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TMI Blog2015 (2) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 25-2-2015 - Ms. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER Appellant by : Shri Pramod Shingte Respondent by : Shri B.C. Malakar ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 15-02-2013 of the CIT(A)-II, Nashik, relating to Assessment Year 2008-09. 2. Facts of the case, in brief, are that the assessee is a firm engaged in the business of building construction and land development. It filed its return of income on 06-03-2009 declaring total income at ₹ 81,560/. During the course of assessment proceedings the AO noted that assessee has paid interest of ₹ 9,26,418/- on loans availed from cooperative societies, i.e. Anand Nagari Pat Sanstha and Sinnar Nagari Sahakari Pat Sanstha. The AO, therefore, asked the assessee to substantiate the justification of such interest paid at ₹ 9,26,418/- to the above said cooperative credit societies and also to explain as to why no tax has been deducted u/s.194A from such payment. It was explained by the assessee that when the cooperative credit society constitutes with its members only and no other person or public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable u/s.36(1)(iii) if it is proved that the borrowed funds were used for the business purposes only. Since the assessee has not proved that the interest free amounts advanced were infact for the purpose of business, therefore, following the decision of the Hyderabad Bench of the Tribunal in the case of Ravindra Singh Arora Vs. CIT reported in 53 SOT 124 the Ld.CIT(A) disallowed such interest u/s.36(1)(iii) of the I.T. Act. 4.1 So far as the addition of ₹ 9,26,418/- u/s.40(a)(ia) is concerned, he observed that the provisions of section 194A are not applicable in regard to loans obtained from the cooperative societies. While doing so, he followed the decision of the Hon ble Madras High Court in the case of Syndicate Bank Employees Cooperative Thrift and Credit Society Ltd. Vs. ITO reported in 287 ITR 40 and the decision of the Pune Bench of the Tribunal in the case of Maharastra Arogya Mandal. Since the Revenue is not in appeal against deletion of the above amount, we are not concerned with the above issue. 4.2 The Ld.CIT(A) however observed that a survey u/s.133A of the I.T. Act in the case of the Sanklechas had taken place on 17- 10-2007. During the course of survey p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. He noted that the assessee failed to prove that the figures reflected on page 43 of Annexure 60 are part of its regular books of account. The retraction of the assessee from its statement is without any documentary evidence. The AO has also not brought on record any documentary evidence to prove that the figures recorded on page 43 of Annexure 60 are part of the regular books of account. He observed that the figures mentioned at page 43 of Annexure 60 pertains to expenditure incurred on account of labour and material for its Gaikwad Sankul Project. The assessee has undertaken the said project during the impugned assessment year. There is a direct nexus between the activity of the assessee and the figures reflected on page 43 of Annexure 60. Since the assessee had admitted during the survey that these figures were outside its regular books of account, therefore, the CIT(A) was of the opinion that the figures mentioned on page 43 of Annexure 60 are assessee s unexplained expenditure outside the regular books of account. He therefore enhanced the income of the assessee by ₹ 25 lakhs. 6. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may please be deleted. Copy of the paper forms part of grounds of appeal. 9. On the facts and in the circumstances of the case and in law the Learned CIT(A) is not justified in enhancing the income on the basis of a dumb document, which is neither in the handwriting of any of the partner, not it bears the signature of any partner. The addition may please be deleted. 10. The appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal. 7. Grounds of appeal No.1 to 5 by the assessee relates to disallowance of ₹ 3,04,000/- u/s.36(1)(iii) of the I.T. Act. The Ld. Counsel for the assessee submitted that the assessee was having both interest free and interest bearing funds. Referring to page 14 of the paper book he submitted that the capital account of the partners as on 31-03-2008 was ₹ 31,03,627/-. Referring to the decision of the Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd. reported in 313 ITR 340 he submitted that the Hon ble High Court has held that if there was funds available both interest free and overdraft and/or loans taken, then a presumption would arise that investment would be out of interest free fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, however, he cannot introduce a new source of income as his power of enhancement is restricted only to income which was subject matter of consideration for purposes of assessment by the AO. For the above proposition, he relied on the following decisions : i. CIT Vs. Shapoorji Pallonji Mistry 44 ITR 891 (SC) ii. CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 (SC) iii. CIT Vs. Sardarilal and Company 120 taxmann 295 (Delhi) iv. CIT Vs. Union tyres 107 taxmann 447 (Delhi) 11.1 Referring to the above decisions he submitted that it has been held in the above decisions that whenever question of taxability of income from a new source of income is concerned which had not been considered by the AO, jurisdiction to deal with same in appropriate cases may be dealt with u/s.147/148 and section 263 if requisite conditions are satisfied and it is inconceivable that in presence of such specific provisions similar power is available to a first appellate authority. 12. So far as the merit of the case is concerned, he submitted that although the Ld.CIT(A) while deciding the issue has called for a remand report, however, the AO has not applied his mind properly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 10-12-2010 had clarified that all the advances received and paid have already been properly recorded in the regularly maintained books of accounts. It was also brought to the notice of the AO that during the survey operation the partner Shri Prakash Sanklecha was upset and could not give proper answers due to tension. Relying on various decisions the assessee had argued before the AO that no addition is called for. The assessee had also produced the books of accounts before the AO to substantiate that all those figures are already recorded in the books of account. On the basis of the above the AO has not made any addition. From the copy of the audited accounts filed in the paper book we find the assessee has shown works expenses at ₹ 75,42,955/- as per Schedule-M. The Schedule-M annexed to the audited accounts shows labour charges at ₹ 14,38,060/-. Similarly, the assessee has also shown purchases to the tune of ₹ 68,11,278/-. We therefore find merit in the submission of the Ld. Counsel for the assessee that the figures in the impounded document area already entered in the regular books of account and therefore no addition is called for. Accordingly, we hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 251 could not be confined to the matter which had been considered by the ITO, as the Commissioner is vested with all the plenary powers which the ITO may have while making the assessment, but did not comment on the issue whether these wide powers also include the power to discover a new source of income. Therefore, the principle of law laid down in Shapoorji Pallonji Mistry's case (supra) and Rai Bahadur Hardutroy Motilal Chamaria's case (supra) still holds the field. 12. Thus, the principle emerging from the aforenoted pronouncements of the Supreme Court is, that the first appellate authority is invested with very wide powers under section 251(1)(a) and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee make a grievance and ranges over the whole assessment to correct the Assessing Officer not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment. However, there is a solitary but significant limitation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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