TMI Blog2019 (12) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... inciple of natural justice. In our opinion, the finding of the learned CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. Accordingly, we uphold the authority of the learned CIT(A) in enhancing the income. The grounds of appeal of the assessee in this respect are accordingly dismissed. Difference in cash balance available in bank as well as in books of accounts - HELD THAT:- The assessee in its written submissions has raised the issue that opening balance of trade receivables has not been taken into account by the learned CIT(A) and also no adjustment has been made for other non-cash expenditure like depreciation, forex loss booked, etc. CIT(DR) has submitted that issue needs verification at the end of lower authorities. We are in agreement with the learned DR because this is a matter of factual verification on the basis of financial statement of earlier year as well as financial statement of the year under consideration. Accordingly, we set aside the finding of the learned CIT(A) on the issue of addition and restore the matter back to the file of the Ld. CIT(A) for deciding afresh after providing adequate opportunity of being heard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason for the proposed additions and also by not considering the appellant s explanation submitted to him on 15.3.2018. iv) The Ld. CIT (Appeal) erred in making addition of ₹ 4,51,21,897/- as unexplained cash in hand though it formed part of closing bank balance as reported in audited financial statements for which confirmation were duly placed on record before the Ld. CIT (Appeal) and the Assessing Officer. 2. (i) That on the facts and in circumstances of the case, the Ld. CIT (Appeal) erred in making further addition of ₹ 10,77,29J43/- by treating 50% of outstanding trade liability as per Balance Sheet of the appellant as its income. (ii) Without prejudice, the Ld. CIT (Appeal) erred in passing a selfcontradictory order by treating 50% of outstanding trade liability of the appellant as bogus though treating the foreign exchange loss on its revaluation as business expenditure. (iii) Without prejudice, the Ld. CIT (Appeal) erred in not adjusting the opening balance of trade liabilities brought forward from 31.3.2012 included in the closing balance of trade liabilities as on 31.3.2013. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition on the basis of incorrect appreciation of facts and erroneous computation of availability of the cash during financial year 2012-13 and erred in not taking into account opening balance of trade receivables and not making adjustment for other non-cash expenditures like depreciation, forex loss booked etc. The Ld. counsel submitted that the learned CIT(A) is not justified in enhancing the income of the assessee on the issues which has already been investigated by the Assessing Officer and found satisfactory by him. 4. On the merit of the addition, the Ld. counsel of the assessee referred to various pages of the paper book and submitted that the learned CIT(A) has wrongly computed availability of the cash in books of account at ₹ 2.11 crore as against availability of ₹ 6.43 crores. The Ld. counsel also submitted that the learned CIT(A) is not justified in making addition for outstanding liabilities in absence of any waiver of liability in the year under consideration. He submitted that even the current liability raised in the year under consideration is a genuine one and which has been repaid by the assessee in subsequent assessment year a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) has made basic error in not taking into account the opening balance of Trade Receivables and also not making adjustment for other non cash expenditure like depreciation, forex loss booked etc. C. Adjustments are also required to be made in respect of Increase/Decrease in Inventories , Loans Advances , Other Current Non-Current Assets Other current liabilities provisions (PI. ref. Notes 4-23 of accounts at Pg. 68-8O/V0I.-I). The Reconciliation statement clearly shows that cash and cash equivalent during the year was as on 31.3.2013 was of ₹ 6.91 crores. (Net increase in cash 2.85 Cr. + O. PI. 4.06 Cr.) (Pg. 52/Supp. PB). (Pg. 74/Vol- I) D. Another adverse observation of the CIT(A) is: There was absolutely no justification of having such huge cash in hand idle when the appellant was saddled with enormous liabilities Note 29 at Pg. 85/Vol.-I clarifies the reason for delay in payment to the AEs as follows:- The company has incurred loss of Rs.,2,403,915 (PY: ₹ 9,283,378) during the year and has accumulated losses as at March 31, 2013 of ₹ 20,839 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee on the very imports, and then turn around and say no evidence of imports/ purchases was furnished. Acceptance of Foreign Exchange loss work-sheets by Ld. CIT (A) in para 7 of his order clearly proves that he accepted the fact that the Appellant had imported goods from Pneumax Spa Italy, which was subject to duty. These worksheets were furnished to the AO/CIT(A) as annexure to assessee s letter dt. 19.1.2016 addressed to AO (Pg. 157-62/Vol-II). It is enclosed as Annexure 2 at Pg. 20-27of this synopsis. Appellant Company had submitted details of goods imported, Exchange Rate on the date of import and the actual payment on the goods imported and record of the exchange loss booked for the difference in exchange rate. The Consigner s invoices were duly backed with cost sheet, Bill of Entry, and Custom Duty challans. Complete details of Bank account and confirmation were also furnished to the AO. Details of goods imported on CIF basis and Expenditure in foreign currency are given in Note 24 of the audited accounts at pg. 80/VoLI. Also in Form 3CD u/s 44AB at Pg. 112, 131,138 also Form 3CEB at pg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has made addition in respect of the source of the income already declared by the assessee in the return of income and thus in view of the following decisions the learned CIT(A) having coterminous of the Assessing Officer, he was justified in enhancing the income : 1. Jute Corporation of India versus CIT 187 ITR 688 (SC) 2. CIT Vs Nirbheram Deluram 224 ITR 610 (SC) 3. CIT Vs Goel Die Cast Ltd 297 ITR 72 ( P H) 6. On the merit of the case, she submitted that in view of the computation of the cash availability and other documents in respect of opening trade receivables etc. filed by the assessee need verification at the hand of the Assessing Officer and, therefore, the matter may be restored back to the file of learned CIT(A) or to the Assessing Officer for deciding afresh. 