have received the above payment from the assessee. On the remand report, the assessee once again submitted the affidavit of 19 persons where Rs. 8,919,000 were paid to those farmers who have confirmed the receipt of the payment from the assessee. This was the additional evidences submitted before the AO in remand proceedings. The statement of several persons was also recorded under section 131 of the act. The assessee also explained that out of the sum claimed of Rs.1 44,76,220, the assessee has not received a sum of Rs. 1,122,360 and further sum of Rs. 1,088,400 was not received on account of land settlement work but was received on account of sale of Morum which is already been disclosed in the books of accounts of the assessee in his proprietary concern. Thus, the claim of the assessee verified by the learned assessing officer during the remand proceedings clearly showed that that assessee has only received a sum of Rs. 12,265,460/- on account of settlement of land, out of which the assessee has incurred expenditure of Rs. 10,919,000/- paid to different persons, out of which the affidavits were filed with respect to 19 persons for payment of Rs. 8,919,000/- as per the list of those persons. 050. The learned CIT – A examined the complete details and additional evidences in the form of balance sheet of the assessee and affidavits that were not available before the assessing officer. The learned CIT – A rejected all the affidavits stating that i. it was executed on the stamp paper on which the declaration of having received the money for surrendering the right on encroached land is given are all purchased on 20/12/2014 by Page | 22 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 one advocate who is incidentally the authorized representative of the assessee. ii. The above stamp papers are also serially numbered. iii. All the affidavits are of common language. iv. They have also been notarized by one person. Therefore, it created out. v. The learned CIT – A asked the assessee whether these persons who received the money have shown income in their return, their PAN and to produce those persons. vi. The learned CIT – A further asked the copies of the bank account of these persons where the above sum has been deposited. vii. The assessee was also asked to produce these persons. 051. The assessee produced all these persons and the statement were recorded by the learned CIT – A. The statements of all these persons were recorded in presence of the advocate of the assessee. All the persons have confirmed that they have received payment from the assessee. Assessee also gave the permanent account number of the main person of the family who received the above payment. Those persons also submitted nature of occupation, and their entitlement to receive such compensation, land area, survey number of land evicted from, amount of compensation received, who paid the compensation, how they were enjoying occupation of the land. 052. However the learned CIT – A rejected all the statement of those persons finding out some infirmities in those statements. It was noted by him that when the payments are made to three or four persons of one family, only one person of that family knows the details about the transaction. All other persons have confirmed the statement of the one family member. Further, the other family members are either illiterate or ignorant about the transaction. All the persons are very poor and do not have any bank account. The money is split into small amounts in various names so that Page | 23 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 appears that there were large number of persons to whom compensation was paid for surrendering their rights. The stamp papers on which these affidavits are made are brought by one person, all these stamp papers are having running serial number. The subject matter was also typed similarly. The statements were signed either in the office of the assessee or at the residence of these persons. In the statement all, these persons are stated that their family was growing crop on this land. However, there were no details of agricultural expenditure incurred by those people and agricultural income earned by those persons. None of the persons was aware about the exact owner of the land. All those persons who received the sum did not show where they have invested the above sum. Therefore, the learned CIT – A was of the view that had the persons actually received the money, they would have invested the same in their business or had brought some tangible assets with the above money. Further, none of the recipients of the sum has paid any taxes therefore; he held that above payment is not genuine. 053. As the statement was recorded in the presence of the authorized representative of the assessee, the statements were also given to the assessee. It was also confronted to him that he is the main person who have prepared this affidavit. He explained that he is handling the appeal matter of the assessee and therefore as the assessee has made payment to the various persons, their affidavits were obtained. It was further stated that the affidavits was signed in the office of the assessee or at the residence of those persons. With respect to the notary of those affidavits, he also explained that he is a witness to that process. 