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2016 (7) TMI 1511 - AT - Income TaxValidity of enhancement action of the CIT(A) - power on the Commissioner of Income Tax (Appeals) to enhance the assessment u/s 251(1) (a) - unexplained source of income towards investment - new source of income discovered in the enhancement proceedings by the CIT(A) - HELD THAT - In instant case is not about discovery of new source of income but re-appreciation of seized material placed before Assessing Officer to probe the source of income towards investment claimed by the assessee. Therefore we find no reason to entertain the plea of lack of jurisdiction towards enhancement raised by the assessee. We concurrently note that the assessee could not demonstrate on merits by any tangible evidence on record in rebuttal that the purported loans were given to the friends and relatives and were actually recovered in cash to establish the nexus of loans recovered qua the investments toward land acquisition. We accordingly find it difficult to hold the case in favour of the assessee on merits since the primary onus has not been discharged by the assessee at all. In view of the aforesaid reasonings the plea of the assessee on merits also deserves to be discarded. We simultaneously notice that the CIT(A) has enhanced the income by 70 lakhs whereas the controversy revolves around non-availability of 61.65 lakhs only. The source of balance unaccounted investment of 8.46 lakhs has already been duly offered and assessed by the Assessing Officer. Thus the enhancement of assessed income requires to be restricted to 61.65 lakhs only. Thus the assessee gets partial relief on this issue on merits.
Issues Involved:
1. Jurisdiction of the CIT(A) to enhance assessed income under section 251(1) of the Income-tax Act, 1961. 2. Assessability of additions made towards unexplained investment on merits. Issue-wise Detailed Analysis: 1. Jurisdiction of the CIT(A) to Enhance Assessed Income: The primary grievance raised by the assessee concerns the jurisdiction of the CIT(A) to enhance the assessed income by invoking section 251(1) of the Income-tax Act, 1961. The assessee contended that the enhancement action by the CIT(A) was beyond his jurisdiction, as it sought to find a new source of income not assessed by the Assessing Officer. The CIT(A) relied on the decision of the Hon’ble High Court of Karnataka in CIT vs. K. S. Dattatraya to justify his action, explaining that his power to enhance the assessment is in accordance with the provisions of the Act. The Tribunal analyzed the scope of the CIT(A)’s power under section 251(1)(a) and noted that while the CIT(A) has wide powers, these are restricted to the areas and sources of income considered by the Assessing Officer and should not lead to the discovery of a new source of income. The Tribunal referred to the decision of the Co-ordinate Bench of the Tribunal in M/s National Auto World vs. ITO, which established that the CIT(A) has no power to enhance the assessment by discovering a new source of income not processed by the Assessing Officer. However, the Tribunal found that the CIT(A)’s action did not amount to discovering a new source of income but rather re-appreciating the existing seized material considered by the Assessing Officer. The CIT(A) demonstrated that the unaccounted cash of ?61.65 lakhs assessed in the assessment year 2002-03 was invested in road construction projects and not given as loans and advances as claimed by the assessee. Thus, the enhancement was based on tangible seized material and not on a new source of income. The Tribunal concluded that the CIT(A) did not err in exercising his power under section 251(1)(a). 2. Assessability of Additions Made Towards Unexplained Investment on Merits: The second grievance of the assessee was the assessability of additions made towards unexplained investment on merits. The CIT(A) observed that the assessee failed to produce any documentary evidence to substantiate the recovery of loans and advances purportedly given to friends and relatives in the assessment year 2002-03. The seized documents clearly established that the cash amounting to ?61.65 lakhs was utilized for road construction projects in the assessment year 2002-03, and not recovered as claimed by the assessee. The Tribunal noted that the assessee could not demonstrate on merits any tangible evidence to establish the nexus of loans recovered and the investments towards land acquisition. Consequently, the Tribunal found it difficult to hold the case in favor of the assessee on merits. However, the Tribunal observed that the CIT(A) had enhanced the income by ?70 lakhs, whereas the controversy revolved around the non-availability of ?61.65 lakhs only. The source of the balance unaccounted investment of ?8.46 lakhs had already been duly offered and assessed by the Assessing Officer. Thus, the enhancement of assessed income was restricted to ?61.65 lakhs, providing partial relief to the assessee on this issue. Conclusion: The Tribunal partly allowed the appeal of the assessee, concluding that the CIT(A) had jurisdiction to enhance the assessed income based on re-appreciation of existing seized material and not by discovering a new source of income. On merits, the Tribunal restricted the enhancement of assessed income to ?61.65 lakhs, providing partial relief to the assessee.
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