TMI Blog2024 (1) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the order passed by the CIT(A) is in gross violation of the principles of natural justice and the additions made by him are not sustainable for this reason alone. Powers of CIT(A) - Whether disallowance of staff welfare expenses and interest expenses was beyond the power of the CIT(A)? - Though section 251 of the Act gives power to the ld.CIT(A) to expand scope of the assessment made, but the Hon ble Supreme Court in various decisions has held that the scope cannot be expanded to discover new source of income. Once an assessment comes before the first appellate authority, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee, but ranges over the whole assessment and it is open to him to correct the Assessing Officer not only with regard to matter raised in appeal but also with regard to all matters considered by the AO . He can revise every process which led to the ultimate computation or assessment. But this power cannot extend to the Ld.CIT(A) discovering new sources of income. The Hon ble apex court laid down this law in CIT vs Shapoorji Pallonji Mistry [ 1962 (2) TMI 12 - SUPREME COURT] which was follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry regarding it. iii) The Commissioner Appeals also ought to have followed judgment of Hon'ble Delhi High Court in the case of CIT vs. Sardarilal Co. (2002) 120 Taxman 595 (Delhi) which held that whenever question of taxability of income from a new source of income is concerned which had not been considered by Assessing Officer, jurisdiction to deal with same in appropriate cases may be dealt with under section 147/148 if requisite conditions are fulfilled and it is inconceivable that in presence of such specific provision a similar power is available to first appropriate authority. iv) The Commissioner Appeals ought to have followed the judgment qf Hon'ble Supreme Court in the case of CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) and also judgment of Hon'ble Supreme Court in the case of CIT vs. RaibahadurHardutrai Motilal Chamaria (1967) 56 ITR 443 (SC). v) Without prejudice to the above, it is submitted that the Commissioner Appeals ought to have quashed the assessment order passed by Deputy Commissioner of Income-Tax, Circle-2(l), Vadodara as same is passed taking recourse of section 145(3) based on incorrect appreciation of facts on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh banking channel as compared to that claimed by the assessee in its books of accounts. Noting these anomalies, along with the fact that the assessee though being a marketing company having only sale commission income as its main income, it was incurring losses, which was not possible he therefore held that audited books of accounts of the assessee were not reliable and accordingly rejected the same in terms of provisions of section 145(3) of the Act. After rejecting the books of accounts, he applied a net profit of 10% of the turnover of the company for the purpose of assessing the taxable income. 5. Aggrieved by the same, the assessee went in appeal before the ld.CIT(A) who after considering the facts of the case before him and the pleadings made by the assessee, held that it was not a case for application of GP rate, but specific disallowance was to be made. He found no anamoly in the claim of salary expenses, and vis- -vis travelling expenses, though he agreed with the AO that their business purpose was not established he went on to make an adhoc disallowance of 20% of the same. Further, the ld.CIT(A) noted that the assessee had no capital of its own, and in fact a negativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the orders of the authorities below. As emanates from the record, and as pointed to us during the course of hearing, the AO had rejected the books of accounts of the assessee and estimated the income of the assessee by applying 10% to the gross turnover of the assessee. His reasons for rejecting the books of accounts of the assessee were i) Unverifiable and un-evidenced travelling expenses; ii) Mismatch in salary as paid through bank and claimed in the books of accounts; iii) His general observation that the assessee being in the marketing business, earning commission income alone, it was showing loss which was not probably in this line of business. 10. As pointed out by the ld.counsel for the assessee, the ld.CIT(A) did not find any merit in the anomaly of salary mismatch between that reflected in the bank and that claimed by the assessee in its books as noted by the AO. But however, he concurred with the AO on the non-verifiability of travelling expenses. Having said so, we have noted that the ld.CIT(A) thereafter went onto hold that in the facts of the present case specific disallowances were to be made and gross profit rate was not to be applied. Impliedly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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