TMI Blog2021 (4) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and adjudicate this issue on powers of enhancement of the CIT(A), on the facts and circumstances of the case, in favour of the assessee. Thus, we quash the enhancement made by the Ld. CIT(A). MAT computation applicability - Section 115JB applicability to assessee company - admittedly, the gross taxable income and the total income as well as the tax payable are Nil - HELD THAT:- This issue whether book profits can be computed U/s. 115JB of the Act, when the GTI and TI of the assessee are Nil and no taxes payable, is adjudicated in favour of the assessee, by respectfully following the decision of the Hon'ble Jurisdiction High Court own case on this issue. No other arguments are raised before us. - Decided in favour of assessee. - ITA No. 1956/Kol/2018 - - - Dated:- 1-4-2021 - Sri J. Sudhakar Reddy, Hon ble Accountant Member And Sri Aby T. Varkey, Hon ble Judicial Member For the Appellant : S. M. Surana, Advocate and P.K. Sanghai, C.A. For the Respondents : Tajinder Pal Singh, CIT, D/R ORDER Per J. Sudhakar Reddy , AM This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) - 4, (hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, the assessee submitted that in the absence of any taxable income under the normal provisions and tax being computed thereon, the computation provision for calculating tax U/s. 115JB of the Act fails and hence this Section 115JB is not applicable to the assessee company. For this proposition, that MAT provision does not apply to the assessee company, when the taxable income in -Nil- under the normal provisions of the Act, the assessee relied on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. U/s. Vishnu Sugar Mills Ltd. in ITA No. 359 of 2006, G.A. No. 3015 of 2006, for Assessment Year 2002-03, judgment dt. 20/11/2006 and the order of the Kolkata 'A' Bench of the Tribunal in the case of Neeraj Vanijya P. Ltd. vs. ITO in ITA No. 1504/Kol/2008, order dt. 31/03/2008. The assessee also referred to the certificate issue by the chartered accountant in Form No. 29B, certifying that MAT provisions U/s. 115JB of the Act are not applicable to the assessee company in view of the judgment of the Hon'ble Jurisdictional High Court on this issue. This Form No. 29B, was filed along with the return of income. The Ld. CIT(A) invoked his power U/s. 251( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be excluded from the computation of income both under the normal provisions of the Act as well as while computing book profits U/s. 115JB of the Act. The basic contention of the assessee is that the amount in question is in the nature of capital receipt and not in the nature of profit or gains, taxable U/s. 45 of the Act and realisation of capital due to improvement of capital asset by way of external development over a long period of time. 3. Aggrieved the assessee is in appeal before us on various grounds. 4. The Ld. Senior Counsel, Shri S.M. Surana, based his arguments on two main issues. These are (a) That the Ld. CIT(A) was in error while invoking provision U/s. 251(1)(a) r.w.s. 251(2) of the Act and enhancing the income of the assessee. (b) That the Ld. CIT(A) was wrong on the issue as to whether Section 115JB of the Act, applies to the assessee company or not, when admittedly, the gross taxable income and the total income as well as the tax payable are Nil, by refusing to follow the binding decision of the Hon'ble Jurisdictional High Court as well as the order of the ITAT Kolkata Bench of the Tribunal, on this issue. On the first issue, as to whether, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Kanpur Coal Syndicate (supra) and other cases. We would be dealing with the propositions of law laid down in each of these cases during the course of our findings. Thus, he submits that the Ld. CIT(A) was wrong in exercising his powers of enhancement U/s. 251(1](a] of the Act. On a query raised by the Bench, as to whether the computation of income U/s. 115JB of the Act, tantamount to taxing of the assessee from a different source of income (new source of income), the Ld. counsel for the assessee relied on a number of decisions as well as the CBDT Circular No. 13/2001 dt. 09/11/2001, reported in 252 ITR St. 50 and submitted that computation of income U/s. 115JB of the Act, is a self contained code. He submitted that when the Assessing Officer has not dealt with or considered the computation of profits U/s. 115JB of the Act, the Ld. CIT(A), does not have the power to enhance the assessment by bringing in a totally different self contained code for computation of book profits, not dealt with by the Assessing Officer. He further submitted that the Kolkata D Bench of Tribunal in the case of ACIT vs. M/s. Vishnu Sugar Mills Ltd. in ITA No. 1761/Kol/2005 C.O. No. 189/Kol/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order on an additional issue/s which was not raised or considered by the ITO. He submitted that no restrictions whatsoever, can be placed on the powers of the Ld. CIT(A) while hearing the appeal and that he Ld. CIT(A) has all the powers that the original authority