054. The learned CIT appeal further noted that these affidavits were prepared only to give a color of genuineness. It was further held that affidavit of these persons could be obtained by the assessee being a zilla panchayat member who hold the power over the above person in that area. Accordingly, he concluded that the assessee has received payment of Rs.133,87,820 /- which is undisclosed income of the assessee. 055. The learned authorized representative submitted that Lodha dwellers private limited has paid the assessee a sum of Rs. 1 22,65,464 for settlement of the land . The land was having encroachment by several Page | 24 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 persons. The assessee was asked to help the developer to get this land settled and encroachment removed by amicable settlement. The assessee entered into discussions with parties who are having the encroachment over the above land and Paid a sum of Rs. 1,09,19,000 to different persons. The land was vacated and handed over to the developer. To substantiate the claim of the amount received, the learned assessing officer received the independent confirmation from the developer. For justification of the payment, assessee produced the affidavit of all 19 parties before the assessing officer. All the 19 parties were produced before the AO for verification; all these parties confirmed having encroachment over the land and receiving the sum as stated in their affidavit. It was further stated that affidavit was made to give the evidence of the sum received by all these parties for vacation of the land. It was further stated that this was the work given to the assessee by the developer for the reason that assessee was having very good relationship with all those persons. The assessee was also engaged, as proper compensation to those persons for the encroachment was also to be given without any disturbances in development of the project and to avoid any litigation. In this regard, the affidavits were prepared those affidavits cannot be ignored. Further, when the persons who made the affidavit in person have also confirmed the fact of receiving the above money because of releasing the encroachment, the fact of affidavit has been proved. Naturally, not all those persons could have invested the sum because of the smallness of the amount. Those persons did not receive any substantial sum by which any investment could have been made. All those persons were of the small means. It was therefore submitted that the allegations of the learned CIT appeal are clearly unfounded. He therefore submitted that assessee has offered income out of the above sum which is already taxed by the learned assessing officer and therefore the addition confirmed by the learned CIT – A is devoid of any merit. 056. The learned departmental representative vehemently supported the order of the learned CIT – A. He specifically referred to paragraph number 13.11 of the appellate order. Accordingly he submitted that the assessee has received payment of ₹ 13,387,820 from Lodha dwellers which is not shown Page | 25 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 in the return of income by the assessee has been correctly added by the learned CIT – A. 057. We have carefully considered the rival contention and perused the order of the lower authorities. The fact shows that the learned assessing officer has made an addition of ₹ 14,476,220 as undisclosed income. It was seen from the ITS details available on the Department system against the assessee's permanent account number that during the year the assessee has received a sum of ₹ 14,476,220/– from M/s Lodha dwellers private limited and tax deduction at source thereon has also been made. The assessee has also claimed credit for the entire tax deduction at source appearing in forms number 26AS. The assessee has not disclosed these receipts in the return filed. Therefore, the assessee was provided a copy of the form number 26AS details asking him to reconcile and explain the amounts with reference to the return filed. The above sum was not found reflected in the assessee's books of accounts. The assessee submitted as per letter dated 7/2/2014 the unsigned the Ledger extract of Lodha dwellers private limited in its books along with the copies of the bills along with the bank statement of the assessee. Meanwhile the learned assessing officer also collected confirmation from Lodha dwellers limited wherein it was stated that a sum of ₹ 14,476,220/– was paid to the assessee by way of compensation to vacate lands. The assessee did not reflect the above sum in his books of accounts. The learned AO further noted that above sum has been paid to the assessee and not to its proprietary concern and therefore he made the addition of the above sum. When the matter reached before the learned CIT – A, assessee submitted a separate balance sheet with the profit and loss account and disclosed net profit of ₹ 2,416,230/- which was an undisclosed income. In the profit and loss account the payment for settlement of the land was shown at ₹ 12,265,460 whereas the Lodha dwellers has confirmed having paid a sum of ₹ 14,476,220/–. Against this receipt, the assessee has claimed the expenses of ₹ 10,919,000/– paid for settlement to various persons. The assessee produced the affidavits of all those parties to whom the amount was paid. Assessee submitted