TMI Blog2011 (9) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... is not made in the assessment order, it would clearly follow that the Assessing Officer had “determined” the same in the course of assessment by deciding not to make any addition - Decided against the assessee - ITA No. 322 of 2005 - - - Dated:- 30-9-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE M.L. MEHTA, JJ. For Appellant : Mr. C.S. Aggarwal, Sr. Advocate with Mr. Prakash Kumar, Advocate. For Respondent: Mr. Sanjeev Sabharwal, Sr. Standing Counsel. A.K. SIKRI, J. 1. This appeal was admitted on the following substantial questions of law:- 1. Whether in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in confirming the:- i) Addition of Rs.10,00,000/- on the basis of pages 16 and 17 of Annexure A-1 of the seized documents allegedly representing an amount received from Mr. Roop Chand. ii) Addition of Rs.10,00,000/- on account of an alleged purported payment made to Sh. Jitu Virmani on the basis of notes on page No. 24 of Annexure A-1 of the seized documents. iii) Addition of Rs.20,00,000/- on account an amount allegedly received from Jeetu Vitrmani, on the basis of the notings on page 27 of Annexure-1 of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98 (iii) An amount allegedly paid to Mr. Jitu Virmani Rs. 10,00,000 (iv) An amount received from Mr. Jitu Virmani Rs. 20,00,000 Total Rs. 42,42,698 In terms of the aforesaid order dated 28th February, 2002 under Section 158BC of the Act, the Assessing Officer made the additions of undisclosed income of Rs.10,00,000/- under Section 68 of the Act of the amount received from Sh. Roop Chand Indermal Singhi by holding as under:- 9.In view of the above observation, the submissions of the assessee that Rs.10 lakhs received back from Mr. Singhi was utilized for making unaccounted expenses is not tenable. The entries as appearing on page no. 20,24 and 60 and Rs. 2,50,000/- cash seized from the assessee‟s premises and cost of jewellery Rs. 2,59,000/- and misc. items taken for Rs.1,35,000/- are distinctively separate entities and items from Rs. 10 lakhs received by the assessee as per the agreement appearing on page No. 16 17 of Annexure A-1. In the light of the above, Rs. 10 lakhs on page No. 16 17 of Annexure A-1 represents the undisclosed income of the assessee u/s 68 of the IT Act 1961 for the FY 93- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C and CH denotes cheques. It was further stated that only a sum of Rs.25 lakhs has been paid by the Company. Since the agreement could not materialize due to recession in the market, the balance amount of Rs. 10 lakhs was not paid. This transaction of the Co; it was averred is duly recorded in the books of GMS Construction Co.(P) Ltd. and reflected in its return. It was further clarified that the assessee could not read due to severe eye sight problem and he must have omitted to write the letter H while writing 10C by being interrupted by a visitor/telephone call. Thus, it was stated that there is no element of cash transaction on these papers which belongs to GMS Construction Co (P) Ltd.. During the course of search, the assessee‟s statement was recorded and he was asked to comment on page No. 54 as above. He was asked to comment on the suffix C and Ch. It was stated by him that both the terminologies are of cheques and that it was agreed that Rs.10 lakh will be paid on MOU and Rs.25 lakhs on agreement. However, since the terms changed, no MOU was prepared and direct agreement was made. Therefore, first Rs.25 lakhs was paid and the balance is yet to be aid. The assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant being aggrieved from the aforesaid order u/s 158BC of the Act, filed an appeal before Commissioner of Income Tax (Appeals)-XXX, New Delhi and challenged the additions made to the declared undisclosed income which was made by the Assessing Officer on various grounds. 3. The Commissioner of Income Tax (Appeals) disposed off the appeal vide orders dated 24th March, 2003. The learned CIT (A) not only confirmed the additions made by the Assessing Officer but also enhanced the assessment made u/s 158 BC of the Act. The CIT (A) in terms of the aforesaid order enhanced the assessment of undisclosed income made by the Assessing Officer in respect of following alleged transactions: i. Chellagatta Properties ii. R.T. Nagar Properties iii. NRE accounts of R.P.S. Baweja Mrs. Rekhi. The CIT (A) enhanced the assessment of undisclosed income of the appellant by Rs. 1,05,00,000/- on account of alleged deal in respect of Chellagatta properties by holding as under:- 13.5 The facts mentioned above very clearly point out the following: i. The notings on the page are in the handwriting of Sh. G.M. Singh ii. In his statement on 5.2.2000 Sh. G.M. Singh has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67.86 lacs for Mrs. Praveen Nindrajog. There is no correlation between these two sets of figures and the explanation given cannot explain the notings on page 21. (g) As Sh. G.M. Singh had confirmed that Rs.1.35 crores were already invested, it is logical to believe the writings on page 21 that the same amount was received back on 4.9.95, after the deal was not finalized. 