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TMI Blog1989 (11) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... rest paid at Rs. 30,846 was not allowed. According to the ITO, the interest was not paid. It was only credited in the creditor's a/c. Therefore, he assessed the income at Rs. 79,040 against income of Rs. 18,300 as shown by the assessee. 4. Being aggrieved, the assessee carried the matter before the AAC. The AAC instead of deciding the issues, issued a notice for enhancement on the items or the issues which were neither considered by the ITO nor raised by the assessee before him. The notice was regarding enhancement of income of Rs. 3,24,000 under s. 2(22)(e), Rs. 97,303 under s. 2(24)(Iv) and cash credits of Rs. 1,32,000. 5. After issue of notice and considering the various submissions he was of the view that the income of the assessee should be enhanced by the above amounts. In para 53 of his order, he considered the fresh material and on the basis thereof it was held that a sum of Rs. 3,24,000 has been made available to the assessee firm by M/s. Saraf textile Mils P. Ltd. During the period relevant to the impugned assessment proceedings, which were enjoyed by the partners. As there is no distinction between the assessee firm and its partners as per the Indian partnership Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 344 (Raj) and CIT vs. SETH MANICKLAL FOMRA (1975) 99 ITR 470 (Mad). Shri Ranka in counter reply submitted that the decision in 53 ITR 225 was entirely on different aspects and the other of the ITO was set aside with directions make the de novo assessments. While in the case of the assessee, the AAC has directed the ITO to make specific additions and order is not set aside to make the de novo assessments. But if it is just a partial setting aside and that with a binding direction for enhancement or addition of income, therefore, the ratio of decision in 53 ITR 225 is not applicable. 8. I heard the rival submissions and considered the material on record. The facts are not in dispute that the items regarding addition under s. 2(22)(e), 2(24)(iv) and cash credits were neither considered by the ITO nor any issue is raised in respect of those amounts before the AAC, whether the AAC can consider the enhancement in respect of items or issues which were neither raised nor considered by the ITO. These have been considered in the following cases relied upon by both the sides. In CIT vs. SHAPOORJI PALLONJI MISTRY. Their Lordships of the Supreme Court have taken the view that the "AAC has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources and to assess them." In CIT vs. KANPUR COAL SYNDICATE, their Lordships of the Supreme Court have considered the enhancement power of AAC. The issue before their Lordships was that "s. 3 of the 1992 Act gives impliedly an option to assess the total income of the assessee but it does not specify the particular office who can exercise the option. It is in the first instance for the ITO to exercise that opinion. This is part of the process of assessment. Where, however, the ITO assesses the association of persons instead of the members individually an appeal lies under s. 30 to the AAC, who under cl. (b) of s. 31(3) has power to set aside the assessment and direct the ITO to assess the members individually. The AAC has plenary powers in disposing of an appeal. The scope of his powers is co-terminus with that of the ITO. He can do what the ITO can do and can also direct him to do what he has failed to do-" In the case of CIT vs. JAY TEXTILE MILLS, their Lordships of the Punjab & Haryana High Court had taken the view that the AAC can set aside and remand the matter back to the ITO with the direction to decide it afresh but the AAC has no power to direct that ITO to find out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons as noted later, the said sum of Rs. 3,24,000 is to be treated as income of the assessee firm for the impugned assessment proceeding as there is no distinction between the assessee firm and its partners as per Indian Partnership Act and in view of the judicial pronouncement as quoted above. As to my notice under s. 251(2) of the IT Act dated 5th March, 1986 on this point, assessee's income deserved to be enhanced by a sum of Rs. 3,24,000." 11. In para 55, the AAC observed as under: "The value of the benefit under s. 2(24)(iv) of the IT Act with reference to Rs. 4,70,501.80 comes to Rs. 70,575.27 whereas the value of the benefit in respect of the value of the benefit in respect of the advances made available to the assessee during the previous year relevant to the impugned assessment proceeding from the date of the different advances being made comes to Rs. 26,728 exclusive of any interest being allowed on the tailoring receipts as claimed by the assessee which is not taken into consideration for the reasons as noted above. Thus the assessee's income further deserves to be enhanced by a sum of Rs. 97,303 apart from over and above the sum of Rs. 3,24,000 as mentioned in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original order. For that again, it is to be seen whether the AAC set aside the original assessment to the ITO without any restrictions. If the assessment was set aside and restored to the ITO without any restriction then the ITO can consider any items or issue for inclusion in the assessment order. But here if we go through the observations of the AAC as above, nothing remained particularly to the ITO to consider. He had to make those additions as the AAC's direction was more or less binding on the ITO on these issues. Therefore, the submission of the learned Sr. Deptl, Representative Shri Boliya that after setting aside the issue, which was not considered by the ITO still remains open to the ITO, now in giving effect to the AAC's order. Therefore, in my view, when the assessment was not set aside without the restrictions to the ITO, the ITO has no power to consider the fresh source of income or new source of income for enhancement in the income of the assessee. 14. The next issue for consideration in this appeal is whether the AAC erred in observing that the assessee has not furnished details of expenses incurred for tailoring business and not producing the tailors physically be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income from tailoring and money lending business. For that I direct the AAC to consider the well settled principles laid down by their Lordships of the Supreme Court in the case of JAI DAYAL PODDAR AIR 1974 SC 171 and decide the issue on the basis of those principles. 18. The next issue relates whether the AAC erred in refusing continuation of registration. The relevant facts are that the assessee was allowed registration from the very beginning. This year continuation of registration was refused by the ITO. The view taken by the ITO was confirmed by the AAC, for the reasons that the assessee was indulged in activities which prevented the assessee for continuation of registration. Shri Ranka submitted that the assessee firm is a very old firm which came into existence in 1973-74 and since then the registration has been granted and continuation of registration was allowed. There is no change in the constitution of the firm. The activities also remained the same. Therefore, there is no justification in refusing registration. 19. After hearing the rival submissions in my view, the authorities below have gone wrong in refusing continuation of registration especially when there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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