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2017 (8) TMI 1554 - AT - Income TaxEnhancement of income on account of total credits in Dummy HO Cash Book Account i.e. expenses debited to that account - NP determination - show cause notice issued u/s 251 - HELD THAT:- The assessee pointed out that detailed reply was filed before the AO and the assessment was made by considering the said expenses and by applying NP rate of 6%. The second plea of assessee before the CIT(A) was that the said documents pertained to number of assessee and the total credits on account of expenses could not be added in the hands of assessee. Later, another show cause notice was issued on 30.11.2012 asking the assessee as to why the total credits of ₹ 1.05 crores as shown in the Dummy HO Cash Book should not be added to the income of assessee. CIT(A) added sum of ₹ 1.05 crores to the income of assessee on account of unexplained receipts. Another addition which was made was on account of cash payment in advance of ₹ 2,19,726/- for which, no enhancement notice was issued by the CIT(A). In the first instance, since no enhancement notice has been given to the assessee in respect of addition of ₹ 2,19,726/-, the same merits to be deleted in the hands of assessee and hence, we direct the AO to delete the same. Addition made by the CIT(A) by way of enhancement notice is on account of unexplained receipts - AO had considered the said seized documents and had estimated the profits in the hands of assessee by applying net profit rate. AO had considered the total receipts in the hands of assessee as per TDS certificates at ₹ 3.71 crores and had also noted the non-receipt of TDS certificates from Nashik Municipal Corporation. In respect of TDS of ₹ 27,581/-, which he held to be equivalent to contract receipts of ₹ 11,07,670/- and the total contract receipts were calculated at ₹ 3.82 crores. The Assessing Officer because of non-verifiability of expenses and the high turnover of contract, estimated the net profit at 6% of the gross receipts. The Assessing Officer thus, had accepted the total contract receipts in the hands of assessee but because of non-verifiability of expenses had estimated the net profit. CIT(A) has found new source of income i.e. total receipts found in the Dummy HO Cash Book at ₹ 1.05 crores and has made the addition on that account. CIT(A) in the present case has travelled beyond the sources of income which was the subject matter of consideration by the AO, wherein the AO after accepting the contract receipts had doubted the expenses claimed by the assessee and accordingly, applied the net profit rate to determine the income in the hands of assessee. CIT(A) had first started enquiries in respect of payments made by the assessee which was the issue considered by the Assessing Officer while completing assessment under section 143(3) of the Act. Later, the CIT(A) has issued the show cause notice, wherein reference was made to receipts, which were accepted by the Assessing Officer and not disturbed. In the absence of any enquiry by the Assessing Officer regarding receipts recorded in the Dummy HO Cash Book, the same was outside the purview of enhancement scope of the CIT(A). In case any new source of income is to be added in the hands of assessee which was not considered by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases, is to be dealt with under section 147/148 of the Act and / or under section 263 of the Act, where requisite conditions are fulfilled. Such is the proposition laid down by the Hon’ble High Court of Delhi in CIT Vs. Sardari Lal & Co. [2001 (9) TMI 1130 - DELHI HIGH COURT] . Applying the said propositions and the dictate of the Hon'ble Supreme Court on the issue, we hold that it is not open to the CIT(A) to introduce in the assessment a new source of income and the assessment had to be confined to those items of income which were the subject matter of original assessment. Accordingly, we reverse the order of CIT(A) in this regard and delete the addition of ₹ 1.05 crores. The grounds of appeal raised by the assessee are thus, allowed. Levy of penalty u/s 271(1)(c) - HELD THAT:- Perusal of penalty order reflects that the penalty has been levied on account of enhancement made by the CIT(A), where the CIT(A) had directed the Assessing Officer to issue notice under section 274 r.w.s. 271(1)(c). The notice was returned by the postal authorities and thereafter, the same was affixed at the premises of assessee. The CIT(A) levied penalty on the addition of ₹ 1.05 crores and ₹ 2,19,726/-. Both these additions were made in the hands of assessee pursuant to enhancement made by the CIT(A). We have in the paras hereinabove already deleted the enhancement and in view thereof, we hereby delete the penalty levied under section 271(1)(c) of the Act on such enhanced income. The grounds of appeal raised by the assessee are thus, allowed.
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