TMI Blog2017 (8) TMI 1554X X X X Extracts X X X X X X X X Extracts X X X X ..... since no enhancement notice has been given to the assessee in respect of addition of ₹ 2,19,726/-, the same merits to be deleted in the hands of assessee and hence, we direct the AO to delete the same. Addition made by the CIT(A) by way of enhancement notice is on account of unexplained receipts - AO had considered the said seized documents and had estimated the profits in the hands of assessee by applying net profit rate. AO had considered the total receipts in the hands of assessee as per TDS certificates at ₹ 3.71 crores and had also noted the non-receipt of TDS certificates from Nashik Municipal Corporation. In respect of TDS of ₹ 27,581/-, which he held to be equivalent to contract receipts of ₹ 11,07,670/- and the total contract receipts were calculated at ₹ 3.82 crores. The Assessing Officer because of non-verifiability of expenses and the high turnover of contract, estimated the net profit at 6% of the gross receipts. The Assessing Officer thus, had accepted the total contract receipts in the hands of assessee but because of non-verifiability of expenses had estimated the net profit. CIT(A) has found new source of income i.e. total rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the hands of assessee pursuant to enhancement made by the CIT(A). We have in the paras hereinabove already deleted the enhancement and in view thereof, we hereby delete the penalty levied under section 271(1)(c) of the Act on such enhanced income. The grounds of appeal raised by the assessee are thus, allowed. - ITA Nos. 535/PUN/2013 & 1354/PUN/2016, ITA No. 21/PUN/2015 - - - Dated:- 16-8-2017 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For the Appellant : Shri Kishor Phadke For the Respondent : Shri Shivanand Kalakari, JCIT ORDER PER SUSHMA CHOWLA, JM: The above three appeals filed by the same assessee are against separate orders of CIT(A)-II, CIT(A)-I, Nashik and CIT(A)-12, Pune, dated 18-12-2012, 30-10-2014 and 23-03-2016 respectively relating to assessment years 2004-05, 2005-06 2004-05 against orders passed under section 153A read with section 143(3), 271(1)(c) 143(3) read with section 153A of the Income Tax Act, 1961 (in short the Act ) respectively. 2. All the appeals filed by the assessee were heard together and are being disposed of by this consolidated order for the sake of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A)-II, Nasik erred in law and on facts in enhancing the taxable income of the appellant by ₹ 1,05,65,000/- for an altogether different issue relating to entries recorded in Dummy HO cash book account without appreciating that the said document was seized from the premises of Shri Prem Luthra and not from the premises of the appellant. Further, the learned CIT(A)-II, Nasik erred in not following procedure prescribed u/s 153C before proceeding for the said addition. 7. The learned CIT(A)-II, Nasik erred in law and on facts in not appreciating that the said issue of entries recorded in Dummy HO cash book was enquired by the learned AO vide his questionnaire dated 31/10/2008 which was replied to on 2/12/2008 and 26/12/2008 by the appellant. The learned CIT(A)-II, Nasik erred in exceeding his powers of enquiry on such a subject matter on which there was conspicuous mind application of the learned AO. 8. Without prejudice to Ground No. 5, 6 7 and alternately, the learned CIT(A)-II, Nasik erred in law and on facts in not appreciating that majority of the receipts entries stated in the said Dummy HO cash book account were recorded in accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and loss account. The Assessing Officer was of the view that the correctness for this profit was not verifiable and the Net profit shown in the return of income could not be accepted. As per the TDS certificates enclosed with the original return of income, the total contract receipts worked to the tune of ₹ 3,71,00,072/-. In addition, the assessee had not received the TDS certificate from Nashik Municipal Corporation in respect of TDS of ₹ 27,581/- which would be equivalent to contract receipts of ₹ 11,07,670/-. Thus, the total contract receipts were calculated at ₹ 3,82,07,742/-. The Assessing Officer in view of the non-verifiability of the expenses and the high turnover of the contract, estimated the Net profit at 6% of the Gross receipts working to ₹ 22,92,464/-, which resulted in addition of ₹ 2,36,893/-. 