may have in determining the assessable income in the case of any assessee. He relied on the order of the Ld. CIT(A) and submitted that a certificate given by the chartered accountant in Form 29A of the Act, with MAT provisions U/s. 115JB of the Act, is not applicable to the assessee is wrong, as the provisions of Section 115JA and the provisions of Section 115JB are different and the decisions or judgments cited U/s. 115JA of the Act cannot be applied in this case. He further relied on the order of the Ld. CIT(A) and submitted that the judgment of the Hon'ble Calcutta High Court, cannot be held as a binding precedent for the reason that, it was not a speaking order and only held that there is no substantial question of law involved on the decision of the Tribunal, in the case of the assessee, for the Assessment Year 2002-03. He submitted that the Lucknow Bench of the Tribunal has held that this order is per i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers in the appeal as he thinks fit (2) The [***] [Commissioner [Appeals]] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.--In disposing of an appeal, the [***] [Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the [***] [Commissioner (Appeals)] by the appellant. 8. The Hon'ble Supreme Court in the case of CIT vs. Rai Bahadur Hardutroy Motilal Chamaha (1967) 66 ITR 443 (SC), has held as under:- Section 251 of the Income-tax Act, 1961 [Corresponding to section 31(3) of the Indian Income-tax Act, 1922] - Commissioner (Appeals) - Power of Assessment year 1952-53 - Whether power of enhancement of AAC under section 31(3) of 1922 Act is restricted to subject matter of assessment or source of income which have been considered expressly or by clear implication by ITO from point of view of taxability of assessee-Held, yes - Whether, therefore, AAC had no jurisdiction under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment has to be confined to those items of income which were the subject-matter of original assessment. The Hon'ble Supreme Court in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC), held as follows:- It was, therefore, held that section 3 of 1922 Act impliedly gives an option to an appropriate authority to assess the total income of either the association of persons or the members of such association individually. The next question is whether the said option was given only to the ITO and is denied to the AAC and the Tribunal. Under the Act the ITO, after following the procedure prescribed, makes the assessment under section 23 of 1922 Act. Doubtless in making the assessment at the first instance he has to exercise the option whether he should assess the association of persons or the members thereof individually. It is not because that any section of the Act confers an exclusive power on him to do so, but because it is part of the process of assessment; that is to say, he has to ascertain who is the person liable to be assessed for the tax. If he seeks to assess an association of persons as an assessable entity, the said entity can object to the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date on which such order is communicated to him. Under section 33 of 1922 Act the Tribunal has ample power to set aside the assessment made on the association of persons and direct the ITO to assess the individuals or to direct the amendment of the assessment already made on the members. The comprehensive phraseology used both in section 31 and section 33 of the 1922 Act does not countenance the attempt of the revenue to restrict the powers of the AAC or of the Appellate Tribunal: both of them have power to direct the appropriate authority to assess the members individually instead of the association of persons as a unit. It was, therefore, held agreeing with the High Court, that the Tribunal has jurisdiction to give directions to the appropriate authority to cancel the assessment made on the association of persons and to give appropriate directions to the authority concerned to make afresh assessment on the members of that association individually. In the result, the instant appeal was to be dismissed. This judgment was considered in subsequent judgments by various Courts and the later judgments hold the field on this issue. The Hon'ble Supreme Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are not admissible under the provisions of the Act thereby leading to escapement of income. The Income-Tax Act provides for remedial measures which can be taken under these circumstances. While framing an assessment under Section 143(3) of the Act, any of the following situation may occur:- (a) The Assessing Officer may accept the return of income without making any addition or disallowance; or (b) The assessment is framed and the Assessing Officer makes certain addition or disallowance and in making such additions or disallowances, he deals with such item or items of income in the body of order of assessment but he under-assessed such sums; or (c) He makes no addition in respect of some of the items, though in the 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 