TMI Blog2012 (6) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... swered in favour of the Revenue and against the assessee. Enhancement of assessed income - jurisdiction of CIT(A) to enhance - held that:- the first appellate authority gave an opportunity to the assessee to explain those receipts, called upon the Assessing Officer to hold an enquiry and submit a report. In the report submitted it became evident that except the aforesaid payment of Rs. 40 lakhs in respect of all other payments, the creditors stood by the said payment. Only in respect of this disputed payment, in the first place there is a difference in the name. After the person was identified he gave a statement denying the said pay- ment, denied knowing the assessee at all. The assessee was given an opportunity to cross-examine the said Rajanna who was extensively cross- examined. It is after all this exercise, the appellate authority held that the explanation offered by the assessee is not satisfactory and, therefore, he has failed to disclose the nature and source of income and, section 68 is attracted. Therefore, it cannot be said that the appellate authority had no jurisdiction to go into the said matter, add the said income and enhance the tax. The Tribunal was wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that he remembered to have signed a document. When con- tacted, P. J. Fernandez, originally confirmed that he advanced the amounts by borrowing from Sri Srikanta Dutta Wodeyar. Sri Wodeyar also con- firmed this. However, on July 5, 1985, in the course of a statement recorded under section 132(4), P. J. Fernandez categorically denied that he advanced the sum of Rs. 1.35 crores to the assessee. He added that he only lent his name to the assessee to help him. Sri Wodeyar also reiterated from his earlier stand. The statement of P. J. Fernandez recorded on July 5, 1985, was shown to the assessee on January 18, 1988. The assessee's son, K.Venkatesh Dutt, was also confronted with the said statement. K.Ventakesh Dutt in his statement on August 18, 1986, stated that his father only knew about the loans. In those circumstances, the Assessing Officer held that the explanation offered by the assessee is not satisfactory. Even in the statement filed with the return, the sum of Rs. 1.35 crores is shown as credits from P. J. Fernandez. Even in letter dated February 24, 1989, it is stated that the amounts were received from P. J. Fernandez. However, it was stated that the sum of Rs. 1,35,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is. The Assessing Officer was aware of the pros and cons relating to the assessment proceedings of both the assessee and his son and the conscious act on the part of the Assessing Officer in choosing to assess the amount of Rs. 1.35 crores in the hands of Venkatesh Dutt in a substantive manner would certainly preclude him from assessing the same amount once more in the hands of the assessee. The assessee can be con- sidered to have discharged even the stronger onus of proving the source of the money claimed to be from his son. Hence, although the credits appeared in the bank account of the assessee in its view, the assessee can- not be held to be liable to be assessed in respect of this amount by application of the provisions of section 68. Therefore, the order of the authorities was reversed by directing deletion of addition of Rs. 1.35 crores in the hands of the assessee. Aggrieved by the said order of the Tribunal, the Revenue is in appeal. 7. The learned counsel for the Revenue assailing the impugned order passed by the Tribunal contended that the statement recorded by the Assessing Officer of the aforesaid four persons are totally inconsistent with each other. Everyone of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that the assessee is an agriculturist and partner in five firms which are carrying on the business in liquor. The assessee is also an excise contractor. The material on record discloses that he needed money for depositing one month's kist in excise auction bids for the relevant excise year. Admittedly, he had no funds. Rs. 1.35 crores was credited to his account on May 2, 1985, May 13, 1985, and May 16, 1985, in the Canara Bank, Langford Town Branch. In the return filed under section 139 of the Act, he did not disclose the said amount. There was a search of the residential and business premises of the assessee on June 7, 1985. At that time, the bank pass book of the assessee in Langford Town Branch of Canara Bank was seized. The said pass book disclosed the aforesaid depo- sits. Thereafter, the assessee's statement was recorded. He stated that the said credits were loan taken by means of demand drafts from one P. J. Fernandez, 133, Brigade Road, Bangalore, the said loan was arranged by his son, Sri Venkatesh Dutt. He remembered to have signed the document. When contacted P. J. Fernandez originally confirmed that he advanced the amounts by borrowing money from one Sri Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer, satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year." 12. In order to attract section 68 of the Act, twin conditions have to be fulfilled. They are : (1) a sum is to be found credited in the books of an assessee main- tained for any previous year, which is not offered to tax, (2) When asked to explain the return and source of the income, (a) the assessee offers no explanation, or (b) the explanation offered is not satisfactory, in the opinion of the Assessing Officer. 13. The initial burden lies on the Department to prove that the said receipt is in the nature of income and it is within the taxing provision. Then the burden shifts on to the assessee to show that it is not taxable because it falls within the exception provided under the Act. When a sum is found credited in the books of the assessee, which is not disputed, it is a prima facie evidence against the assessee. If the assessee fails to rebut the said evidence, the same can be used against the assessee by holding that it was a receipt of an income nature and brought to tax. The apex court in the case of Sumati Daya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities concurrently found the explanation offered by the assessees unacceptable." 14. It is in this background of the aforesaid statutory provisions and the interpretation placed on the same by the apex court, we have to find out whether the Tribunal was justified in interfering with the order passed by the appellate authority as well as the Assessing Officer. 