TMI Blog1991 (1) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... and 10per cent in brokens. During the assessment proceedings wherever there is a shortfall or excess yield of brokens corresponding additions were made in a number of rice mill cases. The results shown by the assessee are far from satisfactory. "The ITO, therefore, was not satisfied with the yield in rice and yield in brokens and, therefore, rejected the plea of the assessee and made the addition of Rs. 2,12,524. The appellant was not also successful before the first appellate authority who, in his appellate order, observed that: The probability of disposing of the brokens outside the books cannot be ruled out. In the circumstances as referred to above it appears that the addition so made by taking the brokens at 10per cent is quite fair and reasonable and deserves to be confirmed." He accordingly confirmed the addition of Rs. 2,12,524. 2. Before us the learned counsel points out that the order of CIT(A) is contrary to law and facts of the case. The CIT(A) erred in sustaining the addition of Rs. 2,12,524 made by the ITO towards the alleged excess yield of brokens out of the paddy milled. The learned counsel urges that the CIT(A) ought to have accepted the yield of brokens a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, has not brought any material on record to substantiate his findings. The plain readings of the order of the ITO show that he has made the addition only on the basis of suspicion. With a view to make the addition, it is incumbent on the part of the ITO to prove the factum of concealment. The ITO has also to disprove the contention of the assessee that the yield in brokens is on the high side. It may not be out of place to mention that the low yield in rice in brokens may raise some suspicion but it cannot be taken as a conclusive evidence that the book result of the assessee is not acceptable. Unless the ITO is able to prove that the assessee has deliberately shown the low yield in rice and high yield in brokens, no addition can be sustained. The CIT(A) also has mechanically accepted the findings of the ITO without bringing any material on record to justify the addition. 5. It may also be mentioned that the ITO has mainly made the addition under the impression that the assessee has sold the brokens outside the books of accounts. This allegation has not been proved either by the ITO or by the CIT(A). No. 169 evidence has been brought to establish that the assessee sold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons recorded by him and the decision relied on by him, the CIT(A) enhanced the income of the appellant by a sum of Rs. 3,41,847. 8. Before us the learned counsel for the assessee has objected to enhancement He has argued that under the provisions of s. 251, the CIT(A) cannot enhance the income of the assessee on the matters which were not considered by the ITO unless the ITO had considered the valuation of the closing stock, during the course of the assessment proceedings, the CIT(A) had no legal jurisdiction to enhance the income by estimating the closing stock at market rate. In this connection the learned counsel relied on the Supreme Court decisions in the case of CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) and CIT vs. Rai Bahadur Hardutroy Motilal Chammaria (1967) 66 ITR 443 (SC). The learned counsel has also drawn our attention to the decision of the Bombay High Court in the case of Lokenath Tolaram vs. CIT (1986) 50 CTR (Bom) 237: (1986) 161 ITR 82 (Bom). He urges that in view of these decisions, the CIT(A) had no jurisdiction to enhance the income of the assessee by a sum of Rs. 3,41,847. 9. On merit the learned counsel argues that the CIT(A) ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urges that the CIT(A) has rightly enhanced the income of the assessee. On merit the learned Deptl. Representative points out that on the dissolution of the firm, as a result of the death of the partner, the stock has to be valued at market rate. On dissolution of the firm, on the death of the partner, the old firm comes to an end and the new firm is born. The stock in the hands of the new firm, therefore, has to be taken at the market rate. The learned Deptl. Representative also draws our attention to the fact that this issue has been concluded by the jurisdictional High Court in the case of V.C. Venkata Subbaiah Chetty Sons vs. CIT (1988) 74 CTR (AP) 60 : (1988) 171 ITR 590 (AP) and Sri Ramakrishna Tobacco Co. vs. CIT (1989) 176 ITR 108 (AP). The learned Deptl. Representative, therefore, justified the enhancement made by the CIT(A). 11. We have heard the rival submissions in the light of judicial precedents relied upon. We have also perused the provisions of s.251 of the IT Act. It is true that the appellate authority has plenary powers in disposing of an appeal. The scope of his power is co-terminus with that of the ITO and he can do what the ITO could do and can also direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e section of the IT Act, 1961. Following the decision of the Supreme Court in the case Shapoorji Pallonji Mistry, the Bombay High Court in the case reported in Lokenath Tolaram vs. CIT (1986) 50 CTR (Bom) 237 : (1986) 161 ITR 82 (Bom) has laid down the similar position. 13. In this connection we have also examined the Explanation to s. 251 of the IT Act. The said Explanation empowers the first appellate Authority to consider and decide any matter arising out of the proceedings in which the order appealed against was passed. The words "any matter arising out of the proceedings" are not wide enough to include a matter which should have been raised before or considered by the ITO but was not raised before him or considered by him These words mean any matter which was processed by the ITO or was raised before him for being processed The proceedings before the ITO are limited to the matters expressly or impliedly raised by the assessee and the processing done by him of these matters. The Explanation does not authorise consideration of any matter by the first appellate authority which was not raised before or processed by the ITO. 14. Considering the facts of the case and the judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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