there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he only question is as to whether the CIT(A), in exercise of power under Section 251(1)(a) of the Act has the power to enhance the assessment in the manner done in the instant case. As noted above, the submission of learned counsel for the appellant was that the Assessing Officer had not dealt with the issue in question (on which additions are made) in the assessment order at all and therefore, the CIT(A) had no power to make any additions under Section 251(1)(a) of the Act. According to the assessee, even if the Assessing Officer might have discussed such an issue during the course of hearing before him, i.e. incidental or collateral examination, that itself would not have given power to the CIT(A) unless the issue was specifically dealt with by the 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 31(3) of the Act is restricted to the subject-matter of assessment or the sources of income which have been considered expressly or by clear implication by the Income-tax Officer from the point of view of the taxability of the assessee. It was argued by Mr. Vishwanath Iyer on behalf of the appellant that by applying the principle to the present case, the Appellate Assistant Commissioner had jurisdiction to enhance the quantum of income of the assessee. It was pointed out that the fact of alleged transfer of ₹ 5,85,000 to Forbesganj branch was noted by the Income-tax Officer and also the fact that it did not reach Forbesganj on the same day. So it was argued that in the appeal the Appellate Assistant Commissioner had jurisdiction to deal with the question of the taxability of the amount of ₹ 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 ₹ 5,85,000 from the Calcutta branch, but the Income-tax Officer considered the dispatch of this amount only with a view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner (Appeals). Section 251(1)(a) of the Act empowers the Appellate Assistant Commissioner in disposing of an appeal by the assessed against an order of assessment to confirm, reduce, enhance or annul the assessment or to set aside and refer the case back to the Income Tax Officer for making fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner. Explanation to Section 251 provides that the Appellate Commissioner may hear and decide any matter arising out of the proceedings in which the order appealed against was passed notwithstanding that such a matter was not raised before the Appellate Commissioner by the appellant. The issue with regard to the scope of powers of the first Appellate Authority in disposing of an appeal has come up before 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 v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), while construing the corresponding provisions of the Indian Income Tax Act, 1922, relating to the jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Division Bench was confirmed by the Full Bench of this Court in Sardari Lal Co. (supra) observing as under:- Looking from the aforesaid angles, the inevitable conclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the Assessing Officer, 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 requisite conditions are fulfilled. It is inconceivable that in the presence of such specific provisions, a similar power is available to the first appellate authority. That being the position, the decision in Union Tyres' case (supra) of this court expresses the correct view and does not need reconsideration. This reference is accordingly 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 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be finalized due to the same reason as state above i.e. recession in the real estate business and fall in the market price of the properties. The advances made for Shanti Nagar properties are not related to the assessee and hence to his block assessment. The assessee furnished its comments to the said page which reflected the transactions relating to property purchase at R.T. Nagar, Shanti Nagar and Chellagatta etc. It is thus clear that this very property in respect of which additions are made by the CIT(A) was the subject matter of consideration before the Assessing Officer. It is a different matter that after the reply submitted by the assessee, the Assessing Officer chose not to make any addition on this count and nothing is mentioned in the assessment order. That, however, would not mean that the Assessing Officer had not considered 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 Tyres (supra) and Sardari Lal Co. (supra), the jurisdiction of the first appellate authority could exercise his powers only with regard to any other matter which has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of page No. 21 was not made in respect of the properties in question. 24. We thus answer question No. 2 in favour of the Revenue and against the assessee holding that on the facts of this case, the CIT(A) rightly exercised his powers under Section 251(1) of the Act. 25. In view of our aforesaid answer to question No. 2, we revert back to the additions mentioned at (iv) and (v) under Question No. 1, which are now to be dealt with on merits. Question No. 1(iv): The enhancement of assessment of undisclosed income of assessee of ₹ 2500000/- on account of payment allegedly received from jeetu virmani on the basis of notings in the page 21 of Annexure A-1 of the seized document. 