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2021 (11) TMI 218 - AT - Income TaxEnhancement of total income by CIT-A - Procedure to be followed - HELD THAT:- Enhancement for the assessment year in question was carried out by the CIT(A) without giving any formal intimation to the assessee in this regard and without communicating the basis for arriving at the said figure of enhancement to the assessee. Such approach of the CIT(A) is contrary to statutory protocol as well as law codified in S. 251(2). Power of enhancement conferred under s. 251(1) of the Act is restricted to the subject-matter of assessment or the source of income which have been considered expressly or by clear implication by the AO from the point of view of the taxability of the assessee. Besides, the enhancement proceedings are intrinsically a serious exercise undertaken independently by the CIT(A). Hence, for making any comments adverse to the assessee, it is bounden duty of the CIT(A) to follow due process of law before coming to his own conclusions on unverified facts and before making comments thereon. CIT(A) is bound to confront the assessee with material evidence, if any, in his possession. The statutory obligations in case of enhancement are far wider. As alleged, the impugned enhancement has apparently been made without giving notice to the assessee and without confronting him with his process of reasoning for doing so. The impugned enhancement is thus wholly unsustainable in law. The direction for enhancement is thus quashed and set aside. - Decided in favour of assessee. Enhancement of income to the AO for the earlier assessment years which are not in appeal before him - HELD THAT:- Findings of the CIT(A) seeks to travel beyond the A.Y. 2012-13 in question and seeks to displace the completed assessment of the other years (some of which have already become time barred at the time of passing of original assessment order in appeal) by giving directions to the AO to take remedial actions towards service tax allowed in earlier assessment years. Such findings and directions are outside the scope of powers entrusted under S. 251 as well as S. 150(1) of the Act. To reiterate, Section 150(1) does not permit issue of such directions to the AO without showing as to how such findings/directions are necessary for the purposes of adjudicating the issue of allowability of service tax in the year in question. In the instant case, the issue of allowability of service tax was also examined by the AO under s. 143(3) of the Act for AY 2010-11. The appeal on the point was filed before the CIT(A). The order of the AO thus stood merged with the first appellate order. Such assessment already merged in the order of the higher authority cannot be distributed by the authority of equal rank. Hence, action of the CIT(A) can not be upheld from this perspective as well. As a sequel to such delineation, the directions to the AO to examine the service tax issue in relation to earlier assessment years require to be quashed and expunged. We do so accordingly. Ground No. 3 of the assessee's appeal is thus allowed. Enhanced claim of service tax on actual payment basis before the due date of return - HELD THAT:- Mere admission on the part of the assessee with respect to an addition/disallowance in its original return or in revised return would not ipso facto bar an assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. It is thus well settled that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Revenue authorities cannot enforce untenable actions of the assessee against it which led to declaration of income of higher amount incorrectly. It is thus open to assessee to show that it was over assessed under erroneous impression of law or facts even if it is attributable to the mistake of assessee. We do see potency in the argument laid on behalf of the assessee that both AO and CIT(A) committed error in denying the relief claimed. In our considered view, the action of the revenue authorities is in defiance of the judicial precedents on the issue and thus cannot be countenanced. In our view, the assessee can not be prevented from raising such additional claim merely because the ROI could not be revised. The factual matrix towards actual payments however does not appear to have been verified by the AO. It would thus be in fitness of things to remit the issue back to the file of AO. AO shall allow the higher claim of service tax in accordance with law on being satisfied with the actual payments. Ground no. 4 of the assessee is allowed for statistical purposes. Lump sum disallowances out of wages and 'transportation charges & site expenses' - HELD THAT:- As the assessee could not seriously dispute the rationale for indulging in estimations of disallowance in the facts of the case. A part relief has been granted by the CIT(A) out of estimations under the head 'wages'. No relief has been granted on 'transportation charges and site expenses'. In the absence of any attendant circumstances on record, some estimations cannot be entirely condemned. However, having regard to nature of business and totality of circumstances, a further relief of Rs. One lakh each from two expense heads in question appears just and benign and would meet the ends of justice.
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