TMI Blog2007 (11) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a serious breach of law in not putting to test the evidence produced by the appellant by not summoning all the persons who had purchased gold from the appellant. (4) The Hon ble Commissioner of Income-tax (Appeals) is in error in holding that the appellant was a resident during the year, when the evidence produced by the appellant clearly showed that he was a non-resident during the year. (5) The Hon ble Commissioner of Income-tax (Appeals) is in error in making an addition of Rs. 22,15,116 being the remittances from abroad. The appellant being a non-resident these remittances were clearly not taxable in India. (6) The Hon ble Commissioner of Income-tax (Appeals) is in error in requiring the appellant to prove the source of remittances from abroad when there is no such statutory requirement. (7) The Hon ble Commissioner of Income-tax (Appeals) erred in rejecting the evidence produced by the appellant to prove the foreign remittances, without adducing any valid reasons. (8) For these amongst other grounds that may be raised and evidence adduced at the time of hearing, it is requested that the Hon ble Income-tax Appellate Tribunal may be pleased enough to cancel the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1992 wherein it was found by the Assessing Officer that there was a due entry made in respect of the gold bars brought by the assessee. The assessee also furnished confirmation letters from 12 persons claiming that the gold was sold to them. The Assessing Officer has given the details of the 12 confirmation letters on pages 4 and 5 of the assessment order. The Assessing Officer recorded the statement of five persons as under: ( i )Shri P.K. Jamal ( ii )Shri R.K. Mohammed ( iii )Smt. B.P. Khayarunnisa ( iv )Shri P.C. Siddique ( v )Shri P.C. Mohammed Unni 6. The Assessing Officer has given his analysis of the statements with the reasons for disbelieving those persons. The Assessing Officer asked the assessee to produce the remaining persons for examination, but the assessee expressed his inability by stating that those persons were abroad at that time. It was further contended by the assessee that he had no legal power to call the persons but Department has the same. In the opinion of the Assessing Officer, the persons to whom the gold was sold were assessee s relatives and hence it was not difficult for him to produce them for examination before Assessing Officer. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought to India and utilised it for his various economic activities in India. When he was asked to explain the source of deposit in the saving account of his wife and found no source to explain the entry in the Passport regarding 12 gold bars brought on 26-10-1992 come in handy and then approached his relatives and friends for giving confirmation letters to the effect of purchase of gold bars from the assessee. If the sale was genuine and the deposit of Rs. 5,00,000 in the bank account of wife dated 12-7-1994 was out of the sale proceeds of gold bars the assessee could have explained it at the first instance itself instead of shifting the stance 3 times. 6. For the reasons stated above I hold that the source of the fund from which the amount of Rs. 5,00,000 was deposited by the assessee in the saving account No. 3536 of his wife Smt. Shamila Sheraffudin with State Bank of India, Shornur Branch was not proved and hold that the same was out of his unexplained income. Rs. 5,00,000 is added to the total income of the assessee as income from other sources." 7. In respect of the cash deposit of Rs. 5 lakhs made on 27-3-1995, the Assessing Officer accepted the explanation of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery convincing. Similarly there was discrepancy in the statement of Sri P.C. Siddique and Sri P. C. Mohammed Unni. It is seen that in all the cases the appellant could not produce the convincing evidence of purchase of gold biscuits by these persons from the appellant during the relevant period. In no case conversion of gold biscuit to ornaments or the bills were produced except in the case of Sri P.K. Jamal. The converted jewellery was not having emblem of Ayodhya Jewellery as claimed by Sri P.K. Jamal. It is seen that these persons were of small means. They had already incurred heavy expenditure for which known sources were not sufficient. In such circumstances, purchase of gold from the appellant is not proved by any third party evidence. It is further seen that these persons were related to the appellant. In view of these facts, evidences of all these persons are not very relevant. There were various discrepancies in the statements recorded from these persons. Even the appellant was shifting the stand regarding the source of evidences during the assessment proceedings. It is noted that the appellant was supposed to have brought gold biscuit during 1992. The appellant has clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the assessee to discharge the identity of the person, source and genuineness of the transaction. It is argued that the assessee has filed the confirmation letters before the Assessing Officer and in fact, the Assessing Officer has recorded the statements of five persons. It is further contended that the assessee has given the details in respect of the names and addresses of those persons and on verification of the five persons, nobody has denied that they have purchased the gold from the assessee. Merely because some small contradictions are there in respect of the transactions which go back to financial year 1993-94, the Assessing Officer as well as the CIT(A) cannot put the burden like the burden in prosecution while proving the criminal charges. It is further argued that probability of burden is to be adopted and once the primary burden is discharged, no addition is desired under section 69. The ld. C.A. submitted that the assessee has asked the Assessing Officer to issue summons to the remaining seven persons and record the same and assessee cannot force any person to come and stand before the Assessing Officer. 