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TMI Blog2007 (12) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... ectronics (P) Ltd., for consideration first. Assessee's appeal (ITA No. 1056/Hyd/2003)-Asst. yr. 1998-99 Revenue's appeal (ITA No. 1074/Hyd/2003) 3. Briefly stated facts of the case, as observed by the AO, are that the assessee, a private limited company engaged in the business of manufacture and sale of TVs filed its return of income admitting loss of Rs. 2,48,534. It was observed by the AO that as per the statement filed with the return, it is seen that the company had admitted income of Rs. 16,17,154 under the head 'Other income' The above income included Rs. 12,06,778 being syndication charges received and Rs. 4,10,370 being the waiver of interest by the bank. From the total income of Rs. 16,17,154, the assessee has deducted Rs. 5,17,089 being decrease in value of closing stock Rs. 1,05,263, selling and administration expenses Rs. 4,11,726 and finance expenses Rs. 100. From the profit thus arrived at Rs. 11,00,065 brought forward loss pertaining to TV unit was adjusted and unabsorbed loss was carried forward. During the course of assessment, it was found that the business of the company was to purchase raw material for assembling TV sets and sell them to Government agenci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (the Act) before the Jt. CIT. The Jt. CIT vide his directions dt. 6th March, 2000, relying on certain decisions, directed that since the business in which the loss was originally computed was not carried on by the assessee, the loss cannot be set off in this year. In this view of the matter, the AO after rejecting the assessee's claim for adjustment of carry forward loss from TV business against the income from syndication charges, computed the total income of Rs. 15,13,650, which was arrived at after deducting expenditure relating to commission of Rs. 1,03,500 from gross income of Rs. 16,17,154, comprising of syndication charges of Rs. 12,06,778 and interest waived by the bank treated as income under s. 41 of the Act of Rs. 4,10,376, and accordingly completed the assessment vide order dt. 23rd Nov., 2000 under s. 143(3) of the Act. 5. Being aggrieved, the assessee preferred appeal before the CIT(A). The learned CIT(A) after examining the objects of the assessee company, however, held that it is the managing director of the assessee company, Shri N. Ravikumar Reddy, in his individual capacity, who has earned the syndication charges and not the appellant company. The learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant when the evidence shows that the said business was still continuing. (c) The AO erred in holding that the syndication charges were received during the course of separate business activity of the appellant and was not a part of the earlier existing business. The AO erred in not allowing the entire expenditure debited to the P L a/c. The AO did not discuss the issue about the allowability of the expenditure incurred by the appellant. (d) The AO erred in not adjusting the earlier year's business losses from the income finally determined particularly when such adjustment is possible under s. 72 of the IT Act. (e) The AO erred in not allowing deduction of the brought forward unabsorbed depreciation under s. 32(2) of the IT Act, 1961. 3. The learned CIT(A) erred in holding that it is assessable in the hands of the individual while deciding the case of the company. 4. The learned CIT(A) ought to have observed that the company is entitled for deduction of the business loss and unabsorbed depreciation under s. 72 and under s. 32(2) of the IT Act, 1961 respectively. 5. The learned CIT(A) is not correct in giving a direction to reopen the assessment of Shri Rav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee, the first appellate authority has power to consider new source of income and/or is competent to issue such directions to vary an assessment made in the hands of third party. 13. In CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) while construing the corresponding provisions of Indian IT Act, 1922 relating to jurisdiction of the AAC in such an appeal, the Hon'ble Supreme Court held that, in an appeal filed by the assessee, the AAC has no power to enhance the assessment by discovering a new source of income, not considered by the ITO in the order appealed against. 14. Similar views were expressed by the Hon'ble apex Court in CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) wherein it has been held by their Lordships that the power of enhancement under s. 31(3) of 1922 Act was restricted to the subject-matter of the assessment or the source of income which had been considered expressly or by clear implication by the ITO from the point of view of taxability and that the AAC had no power to assess a source of income which had not been processed by the AO. 15. In CIT vs. Union Tyres (1999) 157 CTR (Del) 286 : (1999) 240 ITR 556 (Del) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd report in respect of item Nos. 1, 3, 8 and 10 noted above but sustained his action in calling for the report on the remaining points. The Revenue's application under s. 256(1) of the Act having been dismissed, on its approaching to the Hon'ble Court under s. 256(2) of the Act on a question "whether the directions by the AAC to the ITO to conduct enquiry and furnish information on the afore noted four points fell within the ambit of his powers under s. 251 (1)(a) of the Act", it has been held by their Lordships at p. 561 that: "........ In our opinion, any addition on account of unexplained investment would constitute. a new source of income which was not the subject-matter of assessment before the AO and, therefore, it was not open to the first appellate authority to direct the AO to conduct enquiry on the said four points." 16. Again in CIT vs. Sardari Lal Co. (2001) 170 CTR (Del)(FB) 431 : (2001) 251 ITR 864 (Del)(FB), it has been held by their Lordships at p. 864 as under: "In CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) the matter related to provisions of the Indian IT Act, 1922. It was held, inter alia, that in 'an appeal filed by the assessee, the AAC h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ships while upholding the view of the Tribunal held at p. 686 as under: "Held, that there was no provision of law under which the CIT(A) could, while deciding the appeal preferred by the assessee (widow), pass orders with regard to the assessments made by the ITO in the case of her deceased husband. Therefore, the Tribunal was right in holding that the CIT was not competent to issue directions to cancel the assessments made in the case of the deceased and to refund the taxes to the concerned taxpayers." 18. In Gauri Shankar Chaudhary vs. Addl. CIT Anr. (1999) 154 CTR (Pat) 264 : (1998) 234 ITR 865 (Pat), it has been observed by their Lordships at p. 869 as under: "........ We have no doubt in our mind that resort to sub-s. (1) of s. 150 of the Act can be taken only in cases where it becomes necessary to make assessment or reassessment or recomputation in consequence of, or to give effect to, any finding or direction pursuant to an appellate order passed by the appellate authority or pursuant to any order in reference or revision or by a Court in any proceeding under any other law. Obviously, the appeal, reference or revision or any other proceeding before a Court must relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us are partly allowed for statistical purposes. Assessee's appeal-ITA No. 327/Hyd/2006: Asst. yr. 1998-99 21. This appeal by the assessee, Shri N. Ravikumar Reddy directed against the order of the CIT(A), dt. 31st Jan., 2006, arises out of the assessment order dt. 28th Feb., 2005 passed under s. 143(4) r/w s. 147 of the Act, in pursuance of the directions of the learned CIT(A)-III, Hyderabad, dt. 8th July, 2003 in the case of M/s Pennar Electronics Ltd. Since, in the context of Revenue's appeal in ITA No. 1074/Hyd/2003 and assessee's appeal in ITA No. 1056/Hyd/2003 against the said order of the learned CIT(A) dt. 8th July, 2003, vide para 19 hereinabove, we have reversed the finding of the CIT(A) and upheld the stand of the AO in assessing the syndication charges in the hands of the company, M/s Pennar Electronics (P) Ltd.; the reassessment proceedings giving rise to this appeal, have no legs to stand. Accordingly, the reassessment order passed by the AO as well as the appellate order of the CIT(A), impugned herein are cancelled and the appeal of the assessee is allowed. 22. In the result, out of the cross-appeals, the appeal of the Revenue (ITA No. 1074/Hyd/2003) is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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