26. Insofar as addition of this amount is concerned, it is pointed out by the learned CIT(A) that at page 21 of the seized documents itself it was mentioned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this amount of ₹ 25,00,000/- was neither received nor adjusted, in such a factual position we are not inclined to interfere with the order of the Ld. CIT(A) on this issue. This ground of the assessee is also dismissed. 28. We are of the opinion that Mr. Sabharwal, learned counsel appearing for the Revenue is correct in his submission that issue pertains to the appreciation of evidence by the two authorities below. 29. In Aradhna Oil Mills v. CIT [2001] 119 Taxman 629 the Madhya Pradesh High Court categorically held that it was not for the High Courts to exercise its power under Section 260A of the Act relying the evidence. That case also related to search and seizure and on the basis of documents seized addition was made by the ITO which was upheld by the Tribunal as well. The explanation of the assessee was not accepted by the quasi-judicial authorities and dismissing the appeal of the assessee, the Court observed:- In effect, the question whether 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee was that these amounts were subsequently received and statement of account was produced. As per the CIT(A), the dates on which the amounts were advanced and the amounts were received hack could not he related to seized documents at all for the following reasons:- i. The documents record Reed. 1.05 crores + 35 chq. On 4.9.95 . This noting cannot be broken up in two parts - one for ₹ 35 lacs and other for ₹ 1.05 crores, particularly when the nothings have been made in the past tense, i.e. Sh. G.M. Singh has recorded that on 4.9.95 itself both amount of ₹ 1.05 crores and ₹ 35 lacs were received. It cannot be said that ₹ 1.05 crores were received after 4.9.95 but Sh. G.M. Singh recorded the same on the date of receipt of ₹ 35 lacs. The appellant is trying to defend himself only by saying that on 4.9.95 ₹ 1.05 crores was not received even though this is recorded as such. ii. In his first statement given on 5.2.2000 Sh. G.M. Singh had also stated that ₹ 1.35 crores were already invested. Therefore, it was not open for him to change his stand that this amount was advanced in the year 1996 as per the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s below. It was sought to be highlighted that major portion of the amount namely ₹ 70 lacs out of ₹ 1.35 crores was received before the date of search and there was no material to assume that the amount of ₹ 1.05 crores was received in cash. However, the two authorities below have found, as a fact, that the amount of ₹ 70 lacs allegedly received could not be related to the transaction in question. 34. We, therefore, do not find any justification for interfering with this finding as well With this question No. 3 also stands answered against the assessee. 35. As a result the appeal warrants to he dismissed which is dismissed. 9. A perusal of the propositions of law laid down in all these case-law, takes us to the conclusion that the Ld. CIT(A) cannot touch or delve on any issue which does not arise from the order of assessment and which was outside the scope of or an issue which is not a subject matter the order of the assessment. In the case on hand, the issue of computation of book profits U/s. 115JB of the Act was not an issue that was a subject matter during the course of assessment proceedings. This issue of computation of book profits U/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows:- We have perused the order passed by the Tribunal It appears that the Tribunal has extensively dealt with the matter. We do not find that any substantial question of law is involved which is required to be decided by this Court. We therefore, do not find any reason to admit the application. Hence, this application is dismissed. 10.1.1. From the above, it is clear that the issue is decided in favour of the assessee by the Hon'ble Jurisdictional High Court. The Ld. CIT(A) was in error in hold that the decisions of the Tribunal was sub-silentio, when the Hon'ble High Court has upheld the same. The Income Tax Department itself, has not been bringing to tax book profits U/s. 115JB of the Act except for the Assessment Year 2005-06 in the case of the assessee when the GTI and TI are -Nil- or negative. The Ld. CIT(A) was in error in refusing to follow the ratio of the judgment laid down by the Hon'ble Jurisdictional High Court and in following the ratio laid down by the Lucknow Bench of the ITAT. The merits of the issue are a matter of interpretation, as to how we should interpret the same is of no relevance, when a binding decision of the Hon'ble Jur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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