10. In respect of the addition of Rs. 2 lakhs, the ld. C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of the said gold were deposited in SB Account No. 3536. The assessee also furnished confirmation letters from 12 persons claiming that the gold is sold to them. The Assessing Officer recorded the statement of five persons but was not satisfied with the statements given by those five persons for the reasons given on pages 5 to 16 of his order. The Assessing Officer has tried to contradict the statements made by those persons by giving his own reasons. There is no dispute that there are some contradictions in the statements given by those persons, but merely there are contradictions in the statements but otherwise when the parties are admitting that they have purchased the gold, then the statements recorded from those persons for the purpose of assessment can be decided in the touch-stone like criminal proceedings while examining the evidence led by the prosecution. Our answer certainly is no . 14. There is no dispute about the proposition that sections 68 and 69 are in the nature of rules of evidence. Though in the 1922 Act, this rule was given recognition by different judicial pronouncements, but there was no specific provision in the said Act. In the 1961 Act, this rule i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Shamila Sherafuddin is concerned. We do not find any justification to sustain the said addition. We, therefore, delete the addition of Rs. 5 lakhs made by Assessing Officer. 16. The next addition is of Rs. 2 lakhs which is out of the cash deposit made by the assessee in SB A/c No. 3536 on 27-3-1995. It is seen that the assessee tried to explain the source of the said deposit by stating that the said deposit was out of the cash withdrawn by him from time to time from his own NRE account No. 342 with State Bank of India. The Assessing Officer rejected the assessee s argument that the assessee could not correlate or identify the withdrawals with the deposit. The assessee further stated that the assessee has sold two properties i.e., land at Cheruthuruthy for Rs. 1,67,000 and residential house for Rs. 1,33,000 and the sale proceeds of those were utilized for the deposit of Rs. 5 lakhs. The Assessing Officer accepted the deposit to the extent of Rs. 3 lakhs but made the addition of Rs. 2 lakhs. 17. We have carefully considered the arguments advanced by the ld. C.A. Admittedly, in respect of the addition of Rs. 2 lakhs though it is contended that it was from the withdrawals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, and the income declared in respect of the income earned abroad cannot be brought to tax in the reassessment proceedings. It was further contended that CIT(A) has power of enhancement for hunting new source of income under section 251(1)( i ) of the Act. The assessee relied on the following decisions to support the said contention: ( i ) CIT v. M.C. Iron Traders [2003] 189 CTR (Punj. Har.) 154, ( ii ) CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 (SC), ( iii ) CIT v. N. Krishnan [1998] 233 ITR 646 (Ker.), ( iv ) Vipan Khanna v. CIT [1998] 225 ITR 220 ( sic ), ( v ) CIT v. Sardari Lal Co. [2001] 251 ITR 864 (Delhi) (FB). The assessee finally contended before the CIT(A) that the proposal for bringing to tax the income earned abroad should be dropped. 19. The CIT(A) rejected the first objection of the assessee that as the subject-matter of the assessee is assessment made under section 147 read with section 143(3) and while initiating the reassessment proceedings under section 147 the subject-matter of reassessment proceedings was not the status or the income earned by the assessee abroad and hence, the CIT(A) has no power to go into t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer can do and can also direct him to do what he has failed to do. Reference is also made to the decision of CIT v. Devi Chand Pan Mal reported in 160 ITR 545. In this decision it was held that powers of AAC are wider that those of the ordinary appellate court under the Code of Civil Procedure. His competence is not restricted to dealing with subject-matter of appeal. He may examine all matters covered by the assessment order and correct the assessment in respect of all such matters even to the prejudice of the assessee, and may remand the case to the ITO for inquiring into items which were not the subject-matter of the appeal. It is thus seen that after 1-4-1989, the Assessing Officer and also CIT(A) can look into the matter which are not recorded as reasons before issue of notice under section 147. . . ." 20. By rejecting the objection of the assessee for enhancement of the foreign income in the hands of the assessee, the CIT(A) made the addition by giving the following reasons: "It is thus seen that if the appellant is "resident", his global income becomes taxable. The income claimed to be earned from abroad Rs. 22,15,116 thus becomes taxable. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 7 lakhs and capital gain in respect of the sale proceeds of the land and residential house. 22. When the matter reached in appeal before the CIT(A), the assessee filed receipt and payment summary for the year ended 31-3-1995 in which the assessee has declared the income from abroad at Rs. 22,15,116. The CIT(A) was of the opinion that in the original return as well as in the revised return filed by the assessee, the assessee himself has declared his status as resident in India and hence if he is a resident in India then income earned outside India - in the words of the CIT(A) global income - was also taxable in the hands of the assessee under the Income-tax Act. The CIT(A) therefore, proposed to make enhancement by bringing to tax the foreign income of the assessee which was declared in the receipt and payment account at Rs. 22,15,116. The CIT(A) also issued notice under section 152(1) of the Act proposing to bring to tax the income earned outside India as declared by the assessee in the receipt and payment account. The assessee s objection was that as the status of the assessee as well as income declared by the assessee which was earned outside India was not the subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of income not mentioned in the return and which is not subject-matter of the assessment order. The CIT(A) has no jurisdiction to assess a source of income which is not disclosed either in the return or in the assessment order. It is well-settled principle by different judicial pronouncements that the CIT(A) cannot travel outside the subject-matter of the assessment order under challenge with a view to find out a new source of income and power of enhancement of the CIT(A) is restricted to the sources which are the subject-matters in appeal before the CIT(A). 