that as the above amount was accounted in the personal profit and loss account and personal balance sheet, which was audited, filed before the learned CIT – A. It was also stated that at the time of filing of the return, the Page | 26 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 assessee forgot to add the net profit of ₹ 24,16,230/–. Assessee submitted name of 19 persons to whom a sum of ₹ 8,919,000 was paid. Assessee also explained that for vacating land, assessee received a sum of ₹ 12,265,460 and the balance sum of ₹ 2,210,760/– was received on sale of Morum. Assessee further submitted that out of the above sum of ₹ 144 lakhs assessee did not receive a sum of ₹ 1,122,360. The respective cheque number of the amount not received by the assessee was also explained. Assessee also submitted the affidavit of those persons and those persons were produced. All of these persons were also examined on oath and they have confirmed that they have received the above sum. The learned CIT – A also enquired about whether the above sum has been shown by these parties in their return of income. The persons were also required to be produced. The assessee produced them. The learned CIT – A examined the statement of all these parties and found that that the payments have been shown in the name of the family members who are petty employees of the assessee or dependent upon him as a supplier of material. Only one of the family members know about the transaction and other family members are either illiterate or ignorant. All these persons are of very poor standard and do not have the bank account. The money payment is split into small amounts in various names. Further, the stamp papers on which these affidavits are executed are bought by one person. The stamp papers were also in running serial number. The language of the affidavit was also identical. The learned CIT – A also noted that there would have been tripartite agreement for sale in purchases between the real owner and Lodha and the encroachers for vacating land. The same agreement was not there. None of the recipients despite having received the money has any details of investment made by them. According to him, had these persons actually received the money, they would have invested the same in their businesses or had purchased some tangible assets with the money. In addition, none of the recipients has paid any taxes. Accordingly, he disbelieved the whole transaction and made an addition of ₹ 13,387,820. On careful examination of the letter of Lodha dwellers private limited dated 17 October 2013 submitted before the learned assessing officer, it clearly states that during the financial year 2010 – 11, the company has purchased various lands and assessee and others had encroached these land. The company has paid assessee as compensation to vacate these Page | 27 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 lands. The assessee also submitted a chart wherein 57 cheques were tabulated amounting to ₹ 14,476,220/–. The above company also submitted the bank statement where all these cheques were cleared. It was stated that that company is engaged in the business of construction of residential building and total payment was made through banking channel. From the above facts, it was clear that there was some land, which was acquired by above company, and to get the clear title over the property because of encroachment it paid the above sum to the assessee. Out of the above sum of ₹ 14,476,220/–, the assessee has admitted that the sum of ₹ 12,265,460/– was received from the above company and the balance was received because of sale of Morum. It was further stated that some of the cheques have not been received by the assessee. In this case, there was an encroachment is confirmed by Lodha dwellers private limited. The assessee has paid amount to various persons; those persons have confirmed that they have received the payment for clearing the encroachment on the above land. The affidavits and signed stamp receipt were also produced. In examination, those parties have also accepted receiving the above sum. Therefore, it cannot be said that that there was no encroachment. Further, had there not been any encouragement on the land acquired by Lodha dwellers private limited, there is no reason for making payment of the above sum to the assessee. Merely because the affidavit are prepared identically, on stamp papers purchased serially, notarized by one notary cannot be given credence over the statement made by those persons in person produced before the lower authorities. Further, all these parties are in the statements submitted that they are persons of small means, therefore, they did not file the return of income or did not make any investment out of the money received for handing over the land. All the affidavits submitted by these persons have clearly identified the land, therefore, the finding of the learned CIT – A that they do not know about the location of the land is not correct. Further, in their statement recorded by the lower authorities, they have clearly identified the survey number of the land. Many of the persons have also identified the area of the land in their statement. They have also confirmed that for how many years they were occupying this land. They have expressed that they do not know who the owner of the land