13.6 On the basis of above mentioned facts and analysis of the same the conclusion that can be arrived at is that the deal in this property was made in the year 1995 and approximately Rs. 1.35 crores were paid to different persons through Sh. Jeet Virmani. The deal did not materialize subsequently and the amount given was received back on 4.9.95 Rs. 35 lacs were received in cheque and Rs.1.05 crores were received back in cash which was not accounted for. All explanations offered subsequently are afterthought. Accordingly Rs.1.05 crores will be treated as income of Sh. G.M. Singh. 4. The CIT (A) further enhanced the assessment of the undisclosed income of the appellant by Rs.25,00,000/- on account of amount allegedly received separately in respect of R.T. Nagar Property, by holding as under: 14.1 In his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT (A) on all the aforesaid additions. Only one enhancement made by the CIT (A) of Rs. 2,12,17,681/- as undisclosed income on account of treating the NRE accounts in the name of Mr. Manjit Rekhi and Mrs. RPS Baweja as benami accounts of the assessee has been deleted with which we are not concerned in the present appeal. This appeal is admitted on the questions of law which are reproduced in the opening para of the present judgment. 6. With this background we proceed to take note of the arguments of each addition in the light of arguments advanced by counsel for either side. Question No. 1 (i) Addition of Rs. 10,00,000 on the basis of pages 16 and 17 of Annexure A-1 representing the amount received from Mr. Roop Chand. 7. Insofar as this addition is concerned, it was based on pages 16 and 17 of AnnexureA-1 which were the documents seized at the time of search at the premises of the assessee. Indisputably, a sum of Rs.10 lacs, as per these documents were received by him from Mr. Roop Chand Indermal Singhi was utilized for making unaccounted expenses which explanation was found to be totally untenable. The assessee had relied upon the entries appearing on pages 20,24 and 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho was a business associate of the assessee and whatever has been written off in the seized document was not the figment of imagination. We again reiterate that no serious attempt was made to question the aforesaid findings of the authorities below with which we are in agreement and hold that this addition was also rightly made. Question No. 1 (iii). Addition of Rs.20,00,000/- on account an amount received from Jeetu Vitrmani, on the basis of the notings on page 27 of Annexure-1 of the seized documents. 10. This addition is made on the basis of notings on page 27 of Annexure A-1. The relationship between Jitu Virmani and the assessee has already been noted above. Notings on this page clearly revealed that this was also dealing in respect of Rajaji Nagar land and as per this document a further sum of Rs. 25 lacs was received as a part of the agreement between the assessee and Jitu Virmani regarding the development of property at Rajaji Nagar. Therefore, for the same reasons given in respect of an addition of Rs. 20 lacs based on page -54 this addition is also perfectly justified. 11. In fact, we may state at this stage that the entire thrust of argument of Mr. C.S. Aggar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment has dealt the claim and in respect of which item of income, he had made the addition, which addition so made required enhancement under this sub-clause (a). The CIT (A) does not have any power to enhance an order of assessment in respect of an issue not dealt by him in the body of the order of assessment, though might have been discussed by the Assessing Officer during the course of hearing before him, incidentally or collateral examination as held by the Apex Court in the case of CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria, 66 ITR 443. This is a ratio of the judgment of Full Bench of this Court in the case of Sardari Lal Sons 251 ITR 864 (Delhi). The submission, thus, was that where an Assessing Officer has failed to make an addition or disallowance with regard to an item of income or expenditure, though has dealt the same in the course of assessment proceeding, same cannot be subject matter of power of enhancement by CIT (A). It was further argued that in the instant case since the Assessing Officer had not dealt with the aforesaid sums, the exclusive jurisdiction to enhance the said assessment, if it was so justified, was with the Commissioner of Income Tax who could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of hearing before him holds a discussion of such items of income (d) Yet, there can be another situation where the Assessing Officer inadvertently omits to tax an amount which ought to have been taxed and in respect of which he does not make any enquiry. (e) Further another situation may arise, where an item or items of income or expenditure, incurred and claimed is not at all considered and an assessment is framed, as a result thereof, a prejudice is caused to the revenue, or (f) Where an item of income which ought to have been taxed remained untaxed, and