2017 (11) TMI 1934 - AT - Income Tax

Undisclosed investment - mismatch between gross turn-over declared by assessee vis-avis gross receipt appearing in the bank statement of the assessee - assessee tried to reconcile the statement as observed by AO explaining that certain receipts in the bank statements are showing the money receipt on the realization of mutual fund as well as maturity value of fixed deposit - CIT(A) reversed the order of AO after giving part relief to assessee by observing the fact that the investment in mutual fund / fixed deposit are coming from the earlier year - HELD THAT - CIT(A) in his appellate order has admitted the fact that AO has not examined both debit and credit side of the bank account. But Ld. CIT(A) has also not commented on all the debit and credit side of the bank statement of the assessee. Also observed by Ld. CIT(A) in his appellate order that Assessing Officer failed to put any effort in his assessment order as well at the stage of remand report. But in this case, also we find that Ld. CIT(A) has also not exercised his power to figure out the unaccounted receipt.The requisition made by the Ld. CIT(A) during remand report has not been recorded in the order of Ld. CIT(A). The provision of Section 250(6) of the Act require the commissioner appeal to dispose of the appeal in writing and with reasoning but we find from the appellate order that where he has given relief to assessee merely relying on the submissions made by assessee. We also note that lot of information were submitted by assessee before Authorities Below which has not been duly verified. Therefore we are inclined to restore the matter back to the file of AO for fresh adjudication in accordance with law. The AO must give reasonable opportunity to the assessee before passing order on this point. Accordingly, Revenue s issue is allowed for statistical purpose. Reopening of assessment - whether CIT(A) erred in not issuing direction to the AO u/s 150(1) to reopen the assessment for those years in which the investment had been made by the assessee - HELD THAT - Respectfully following the judgment in the case of Murlidhar Bhaghubabu 1964 (1) TMI 5 - SUPREME COURT we conclude that Ld. CIT(A) has no power under the provision of law for giving any direction to AO for reopening of assessment. The appeal before Ld. CIT(A) is confined to the particular assessment year which is before him. Thus, in view of the above proposition, we dismiss the ground of Revenue s appeal. Consequently, Revenue s ground is dismissed.

Summary

Issues:
1. Justification of relief allowed to the assessee by Ld. CIT(A).
2. Treatment of undisclosed investment by AO and subsequent deletion by Ld. CIT(A).
3. Direction to reopen assessment for earlier years with undisclosed investments.

Issue 1:
The Revenue challenged the relief granted by Ld. CIT(A) to the assessee amounting to &8377;55,32,393. The AO had added this amount as undisclosed investment by the assessee due to a mismatch in gross receipts declared by the assessee and those appearing in the bank statements. The assessee explained that certain receipts were from the realization of mutual funds and maturity of fixed deposits, which were already offered for tax. Ld. CIT(A) observed that the investment in mutual funds and fixed deposits was from earlier years and granted partial relief to the assessee. However, the appellate order was found to have several deficiencies, leading to the matter being remitted back to the AO for fresh adjudication, allowing the Revenue's issue for statistical purposes.

Issue 2:
The AO made additions based on undisclosed investments by the assessee, which were subsequently deleted by Ld. CIT(A) on the grounds that these investments were made in earlier years, not the year under consideration. The Revenue contended that Ld. CIT(A) should have directed the AO to reopen assessments for the years when the investments were made. However, the Tribunal held that Ld. CIT(A) did not have the authority to issue such directions, as the Income Tax Act provides specific provisions for assessing escaped income under sections 147/263. Citing the Supreme Court judgment in ITO vs. Murlidhar Bhaghubabu, the Tribunal concluded that Ld. CIT(A) lacked the power to direct reopening of assessments for other years, dismissing the Revenue's ground.

Conclusion:
The Tribunal partially allowed the Revenue's appeal for statistical purposes, remitting the matter back to the AO for fresh adjudication due to deficiencies in the appellate order. It also dismissed the Revenue's ground regarding the direction to reopen assessments for earlier years, citing the limitations on Ld. CIT(A)'s powers as per the Income Tax Act and relevant judicial precedent.