25. In the present case, the contention of the assessee is that as far as his status is concerned, that was wrongly stated in the return of income, but at the same time, the correct status was stated in the wealth-tax return as well as in the gift-tax return. The assessee has filed the copy of acknowledgement of the wealth-tax return which is placed at page 146 of the paper book which pertains to the assessment year 1995-96 and it is seen that the assessee has declared his status an individual non-resident. The assessee has also filed the copy of the order of the CIT(A) in respect of the gift-tax assessment placed at pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income-tax; ( b )where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; ( c )where an assessment has been made, but ( i )income chargeable to tax has been underassessed; or ( ii )such income has been assessed at too low a rate; or ( iii )such income has been made the subject of excessive relief under this Act; or ( iv )excessive loss or depreciation allowance or any other allowance under this Act has been computed." 26. If any income has escaped assessment, then by way of a machinery provision, the Legislature has vested the power to bring to tax escaped income by initiating proceedings under section 147 of the Act. It is pertinent to note here that the proceedings under section 147 can be initiated by the Assessing Officer alone and the Legislature has nowhere vested that power in the CIT(A). It is the belief of the Assessing Officer on the basis of information available with him that any income chargeable to tax has escaped assessment. Much water has flown on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing reopened for bringing to tax certain income which had escaped assessment because the controversy on reassessment is confined to matters which are relevant only in respect of the income which had not been brought to tax during the course of the original assessment. A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as "escaped income". Indeed, in the reassessment proceedings for bringing to tax items which had escaped assessment, it would be open to an assessee to put forward claims for deduction of any expenditure in respect of that income or the non-taxability of the items at all. Keeping in view the object and purpose of the proceedings under section 147 of the Act which are for the benefit of the Revenue and not an assessee, an assessee cannot be permitted to convert the reassessment proceedings as his appeal or revision, in disguise, and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to "escaped income", and reagitate the concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to tax the income earned by the assessee outside India taking his status as a resident. While completing the assessment, the Assessing Officer has taken into consideration the rental income from Sumaya Lodge and also considered the capital gain as well as unexplained investment which was noticed by the Assessing Officer during the course of the assessment proceedings to bring to tax the income of Sumaya Lodge and unexplained investment. While examining the issue of unexplained investment, every material was before the Assessing Officer in respect of the assessee s foreign income wherever the assessee has made different investments and as the Assessing Officer was of the opinion that there is no case to bring to tax the foreign income of the assessee, hence he did not consider it to assess the same in the hands of the assessee. Another aspect to be considered here and that is very important aspect as we think - is that the assessment which is the subject-matter of the appeal before the CIT(A) is the off-shoot of the proceedings under section 147. Can the CIT(A) enter into the shoes of the Assessing Officer for further hunting any other escaped income to bring to tax. We have alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of view of taxability and that the Appellate Assistant Commissioner had no power to assess a source of income, which had not been taken into consideration by the Assessing Officer. In CIT v. Nirbheram Daluram [1997] 224 ITR 610, it was observed by the Apex Court that the appellate powers conferred on the first appellate authority under section 251 of the Income-tax Act, 1961, were not confined to the matter, which had been considered by the Income-tax Officer, as the first appellate authority is vested with all the wide powers that the Assessing Officer may have while making the assessment, but the issue whether these wide powers also include the power to discover a new source of income was not commented upon. Consequently, the view expressed in CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC) and CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC) still holds good. Whenever the question of taxability of income from a new source which had not been considered by the Assessing Officer is concerned, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147/148 of the Act and section 263 of the Act, if requisit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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