2016 (5) TMI 116 - HC - Income Tax

Validity of block assessment - whether the seized material did not disclose any undisclosed income? - addition on account of excess transportation charges received - Held that - The assessee did not raise the issue of any addition of a sum of ₹ 1,59,38,774/- because there was no addition of the sum of ₹ 1,59,38,774/- or any part thereof. The assessee attempted to demonstrate the fallacy in the finding arrived at by the Assessing Officer by holding at one place that there was an undisclosed income of ₹ 2.02 crores and at another place by holding that there was an undisclosed income of ₹ 1.59 crores approximately. When the Assessing Officer had not made the addition of ₹ 1,59,38,774/-, the assessee had no occasion to challenge the same. When the assessee carried the matter to the CIT (Appeal), the latter, without anything more, could have enhanced the addition. But the CIT (Appeal) did not do so. He merely confirmed the order of the Assessing Officer. Therefore, the subject matter of challenge before the learned Tribunal was the addition of ₹ 2.02 crores. The learned Tribunal could either have upheld the same or could have set aside the same. The learned Tribunal chose to set aside that addition. The matter should therefore have come to an end in the absence of any cross objection by the revenue. We are of the opinion that the addition of a sum was clearly in excess of jurisdiction. Therefore, the question is answered in the negative and in favour of the assessee.

Summary

Issues Involved:
1. Validity of the block assessment.
2. Competence and justification of the Tribunal in making additions/disallowances.
3. Lawfulness and basis of the disallowance of expenses.

Detailed Analysis:

1. Validity of the Block Assessment:
The primary issue was whether the block assessment was valid, competent, and justified under Section 158B(b) read with Section 158BB of the Income-tax Act, 1961. The Assessing Officer had concluded that the assessee had made an excess claim of transportation charges amounting to Rs. 2,02,36,984/- based on seized documents from oil companies. However, the Tribunal found that the excess transportation charges were already accounted for in the assessee's books and thus could not be treated as undisclosed income. This decision was challenged by the assessee, who argued that the seized material did not disclose any undisclosed income.

2. Competence and Justification of the Tribunal in Making Additions/Disallowances:
The Tribunal examined the alleged bogus creditors and expenditures, ultimately holding that the assessee failed to provide evidence to prove the genuineness of the expenses claimed. The Tribunal upheld the addition of Rs. 1,59,38,774/- as undisclosed income, reasoning that the bogus nature of the expenses was revealed through search operations. However, the Tribunal's competence to confirm this addition was questioned since the Assessing Officer and CIT(Appeal) had not made such an addition. The Tribunal's decision to confirm the addition without a cross-objection from the revenue was deemed beyond its jurisdiction.

3. Lawfulness and Basis of the Disallowance of Expenses:
The Tribunal's decision to disallow the expenses of Rs. 1,59,38,774/- was challenged as being perverse, without lawful basis, and violative of the principles of natural justice. The assessee argued that the findings were based on irrelevant considerations and lacked proper enquiry. The Tribunal's decision was also contested on the grounds that no cross-objection was filed by the revenue, and thus, it was not open for the Tribunal to confirm the addition of Rs. 1,59,38,774/-.

Conclusion:
The High Court found that the Tribunal exceeded its jurisdiction by confirming the addition of Rs. 1,59,38,774/- without a cross-objection from the revenue. The Tribunal's decision to make the addition for the first time was not justified. Consequently, the High Court answered the second question in the negative, in favor of the assessee, and did not examine the third question due to the answer to the second question. The first question was not pressed by the assessee's counsel. The appeal was allowed, and the parties were directed to bear their own costs.