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2024 (4) TMI 739 - AT - Income TaxEnhancement of assessment by CIT(A) u/s 251(2) - addition u/s 56(2)(vii) - HELD THAT:- As from the perusal of the provisions of section 251 of the Act, it is pertinent to note that though the statute has conferred the power of enhancement on the learned CIT(A) while disposing of an appeal against an order of assessment, however, as per the provisions of sub-section (2) the learned CIT(A) is required to grant reasonable opportunity of showing cause against such enhancement to the assessee prior to making any such enhancement. Ostensibly, in the present case, no such opportunity was granted by the learned CIT(A) to the assessee while making the aforesaid enhancement and directing the AO to tax Rs. 25 lakh in the hands of the assessee under section 56(2)(vii)(a) of the Act. Therefore, we are of the considered view that the learned CIT(A), while directing the impugned addition under section 56(2)(vii)(a) of the Act, did not comply with the provisions of section 251(2) of the Act. Addition u/s 56(2)(vii)(a) - Whether such a contravention is an illegality or irregularity? - As u/s 56(2)(vii)(a) of the Act, one of the preconditions for the taxability of the money received by the assessee is that the same should have been received without consideration, which, in our considered view, is not fulfilled in the present case, as the amount was received by the assessee as a security deposit towards the development agreement entered into by the assessee with the developer for development of non-agriculture land. Since one of the conditions for applicability of section 56(2)(vii)(a) of the Act is not satisfied in the present case, we are of the considered view that the impugned enhancement directed by the learned CIT(A) under section 56(2)(vii)(a) of the Act is not sustainable. Therefore, the impugned addition u/s 56(2)(vii)(a) is directed to be deleted. Since the relief has been granted to the assessee on merits, the course of action as noted above in case of non-compliance with the procedure prescribed under section 251(2) of the Act is now rendered to be merely an academic exercise and thus not required in the facts of the present case. Appeal by the assessee is allowed.
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