there is an escapement of income, as a result of the assessee‟s failure to disclose fully and truly all material facts necessary for computation of income. To ensure for each of such situations, an income which ought to have been taxed and remained untaxed, the legislature has provided different remedial measures as are contained in section 251 (1)(a), 263, 154 and 147 of the Act. In the category stated in (a), obviously if an income escapes an assessment, the provisions of Section 147 of the Act can be invoked, subject to the condition stated in the proviso of the said section. In the category of cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO in the body of the order of the assessment. It is this aspect which needs consideration in the present case. 17. Before adverting to this, we may note that, as a fact, the Assessing Officer had issued a questionnaire specifically on the aforesaid two items in respect of which CIT (A) has made the additions by enhancing the income of the assessee. The assessee had even replied to the said questionnaire. It is also to be kept in mind that it is a case of search and during the search certain documents were seized. The assessment of that period has been made on the basis of that search. The Assessing Officer undertaken the exercise as to whether the income is to be brought to tax or not on the basis of various documents seized. Based on seized documents queries were raised and the assessee had even furnished the specific reply thereto before the Assessing Officer. However, it is also a matter of record that in the final assessment order passed, there is no mention about the aforesaid two items. According to the assessee the CIT (A) had discovered a new source of income not considered by the AO in his order and, therefore, the CIT (A) had no such power under Section 251(a) (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the taxability of the amount of Rs. 5,85,000 and to hold that it was taxable as undisclosed profits in the hands of the assessee. We are unable to accept the argument put forward on behalf of the appellant as correct. It is true that the Income-tax Officer has referred to the remittance of Rs. 5,85,000 from the Calcutta branch, but the Income-tax Officer considered the dispatch of this amount only with a view to test the genuineness of the entries relating to Rs. 4,30,000 in the books of the Forbesganj branch. It is manifest that the Income-tax Officer did not consider the remittance of Rs. 5,85,000 in the process of assessment from the point of view of its taxability. It is also manifest that the Appellate Assistant Commissioner has considered the amount of remittance of Rs. 5,85,000 from a different aspect, namely, the point of view of its taxability. but since the Income-tax Officer has not applied his mind to the question of the taxability or non-taxability of the amount of Rs. 5,85,000 the Appellate Assistant Commissioner had not jurisdiction, in the circumstances of the present case, to enhance the taxable income of the assessee on the basis of this amount of Rs. 5,85,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Courts umpteen times but we do not propose to burden the judgment by making reference to all the decisions on the point. We will notice a few decisions which we consider are relevant to answer the question referred. In CIT, Bombay Vs. Shapoor ji Pallonji Mistry [1962] 44ITR 891(SC) , while construing the corresponding provisions of the Indian Income Tax Act, 1922, relating to the jurisdiction of the Appellate Commissioner in such an appeal, the Supreme Court held that, in an appeal filed by the assessee, the Appellate Assistant Commissioner has no power to enhance the assessment by discovering a new source of income, not considered by the Income Tax Officer in the order appealed against. Similar views were expressed by the Apex Court in CIT (Central) Calcutta Vs . Rai Bahadur Hardutory Motilal Chamaria [1967] 66 ITR 443(SC) . It was held that the power of enhancement under Section 31(3) of the 1922 Act was restricted to the Subject-matter of the assessment or the source of income which had been considered expressly or by clear implication by the ITO form the point of view of taxability and that the Appellate Commissioner had no power to assess a source of income which had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposed of. 20. Mr. Sabharwal, learned counsel appearing for the Revenue could not and did not dispute the aforesaid position in law. His submission was that the Assessing officer had considered the issue which was clear from the questionnaire and, therefore the CIT (A) was vested with power to look into the same. As pointed out above, the Assessing Officer had issued a questionnaire on the basis of documents seized during the search. He had specifically undertaken the exercise as to whether the income has to be brought to tax or not on the basis of various seized documents. The reply of the assessee was elicited on this very aspect as well i.e. seized documents (page 21) which related to the transactions in question. It was pointed out that the document contains various notings of cash payments, advances etc. made through Mr. Tameez. The assessee was asked to furnish complete explanation thereof with sources for the same and was asked to explain with documentary evidences where it was accounted for. It was also mentioned that the document pertains to the property at Bangalore and the assessee was required to furnish full and complete details thereof. Page no. 21 reads as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered this matter. It was in our opinion duly considered. 