is. Naturally, when the land is encroached, it may be possible that they will not know who the original Page | 28 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 owner is. Assessee has already offered a sum of ₹ 2,416,230/– as his income for this reason. The sum of ₹ 2,210,760/– has already been offered as income on account of sale of Morum. Further, the Lodha dwellers private limited itself as certified that there was an encroachment of the assessee as well as other persons also. Therefore, assessee has already offered income of Rs. 24,16,230/- which is approximately 20% of the above sum. In view of these facts, we do not find that the whole of the sum received by the assessee from Lodha dwellers is chargeable to tax in the hands of the assessee because, there were many encroachers who have confirmed received payment for removing such encroachment. Accordingly, we find that the sum of 20% added in the hands of the assessee of ₹ 2,416,230/– is sufficient to be taxed in the hands of the assessee. The above sum is also justified for reason that out of the sum of ₹ 12,265,460/– received by the assessee, the total sum of ₹ 10,919,000/– is already disbursed living a sum of only ₹ 1,346,460/– with the assessee. Accordingly, we confirm the addition to the extent of ₹ 2,416,230 because of the above transaction. Accordingly, the learned assessing officer is directed to retain the above addition to the extent of Rs 24,16,230/- and delete the balance amount added by the learned CIT – A. 058. The next item of addition is with respect to the addition of ₹ 1,050,000 made by the learned assessing officer under section 68 of the income tax act. The learned AO mentioned that assessee has deposited as cash amount of the above sum with Union Bank of India and Federal Bank and the source of which is not explained. During the course of assessment the assessee could not produced any detail. However, at the time of appellate proceedings assessee submitted that he does not have any bank account with the federal bank. The learned assessing officer has also not given any information about the figure of deposit of the above sum in that bank account. Assessee submitted the statement of the bank account with Union Bank of India wherein there is a cash deposit of only ₹ 525,000/– was made. 059. learned CIT – A, on examination of the above detail, retained the addition of ₹ 525,000 and granted relief of the balance sum. The assessee is in appeal before us. Page | 29 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 060. The learned authorized representative referred to the statement of the Union Bank of India account number 50161 from 1 April 2010 to 31 of March 2011 and submitted that prior to the cash deposit of ₹ 525,000 on 1/1/2011 the assessee has withdrawn a sum of ₹ 16 lakhs from the same bank account in cash. This cash was available with the assessee for redepositing the above sum. It was submitted that assessee has withdrawn a sum of ₹ 5 to lakhs on for 16 April 2010, ₹ 3 lakhs on 17 April 2010, ₹ 3 lakhs on 19 April 2010 and a further sum of ₹ 5 lakhs on 4 May 2010. Therefore, the assessee was having a sufficient amount available with him in cash deposit a sum of ₹ 525,000 in cash on 1/1/2011. He submitted that as the assessee was having enough sources available with him, the amount of addition confirmed by the learned CIT – A deserves to be deleted. 061. The learned departmental representative vehemently supported the order of the learned CIT – A. 062. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that assessee has deposited in his bank account with union bank of India account number 50161 a sum of ₹ 525,000/- on 1/1/2011. Prior to the deposit of the above cash assessee has withdrawn the sum of ₹ 16 lakhs in cash from the same bank account. Therefore, assessee was having enough sources of funds available in cash with him to deposit the above sum of ₹ 525,000 in cash in the above bank account. There is no finding of the lower authorities that the sum of cash withdrawn on earlier dates was utilized for some other purposes and assessee was not having the above cash available in his hands. In view of this we direct the learned assessing officer to delete the above addition of ₹ 525,000 because of cash deposited in union bank of India account number 50161. 063. The next addition relates to an undisclosed income from luster engineering company of ₹ 92,400. During the course of assessment proceedings, the learned AO found that the appellant has received an amount of ₹ 92,400 from the above company as reflected in AIR data. There is no information available with respect to the above sum during the appellate proceedings also. Accordingly, we find no infirmity in the order of the learned CIT (A) Page | 30 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 in confirming the above addition of ₹ 92,400/– as undisclosed receipt from luster engineering company. 064. The next addition relates to the enhancement made by the learned CIT – A based on the personal balance sheet and profit and loss account filed during the course of appellate proceedings. Based on this the learned CIT – A issued a notice under section 251 (2) of the act on 7/3/2016 which is reproduced at page number 57 of the appellate order. The learned CIT – A noted that in the above balance sheet and amount of ₹ 97,83,899/– is shown to have been received by the assessee in the bank account which has not been disclosed in the original return of income. After discussion, the above sum was added to the total income of the assessee. 