6. The CIT(A) noted the transactions in Dummy H.O. Cash Book account which included huge cash receipts and payments for the Assessment Year 2004-05. The same are tabulated at pages 5 and 6 of the appellate order. The total debits, i.e. receipts in the said account were to the tune of ₹ 1,05,65,000/- and the total cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Book for Assessment Year 2004-05 from 01-04-2003 to 31-03-2004. Pages 29 to 35 of the said Annexure-1 reflected various ledger accounts of Dummy H.O. Ledger account. According to the Dummy H.O. Cash Book, sum of ₹ 1,05,65,000/- was shown to have been received by the assessee during the Assessment Year 2004-05. The assessee kept on taking adjournment but did not attend the office of the CIT(A) and did not furnish the information initially. Later on, some explanation was filed. The CIT(A) referred to the show cause notice as to why total expenses of ₹ 96.91 lakhs shown for Assessment Year 2004-05 in the Dummy H.O. Cash Book should be not be treated as unexplained expenses and income to that extent should not be added. Another show cause notice was issued on 30-11-2012 asking the assessee as to why total receipts of ₹ 1,05,65,000/- as shown in the Dummy H.O. Cash Book for Assessment Year 2004-05 should not be added to the income. In the show cause notice, the assessee was given an opportunity to explain and in the absence of any explanation the CIT(A) stated that income would be enhanced by ₹ 1.05 crores. The assessee sought adjournments and did not give the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re written against each receipt and payment. The dummy HO ledger account from 01-04-2003 to 15-12-2004 are serially numbered from 1 to 6. Similarly Dummy Cash book for this period is serially numbered from pages no. 1 to 3. Prima-facie, while it appears that some of the cash payments made to various persons relate to appellant s business of road contracts/civil construction, certain cash payments pertain hospital expenses. There are cash expenses of appellant s daughter Aarti s fees (₹ 18,000/- on 14-05-2003) and construction of temple (₹ 40,000/- and ₹ 10,000/- on 30-05-2003). As stated earlier the appellant has failed to place on record any concrete evidence to substantiate his submission that some of the transactions were part of the regular books of accounts. In view of the discussion above, I am of the considered view that transactions reflected in the aforesaid seized papers pertain to appellant for A.Y. 2004-05. The dummy HO cash book and dummy HO ledger accounts cannot be treated as dumb documents as the entries recorded very meticulously and pertain to appellant s business and personal expenses, not reflected in the regular books of accounts. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astructure Ltd. Vs. JCIT ITA No.746/PN/2013 order dated 30-12-2016. 3. National Auto World Vs. ITO (2014) 49 taxmann.com 411 (Pune-Trib.) 4. M/s. Vijay Builders Vs. ITO ITA No.863/PN/2013 order dated 25-02-2015 5. M/s. Jaihind Engineers Vs. ITO Shri Lalita G. Kale (prop.) Vs. ITO ITA Nos. 791 and 792/PN/2016 order dated 15-07-2016 6. CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 0443 13. The Ld. Authorised Representative for the assessee stressed that the receipts were never inquired by the Assessing Officer and even the CIT(A) supported the enquiries and referred to the payments but later on he referred to the receipts; in such circumstances, enhancement carried out by the CIT(A) was beyond the jurisdiction to be exercised by him. In respect of the other enhancement of ₹ 2,19,726/- it was pointed out by the Ld. Authorised Representative for the assessee that no such enhancement notice was issued by the CIT(A) and hence no addition is warranted. 14. The Ld. Departmental Representative for the Revenue on the other hand pointed out that the powers of the CIT are coterminous with that of the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here are other provisions like sections 34 and 33B, which enable escaped income from new sources to be brought to tax after following a special procedure. The assessee contends that the powers of the Appellate Assistant Commissioner extend to matters considered by the Income tax Officer, and if a new source is to be considered, then the power of remand should be exercised. By the exercise of the power to assess fresh sources of income, the assessee is deprived of a finding by two tribunals and one right of appeal. 9. The question is whether we should accept the interpretation suggested by the Commissioner in preference to the one, which has held the field for nearly 37 years. In view of the provisions of sections 34 and 33B by which escaped income can be brought to tax, there is reason to think that the view expressed uniformly about the limits of the powers of the Appellate Assistant Commissioner to enhance the assessment has been accepted by the legislature as the true exposition of the words of the section. If it were not, one would expect that the legislature would have amended section 31 and specified the other intention in express words. The Income tax Act was amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 relating to assessment year 2008-09 and in Shri Lalita G. Kale (Prop.) Vs. ITO in ITA No.792/PN/2016, relating to assessment year 2009-10, vide order dated 15.07.2016 held as under:- 13. The Tribunal in M/s. Vijay Builders Vs. The Income Tax Officer (supra) while deciding similar issue of the power of enhancement of the Commissioner of Income Tax (Appeals) had relied on the ratio laid down in the following decisions : i. CIT Vs. Shapoorji Pallonji Mistry 44 ITR 891 (SC). ii. CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 (SC). iii. CIT Vs. Sardarilal and Company 120 taxmann 295 (Delhi). iv. CIT Vs. Union tyres 107 taxmann 447 (Delhi). 