15. In the affidavit filed by the assessee on March 29, 1989, he has cate- gorically admitted the credit of the amounts in his books of account. In the explanation offered he pleaded complete ignorance about the source of the receipt of the amount by stating that it is his son who arranged the funds. He further stated that the said funds have come from one P. J. Fernandez. P. J. Fernandez in turn stated that he is only a name lender and actual amount has come from Wodeyar. Sri Wodeyar disowned the amount. All the three persons have been inconsistent with their stands. They have given go-bye to their earlier stands. The credit of the said amount in the name of the assessee is admitted. Utilisation of the said amount for deposit of one month kisth amount is not in dispute. The assessee is a business man. As he did not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the material on record there is a concerted attempt by the father and the son to suppress income and one is trying to put the blame on the other. In the process both of them are not willing to offer the said income for tax under the Act. As the said amount was credited to the bank account of the assessee which is also reflected in the statement of books of the assessee and the explanation offered by him is not consistent, subsequently the said amount is not repaid and there are contradictions in his statement and the statement of his son, apart from other two persons from whom the money is said to have flown, we are satisfied that all the ingredients of section 68 are attracted. The burden of showing the nature and source of income was squarely on the assessee. In the facts of the case, he has miserably failed to prove the said fact. Therefore, the impugned order passed by the Tribunal cannot be sustained and accordingly it is set aside. The first substantial question of law framed in this regard is answered in favour of the Revenue and against the assessee. 17. This second and third substantial questions of law relates to the order of the Tribunal setting aside the enhancem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income filed by him or in any of the accompanying statements. In the assessment order also, the Assessing Officer did not make any mention of or even reference to this credit item of Rs. 40 lakhs standing in the name of Shri Rajan Patel or Shri B. Rajanna, whatever may be his actual name. Relying on the Explanation to section 251 of the Act it held that the appel- late authority has no jurisdiction to travel beyond the subject-matter of the assessment or beyond the record, i.e., the return of income and the assess- ment order and his power of enhancement relates only the income which has been subjected to the process of assessment. After referring to the judgment of the Madhya Pradesh High Court, it was held, any matter aris- ing out of the proceedings in the Explanation to section 251(1) means only such matters which were either specifically disclosed by the assessee in the return of income filed by him or any accompanying statements or men- tioned by the Assessing Officer in the assessment order and, therefore, the appellate authority was in total error in making the enhancement as it is without jurisdiction it was set aside. 18. Challenging the said finding in this appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the other 10 items of hundis which had not been explained by the assessee. This means that even if question No. 2 is answered in the affirmative, questions Nos. 1 and 3 must be answered in the negative. The appeal is, therefore, allowed, the impugned judgment of the High Court in so far as it relates to questions Nos. 1 and 3 is set aside and the said questions are answered in the negative, i.e., in favour of the Revenue and against the assessee." 21. In coming to the said conclusion the apex court relied on the judgment in the case of Jute Corporation of India Ltd. [1991] 187 ITR 688 (SC) where the law has been declared as under (page 613) : "The above observations are squarely applicable in the interpreta- tion of section 251(1)(a) of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is coterminous with that of the Income-tax Officer, and if that is so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income-tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment ; . . . (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant had a reasonable opportunity of showing cause against such enhance- ment or reduction. Explanation.-In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the pro- ceedings in which the order appealed against was passed, notwith- standing that such matter was not raised before the Commissioner (Appeals) by the appellant." 25. Therefore, the scope of the power of the Commissioner (Appeals) is too wide. The appellate authority has plenary powers in disposing of an appeal. An appeal is a continuation of the process of assessment and an assess- ment is but another name for adjustment of the tax liability to accord with the taxable event in the particular taxpayer's case. The Commissioner (Appeals) under the taxing enactment sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the law laid down by the Legislature. In a tax appeal, the appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts which he had received by way of drafts. The explanation was offered giving the names of persons from whom the said amounts were received. However, all of them were residing at different places in the country. The Assessing Officer could not enquire into the same, as the period prescribed for com- pleting the assessment was coming to an end. Therefore, he proceeded to pass an assessment order without expressing his opinion on the aforesaid loans. It is in this context, the said loans were the subject-matter of the proceedings before the Assessing Officer. He did not pass any order. In those circumstances, the first appellate authority gave an opportunity to the assessee to explain those receipts, called upon the Assessing Officer to hold an enquiry and submit a report. In the report submitted it became evident that except the aforesaid payment of Rs. 40 lakhs in respect of all other payments, the creditors stood by the said payment. Only in respect of this disputed payment, in the first place there is a difference in the name. After the person was identified he gave a statement denying the said pay- ment, denied knowing the assessee at all. The assessee was given an opportunit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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