2020 (7) TMI 825 - AT - Income Tax

Addition u/s 56(2)(vii) v/s 69 unexplained investment - HELD THAT - DR fails to dispute the clinching fact that the impugned addition u/s 56(2)(vii) never formed subject matter of assessee s grounds in the lower appellate proceedings nor any such issue had arisen in the assessment order. This tribunal s co-ordinate bench s decision in Bikram Singh 2016 (4) TMI 822 - ITAT DELHI CIT(A) was not empower to enhance an income on an issue which was not the subject matter of the assessment. CIT(A) cannot touch upon an issue which does not arise from the order of the assessment and was outside the scope of the order of the assessment. Thus direct the Assessing Officer to delete the impugned addition. Assessee s appeal is allowed.

Summary

Issues:
Challenge to addition under section 56(2)(vii) against unexplained investment addition under section 69 in the assessment order.

The judgment pertains to an appeal for the assessment year 2015-16 against the Commissioner of Income Tax (Appeals)-Ranchi's order. The primary issue raised by the assessee challenges the CIT(A)'s action of adding Rs. 44.80 lakh under section 56(2)(vii) in the lower appellate order, contrasting with the unexplained investment addition of Rs. 115,12,000 under section 69 during the regular assessment. The tribunal noted that the addition under section 56(2)(vii) was not a part of the assessee's grounds in the lower appellate proceedings nor was it raised in the assessment order. Citing a previous decision, the tribunal emphasized the importance of considering all relevant records and documents before making additions. It concluded that the CIT(A) had acted beyond its power by directing the Assessing Officer to tax capital gains on the sale of land, an issue not raised in the assessment order. Relying on legal precedents, the tribunal directed the Assessing Officer to delete the impugned addition under section 56(2)(vii), thereby allowing the assessee's appeal.

In a detailed analysis, the tribunal highlighted the procedural irregularities in the CIT(A)'s decision-making process. It emphasized that the CIT(A) should have considered all relevant records and documents submitted by the assessee before passing the order. The tribunal noted that the Assessing Officer had not computed the income of the assessee based on the returned income but on the basis of an intimation under section 143(1) of the Income Tax Act. This discrepancy was raised as a ground before the CIT(A) and was considered a legal issue deserving adjudication. The tribunal also pointed out that the CIT(A) had exceeded its jurisdiction by directing the Assessing Officer to tax capital gains on the sale of land, an issue not part of the assessment order. By citing legal precedents, the tribunal established that the CIT(A) cannot enhance income on an issue not raised in the assessment and that the order of the CIT(A) was unsustainable.

The tribunal concluded the analysis by adopting the detailed reasoning from a previous decision and directed the Assessing Officer to delete the addition under section 56(2)(vii). The tribunal allowed the assessee's appeal, thereby overturning the CIT(A)'s decision and providing relief to the assessee. The order was pronounced in open court at the close of the hearing on 21st July 2020.