14. The Tribunal after considering the factual aspects of the case held as under : 14. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find during the course of assessment proceedings, on being questioned by the AO, the assessee vide letter dated 10-12-2010 had clarified that all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w source of income is concerned which has not been considered by the AO, jurisdiction to deal with same in appropriate cases may be dealt with u/s.147/148 and section 263 if requisite conditions are satisfied. It is inconceivable that in presence of such specific provisions a similar power is available to the first appellate authority. The Hon ble Delhi High Court in the case of Union Tyres (Supra) has also held similar view and held that it is not open to the appellate commissioner to introduce in assessment a new source of income and assessment has to be confined to those items of income which was subject matter of original assessment. The relevant observations of Hon ble Delhi High Court at para Nos. 11 to 13 of the order reads as under : 11. A question regarding powers of the first appellate authority came up for consideration before the Supreme Court recently in CIT v. Nirbheram Daluram [1977] 224 ITR 610/ 91 Taxman 181. Following their earlier decisions in Kanpur Coal Syndicate's case (supra) and Jute Corpn. of India Ltd.'s case (supra) though their Lordships reiterated that the appellate powers conferred on the Commissioner under section 251 could not be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enquiry ordered by the Commissioner was to satisfy himself about the source of investment by the assessee. It is axiomatic that failure to prove the sources of investment will result in addition in the hands of the assessee under a different provision of law and will not have much relevance in the estimation of sales and gross profit rate adopted by the Assessing Officer. In our. opinion, any addition on account of unexplained investment would constitute a new source of income which was not the subject-matter of assessment before the Assessing Officer and, therefore, it was not open to the first appellate authority to direct the Assessing Officer to conduct enquiry on the said four points. 14. For the foregoing reasons, we answer the question in the affirmative, i.e., in favour of the assessee and against the revenue. No order as to costs. 14.2 In view of the above decisions we hold that the Ld.CIT(A) has no power to enhance the income of the assessee by introducing a new source of income which had not been considered by the AO. Addition, if any, on that account can be made by taking recourse into provisions of section 147/148 and section 263. We according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipts worked out to ₹ 3.82 crores and since expenses claimed were not verifiable, estimated the net profit at 6% of gross receipts and calculated the same at ₹ 22,92,464/- and consequently, made an addition of ₹ 2,36,893/-. The CIT(A) on the other hand, noted the transactions in Dummy HO Cash Book Account and in the first instance, show cause notice was issued under section 251 of the Act and the assessee was asked to explain as to why the income of the assessee should not be enhanced by ₹ 96.91 lakhs i.e. on account of total credits in Dummy HO Cash Book Account i.e. expenses debited to that account. The assessee pointed out that detailed reply was filed before the Assessing Officer and the assessment was made by considering the said expenses and by applying NP rate of 6%. The second plea of assessee before the CIT(A) was that the said documents pertained to number of assessees and the total credits on account of expenses could not be added in the hands of assessee. Later, another show cause notice was issued on 30.11.2012 asking the assessee as to why the total credits of ₹ 1.05 crores as shown in the Dummy HO Cash Book should not be added to the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted by the Assessing Officer and not disturbed. In the absence of any enquiry by the Assessing Officer regarding receipts recorded in the Dummy HO Cash Book, the same was outside the purview of enhancement scope of the CIT(A). In case any new source of income is to be added in the hands of assessee which was not considered by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases, is to be dealt with under section 147/148 of the Act and / or under section 263 of the Act, where requisite conditions are fulfilled. Such is the proposition laid down by the Hon ble High Court of Delhi in CIT Vs. Sardari Lal Co. (supra). Applying the said propositions and the dictate of the Hon'ble Supreme Court on the issue, we hold that it is not open to the CIT(A) to introduce in the assessment a new source of income and the assessment had to be confined to those items of income which were the subject matter of original assessment. Accordingly, we reverse the order of CIT(A) in this regard and delete the addition of ₹ 1.05 crores. The grounds of appeal raised by the assessee are thus, allowed. 25. The facts and issues arising in ITA No.1354/PUN/2016 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