065. The learned authorized representative basically objected the provisions of section 251 (2) of the act stating that the learned CIT – A is empowered to issue the notice for enhancement only to the income which was subject matter of consideration for the purpose of assessment by the income tax officer. He submitted that the above sum was not subject to consideration for the purpose of assessment by the learned assessing officer and therefore the learned CIT – A could not have made enhancement of the above sum. For this proposition he relied upon the decision of the honorable Supreme Court in case of Commissioner of income tax versus Shapporji Pallonji Mistry 44 ITR 891. It was further stated that the right course of action that could have been taken by the learned CIT – A was to direct the learned assessing officer to issue notice under section 147 of the act or invoking the revisionary powers under section 263 of the income tax act. 066. The learned departmental representative supported the order of the ld CIT (A). 067. We have carefully considered the rival contention and perused the order of the dl CIT (A) and notice u/s 251 of the Act issued by him for enhancement of income. In this case, the balance sheet and P& L Account were first time available with the ld CIT (A). In the P & l Account, he finds certain details, which were not considered and decided by the ld AO. On looking that income, he issued notice u/s 251 of the Act. Only issue before us is Page | 31 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 whether the ld CIT (A) has such powers. The Appellate powers of ld CIT (A) shows that in an appeal against an order of assessment, the appellate authority may confirm, reduce, enhance, or annul the assessment. In an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. The explanation to the provision further emphasizes that the appellate authority may consider and decide any matter arising out of proceedings in which the order appealed against was passed, though such matter was not raised before him by the appellant. 068. In CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), the assessment year was 1947-48, and the case was finally decided in February 14, 1962. Therefore, the Act considered was pre-Independence enactment. Examining section 31 of the old Act, the Hon. Supreme Court has held that there is no doubt that the appellate authority can "enhance the assessment". This power must, at least, fall within the words "enhance the assessment", if they are not to be rendered wholly nugatory. Therefore, what can be enhanced which is the matter of Assessment only. Thus, it is clear that either it should be part of Return of income or arising in assessment proceedings. The principle emerging from various pronouncements referred and cited before us it is clear that the first appellate authority is invested with very wide powers 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 about which the assessee makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only regarding a matter raised by the assessee in appeal but also regarding any other matter considered by the Assessing Officer and determined in assessment. 069. In CIT v. Sardari Lal and Co. [2001] 251 ITR 864 (Delhi) [FB], Honourable Delhi High court held that inevitable conclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147, or section 148, or even section 263 of the Act if requisite conditions are fulfilled. It is inconceivable that in the presence of such specific Page | 32 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 provisions, a similar power is available to the first appellate authority. Thus powers under section 251 are, indeed, very wide ; but, wide as they are, they do not go to the extent of displacing powers under, say, sections 147, 148, and 263 of the Act. In the present case, the issues on which notice u/s 251 is issued were not at all before ld AO or in Assessment proceedings or were part of Assessment order. The only sum in these proceeding was the addition on account of Lodha Dwellers Pvt Ltd where in we have already upheld the powers of the ld CIT (A) u/s 251 of the Act, as it was part of the Assessment order itself. Therefore, those items, which were not part of the ROI, Assessment proceedings or Assessment order, cannot be considered by the ld CIT (A) for enhancement. Right course would have been to intimate ld AO to issue notice u/s 148 of the Act or to propose revision u/s 263 of the Act. In view of the above , we quash the enhancement to the extent other issues other than income from Lodha Dwellers Pvt Ltd. Accordingly this ground of appeal is allowed. 070. Accordingly, appeal of the Assessee is partly allowed with above direction. 071. In the result, Appeal of Ld AO is dismissed, appeal of assessee is allowed partly. Order pronounced in the open court on 08.02.2023 S d/- S d/- (KAVITHA RAJAGOPAL) (P R ASH ANT M AH AR IS H I) (JUD IC I AL M E M BE R ) (ACCO UNT ANT M EM BE R ) Mumbai, Dated: 08.02.2023 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Page | 33 ITA no. 7329 & 3851/Mum/2016 Pramod Ratan Patil; A.Y. 11–12 Income Tax Appellate Tribunal, Mumbai