2004 (8) TMI 347 - AT - Income Tax

Sustaining of an addition for unexplained investment in NSCs - Enhancing the income through a show-cause notice - HELD THAT - From the facts discussed above it is obvious that the assessee had placed cash flow statement before the authorities below. A copy of the same is also placed at p. 33 of the paper book. It is also not in dispute that the assessee had withdrawn an amount of Rs. 45, 000 on 9th July 1990 and 10th July 1990. It is not the case of the Revenue that the amounts so withdrawn were utilized elsewhere. Mere fact that the assessee could not explain the time gap between the amount withdrawn and the investment in NSCs or where the amount was kept would not itself justify the addition. The claim of the assessee could have been rejected only if the source of balance in the bank account was not established or it could have been demonstrated that the amount so withdrawn was utilized elsewhere. This is not the case here. Therefore we do not find any justification for sustaining the impugned addition. Accordingly the order of CIT(A) is set aside and the addition is deleted. This ground of appeal is allowed. After due consideration we are of the view that such power is not vested with the CIT(A) to travel beyond the scope of original directions given in his first order and travel beyond the issues which stood already concluded or decided at the time of completing the first assessment and deciding the first appeal. Such power was vested with the CIT(A) at the time of deciding the first appeal but not at the time when he decided the second appeal because such issues did not arise from the set aside assessment completed by the AO. Therefore we are of the considered opinion that the learned CIT(A) travelled beyond his powers in raking up the already concluded issue and making enhancement of Rs. 50, 000. We therefore quash the order of CIT(A) in enhancing the income of Rs. 50, 000 as such enhancement made by the CIT(A) is without jurisdiction and bad in law. Consequently the income enhanced by the CIT(A) is deleted. All the grounds of appeal of the assessee are allowed. Thus we do not consider it fit to award any cost to the assessee. We order accordingly. In the result the appeal of the assessee is allowed.

Summary

Issues involved:
1. Sustaining of an addition of Rs. 15,000 for unexplained investment in NSCs.
2. Enhancing the income of the assessee by Rs. 50,000 through a show-cause notice.

Issue 1 - Sustaining of addition for unexplained investment in NSCs:
The assessee invested Rs. 15,000 in NSCs and Rs. 5,000 in PPF, claiming the source was from current year's income. However, the AO made an addition of Rs. 20,000 as the source of the investments was not proven with evidence. The CIT(A) set aside the assessment for proper consideration. Upon reassessment, the AO again made the same addition of Rs. 15,000, which the CIT(A) upheld due to a time gap between withdrawals and investments. The Tribunal found that the cash flow statement and withdrawals supported the investments, thus deleting the addition as the source of balance was established.

Issue 2 - Enhancement of income through show-cause notice:
The CIT(A) issued a notice to enhance the income by Rs. 30,000 for unexplained cash credits and Rs. 20,000 for other issues. The assessee contended that only the NSCs and PPF additions were under appeal initially, and the CIT(A) had no authority to enhance income beyond the original directions. The Tribunal agreed, stating that the CIT(A) exceeded his powers by enhancing income without jurisdiction, thus deleting the enhanced income. No costs were awarded to the assessee based on the circumstances of the case.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting the additions and enhancements made beyond the original directions of the CIT(A).