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TMI Blog2000 (5) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... t hypothecation of stocks and book-debts. On the other hand, the assessee had closing stock of Rs. 53,321 only. Thus, it appeared to the CIT(A) that stock declared by the assessee in the books was lower as compared to the security given by the assessee to the Bank. With a view to ascertain the truth, the CIT(A) asked the assessee to furnish the details of security given to the Bank for security overdraft. The assessee filed a letter from the Bank. Further, on direct request made by the CIT(A) to the Bank, it was confirmed by the Bank that cash credit limit of Rs. 3,00,000 had been sanctioned against hypothecation of stocks and further limit of Rs. 2,00,000 against book-debts. The details as furnished by the assessee to the Bank showed that assessee had closing stock of Rs. 5,02,000 relating to 6537 numbers of sheep skins at the rate of Rs. 67 per skin and 2000 numbers of goat skins at the rate of Rs. 32 per skin. On the other hand, stock as per books was 799 skins valued at Rs. 53,321 only. 3. In view of the above discrepancies, the CIT(A) issued notice of enhancement under section 251(2). Various opportunities were given to the assessee to reconcile the discrepancy, but the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t him to do what he failed to do. Reliance was placed by him on the decision of Supreme Court in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225. He further relied on the recent decision of Supreme Court in the case of CIT v. Nirbheram Daluram [1997] 224 ITR 610, wherein their Lordships, following the decision in the case of Kanpur Coal Syndicate has held that AAC could enhance the assessment even in respect of new source not considered by the Assessing Officer. With reference to the doctrine of merger, it has been argued by the Id. DR that CIT(A) could not exercise revisional powers on the matters which had not been considered by the AAC in view of the Supreme Court decision in the case of CIT v. Amritlal Bhogilal Co. [1958] 34 ITR 130. 6. In reply, it was contended by the Id. counsel for the assessee, that the decision of Supreme Court in the case of Nirbheram Daluram is contrary to the earlier decision of Supreme Court by larger Bench of three judges in the case of Rai Bahadur Hardutroy Motilal Chamaria's case wherein it has been specifically held that any matter which was not considered by the ITO consciously cannot be considered by the CIT(A) for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the words 'enhance the assessment' are not confined to the assessment reached through a particular process, but the amount which ought to have been computed if the true total income had been found. Such contention of the revenue was considered to be a possible view, but the same was not accepted by observing that view expressed by various High Courts uniformly in the cases of Jagarnath Therani v. CIT AIR 1925 Pat. 408, Narrondas Manordass v. CIT [1957] 31 ITR 909 (Bom.) and GaJalaksmi Ginning Factory Ltd. v. CIT [1952] 22 ITR 502 (Mad.) had been accepted by the Legislature by not amending the provisions of section 31 to nullify the effect of such judgments. We have gone through the said judgment of the Supreme Court and also judgments of various High Courts referred therein a id find that in those cases, the addition by way of enhancement related to a source which was never the subject-matter of assessment. Therefore, the aforesaid Judgment of Supreme Court is applicable to a case where entirely a new source of income has been considered by the CIT(A) for the first time. 9. The next decision of Supreme Court is in the case of Rai Bahadur Hardutroy Motilal Chamaria's Their Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAC, though such matter had not been considered by the Assessing Officer. In that connection, the Bench referred to the earlier decision in the case of Kanpur Coal Syndicate and held that the AAC had ample powers to allow additional ground. The decision of Supreme Court in the case of Shapoorji Pallonji Mistry was distinguished by observing that they were not concerned with the issue of enhancement. But, one thing is clear that they applied the ratio laid down in the case of Kanpur Coal Syndicate. 12. On combined reading of the above decisions, there appears to be a conflict between the earlier decision in the case of Rai Bahadur Hardutroy Motilal Chamaria's on one hand and the recent decision in the case of Nirbheram Daluram on the other hand. According to the formal decision, the AAC/CIT(A) cannot enhance the assessment by going into the matter which was not considered consciously by the ITO from the point of view of taxability while according to the later decision, the CIT(A) can enhance the assessment by discovering a new source of income even it was not considered by the Assessing Officer. The most difficult question before us is as to which judgment should be followed. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 31-3-1989 was on record at the time of assessment which clearly shows that closing stock shown by the assessee was at Rs. 53,321 only and the same was very much negligible as compared to the huge overdraft of Rs. 5,35,193 which admittedly was obtained against hypothecation of stocks and book-debts. On the basis of such material, every vigilant officer was required to make enquiries in this regard. However, in the present case, the Assessing Officer failed to make such enquiry. Since the powers of CIT(A) are coterminous with that of Assessing Officer, he was well within his powers to cause enquiry and make addition if discrepancy is not satisfactorily explained. The perusal of the order of CIT(A) clearly shows that assessee was asked to explain the discrepancy after statutory notice under section 251(2) and the hearing was adjourned 11 times, but the assessee failed to avail of such opportunities, perhaps because there was no explanation. Therefore, in our opinion, the contention of the Id. counsel for the assessee regarding jurisdiction of CIT(A) is without force and is accordingly rejected. 15. Now coming to the merits of the case, it has been submitted by the Id. counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bona fide mistake of the estimation. Following the decision of Madras High Court in the case of Coimbatore Spg. Wvg. Co. Ltd. it is held that stock declared by the assessee to the Bank should be taken as correct. The decision of Madras High Court in Shri Padmavathi Cotton Mills'case relied upon by assessee's counsel is distinguishable on the facts of the case inasmuch as in that case, books of account had been accepted by the Assessing Officer, but in the present case, books of account have been rejected. The other decision relied upon by the assessee's counsel relates to the penalty matter which may be relevant in the penalty proceedings, but certainly it is not relevant for our purposes. In view of the above decision, the order of CIT(A) enhancing the assessment on account of under-valuation of stock by Rs. 4,48,679 is, therefore, upheld. 17. The enhancement of assessment by Rs. 41,918 on account of disallowance under section 43B is also confirmed since the matter has not been pressed before us. 18. The last issue relates to the disallowance of interest of Rs. 14,774 under section 40(b). The said interest was paid to Smt. N. Shansunissa, who had deposited certain amount wit ..... 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