7. We have heard the rival submission of the parties and perused the relevant material on record. As far as ground of the assessee related to challenge to the action of the learned CIT(A) in enhancing the income of the assessee is concerned, we find that the CIT(A) issued show cause notice under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding of the learned CIT(A) on the issue. In CIT vs. Kanpur Coal Syndicate (supra) three Judge Bench of The Hon ble Supreme Court discussed the scope of s. 31(3)(a) of the Indian IT Act, 1922, which is almost identical to s. 251(1)(a). The Hon ble Supreme Court held as under: If an appeal lies, s. 31 of the Act describes the powers of the AAC in such an appeal. Under s. 31(3)(a), in disposing of such an appeal, the AAC may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under cl. (b) thereof he may set aside the assessment and direct the ITO to make a fresh assessment. The AAC has, therefore, plenary powers in disposing of an appeal. The scope of his power is conterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has filed to do. 8.1 We also find that Hon ble Supreme Court on the issue of the power of learned CIT(A) in enhancing the income, in the case of Jute Corporation of India (supra), referring to the decision of the Hon ble Supreme Court in the case of Kanpur coal syndicate (supra) has observed as under: The above observatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracted provisions of s. 251 of the Act, which defines powers of the CIT(A), it is evident that appellate authority has been given powers to confirm, reduce, enhance or annul assessment. The only pre-condition mentioned for exercising the powers to enhance the income is that the same could be done only after providing adequate opportunity of hearing to the assessee. There is no restriction under the Act that the information, which could form basis for enhancement of income, could not be sourced from the AO. The enough safeguard for exercising of such powers in the form of principle of natural justice has been provided. 6. An identical issue was considered by a Division Bench of Kerala High Court in Popular Automobiles vs. CIT (1990) 89 CTR (Ker) 248 : (1991) 187 ITR 86 (Ker) wherein it was held as under : It was contended before us that it is open to the CIT(A) to enhance the assessment suo motu. The question that was mooted was that the CIT(A) was not obliged to do so, on a motion made by the ITO in that regard. In other words, it was argued that the power vested in the CIT(A), even to enhance an assessment , is a suo motu disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment and invite the appellate authority to exercise the power vested in him to enhance the assessment or take other steps to undo the harm or error. It is idle to contend that though the CIT(A) can exercise the power to enhance the assessment even suo motu, such a power cannot be exercised when the occasion for the exercise of such power is on an alert made by the ITO or brought to his notice by the ITO (assessing authority). The ITO cannot prefer an appeal against his own assessment. It may be that it is open to him either to rectify the order under s. 154 of the Act or initiate proceedings for reassessment, if it is justified in law, or request the CIT to exercise his suo motu power of revision under s. 263 of the IT Act. It is also open to the ITO to point out the error or omission and request the CIT(A), before whom the appeal filed by the assessee is pending, to take reasonable steps to see that a true and proper assessment is rendered in the case. The powers aforesaid are concurrent. We hold that the ITO had locus standi or right to alert the CIT(A) and bring to his notice that s. 37(3A) of the Act is applicable in the instant case and that an enhancement in dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving such huge cash in hand idle when the appellant was saddled with enormous liabilities. The accounts submitted by the appellant with the return of income and before the Ld. AO did not explain why the appellant was having such huge cash in hand when it was having far more bigger liabilities to discharge and why the cash in hand was not utilized to discharge the liabilities of the appellant. The accounts also did not explain from where the additional cash in hand of ₹ 4,51,21,897/- in the books of accounts of the appellant when the cash available was ₹ 6,62,61,215/- against the actual cash availability as per the accounts of the appellant was only ₹ 2,11,39,318/-. 14, The Ld. Counsel for the appellant sought to explain that out of total trade payables of ₹ 21,54,59,486/- an amount of ₹ 21,22,07,061/- was pertaining to the related foreign concerned M/s Pneumax SpA Italy while the remaining was in respect of unrelated parties. A detailed break up of the outstanding of the related foreign party was also shown. It was stated that because of the tough competition given by the Chinese concerns the appellant was not able to pay to its sis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hased by the appellant from its sister concern in Italy were not placed on record. No documentary evidence that the said goods which were shown to have been traded by the appellant from its sister concern had actually reached this country from Italy were furnished. No details of custom duty, etc., paid were furnished either. The appellant also not brought any material on record that the liabilities were incurred from its sister concern in the exigencies of its business. Some vague arguments were advanced like tough competition by the Chinese concern. These arguments are too general in nature to support the case of the appellant. 10.1 The Ld. counsel of the assessee submitted that no addition could be made in the year under consideration in respect of opening trade payables in absence of liability waved off by the assessee in terms of section 41(1) of the Act. In our opinion, this is settled principle and no addition can be made in respect of the trading liability of the earlier years except under section 41(1) of the Act. As far as the liability of the current year is concerned, the learned CIT(A) has observed that no documentary evidence in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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