21. Mr. C.S. Aggarwal, learned Senior Counsel had submitted that as per the judgments of this court in Union Tires and Sardari Lal (supra), the jurisdiction of the first appellate authority could exercise his powers only with regard to any other matter which has been considered by the Assessing Officer and determined in the course of the assessment. His submission was that there was no such determination. 22. We do not agree with this submission. Obviously, when this matter/item is considered but addition on that account is not made in the assessment order, it would clearly follow that the Assessing Officer had determined the same in the course of assessment by deciding not to make any addition. 23. In the case of Commissioner of Income-Tax, Bombay Vs. Shapporji Pallonji Mistry 34 ITR 342 (which has been affirmed by the Supreme Court), the Bombay High Court clarified that source of income would not mean source in the sense of head of income as used in the Income-Tax Act but would mean a specific source from which a particular income spank or arose. It was clarified that:- .If a particular source o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that receipt of ₹ 25 lacs from Mr.Jitu Virmani was in respect of property at RT Nagar, Bangalore. In his statement dated 5.2.2000, Mr. G.M. Singh explained that Mr. Jitu Virmani was to give ₹ 50 lacs for joint venture in respect of that property. He had given Rs. 25 lacs and balance was to be received. The CIT (A) further observed that in his reply given by the assessee before the Assessing Officer on 8th February, 2002 he mentioned that balance amount of Rs.25 lacs was not received and that amount has been adjustable against the amount due to Mr. G.M. Singh from Solomon Davi Holding Pvt. Ltd. Before the CIT (A), the response of the assessee was that the assumption of Mr. Jitu Virmani was not correct and thus, according to the CIT (A), this was not only a change of stand but not acceptable either because of the following reasons:- 1. On page 21 it has been clearly mentioned that the amount receivable was Rs.50 lacs. 2. On 8.2.02 it was again clearly explained that this amount (the balance amount of Rs. 25 lakhs) had been adjusted against the amount due to Mr/Mrs. G.M. Singh from Soloman David Holding P. Ltd. In view of this the stand of the appellant now t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether a particular entry in the account book is genuine or not, or whether the assessee is able to show its source is a question of fact. In other words, it only involves appreciation of evidence tendered by the assessee pursuant to a query made by the Revenue. It is for the Assessing Officer to accept the explanation offered or not. No doubt, the first appellate court as also the second appellate court are also empowered to examine the factual background of the issue with a view to examine whether the explanation offered is reliable, adequate or/and proper. But that exercise, the High Court in its third appellate jurisdiction cannot do by virtue of the specific language employed in Section 260A of the Act. 30. In a recent judgment pronounced by the Supreme Court in the case of Commissioner of Income Tax Vs. P. Mohanakala, [2007] 291 ITR 278 (SC) this well established principle is reiterated and affirmed by making following pertinent observations:- The findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it was not open for him to change his stand that this amount was advanced in the year 1996 as per the statement of accounts given during the course of assessment proceedings. The CIT (A) further found as under:- f) the notings mentioned two amounts of Rs. 1.05 crores and Rs. 35 lacs whereas the explanation given during the course of assessment proceedings mentioned two different amounts i.e. Rs. 67.81 lacs for Sh. G.M. Singh and Rs. 67.86 lacs for Mrs. Praveen Nindrajog. There is no correlation between these two sets of figures and the explanation given cannot explain the notings on page 21. g) As Sh. G.M. Singh had confirmed that Rs. 1.35 crores were already invested, it is logical to believe the writings on page 21 that the same amount was received back on 4.9.95, after the deal was not finalized. 13.6 On the basis of above mentioned facts and analysis of the same the conclusion that can be arrived at is that the deal in this property was made in the year 1995 and approximately Rs. 1.35 crores were paid to different persons through Sh. Jeetu Virmani. The deal did not materialize subsequently and the amount given was received back on 4.9.95 Rs. 35 lacs were received in ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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