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TMI Blog2017 (11) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the assessing officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147, or section 148, or even section 263 of the Act if requisite conditions are fulfilled. It is inconceivable, according to Sardari Lal, that in the presence of such specific provisions, a similar power is available to the first appellate authority. Eventually, Sardari Lal upheld the decision in Union Tyres[1999 (9) TMI 81 - DELHI High Court]. Undeniably, the precedential position on the powers of the first appellate authority under section 251 undulates. There are seeming contradictions. But, as held by Union Tyres [1999 (9) TMI 81 - DELHI High Court ] and as affirmed on reference by Sardari Lal, there is a consistent judicial assertion that the powers under section 251 are, indeed, very wide; but, wide as they are, they do not go to the extent of displacing powers under, say, sections 147, 148, and 263 of the Act. Therefore, we are in respectful agreement with the view taken by the Full Bench of the High Court of Delhi in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,215,116/-. He has found unexplained income in the statement of receipts and payments submitted by the assessee; it obviously missed the AO s attention. 6. Further aggrieved, the assessee filed the second appeal before the Appellate Tribunal ( the Tribunal ) in ITA No. 161 of 2006. Through its order, dt.29.11.2007, the Tribunal substantially, rather than partly, allowed the appeal. Then, it was the Department s turn to come to this Court under section 260 A of the Act. The Process of Assessment: 7. During the reassessment, the AO added ₹ 31,284/- towards capital gain. The assessee sold two pieces of immovable property and purchased one property in the same year. The assessee is said to have deposited the balance ₹ 5,00,000/- into his wife s savings-bank account. The AO found that the assessee already possessed a house, so he could not claim exemption from capital gains. This reasoning found favour with the Appellate Authority, as well. 8. The assessee has rental income: from Sumaya Lodge , allegedly owned by his wife and him jointly. And the rental income for that assessment year was ₹ 27,681/-, out of which, the assessee showed ₹ 13,84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Tribunal has felt that the assessee has discharged his primary burden. The AO could have issued summons to the remaining purchasers under section 131 of the Act. So it found no justification to sustain the addition. 13. On the addition of ₹ 3,00,000/-, the Tribunal upheld the findings. 14. On the addition of new income of ₹ 22,15,116/-, the Tribunal has held that this item of income was not before the AO. as it was not the subject of assessment. The judgment of the Delhi High Court s Full Bench in CIT v. Sardari Lal 251 ITR 864 (Del) (FB), fully covers the issue, and so the enhancement cannot be sustained. Submissions: Appellant s: 15. On the addition of unexplained income of ₹ 5,00,000/-, Sri P.K. Ravindranath has submitted that those who allegedly purchased the bars of gold from the assessee are his own relatives. Therefore, he ought to have produced them before the AO. Even otherwise, the assessee has, according to the learned senior counsel, the statutory burden of establishing his defence that he had a proper source for the income. 16. The learned senior counsel for the revenue has taken us to section 251 of the Act to assert that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to examine two issues: (1) Has the assessee discharged what is stated to be the primary burden that he did sell his bars of gold and deposited the amount into his wife s account? (2) Has the Appellate Authority the power under section 251 to add to or enhance the assessee s declared income from a source never considered by the AO? The Burden of Proof: 22. It is a truism to say that the Evidence Act per se does not apply to the proceedings under the Income Tax Act, with its own provisions on the burden of proof. In other words, the A.O. is a quasi-judicial authority not fettered by technical rules of evidence and pleadings; he is entitled to act on materials which may not be accepted as evidence in a court of law. Referring to the Indian Income Tax Act, 1922, a Constitution Bench of the Supreme Court has held in Dhakeshwari Cotton Mills Ltd v. CIT (1954) 26 ITR 775 (SC) that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me divergence of opinion expressed on the question of the burden of proof. 26. In Sarogi Credit Corporation v. Commissioner of Income-Tax [1976] 103 ITR 344 (Pat) the Patna High Court has held that if the credit entry stands in the names of the assessee's wife and children, or in the name of any other near relation, or an employee of the assessee, the burden lies on the assessee, though the entry is not in his own name, to explain satisfactorily the nature and source of that entry. 27. But, if the entry stands not in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will, holds Sarogi Credit Corporation, still lie upon the assessee to establish the identity of that party and to satisfy the Income-tax Officer that the entry is real and not fictitious. Once the identity of the third party is established before the Income-tax Officer, and prima facie evidence is placed before him asserting that the entry is not fictitious, the burden of proof initially lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further on ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere fact of payment by an account payee cheque, or mere identification of donor or creditor, or the mere submission of the confirmatory letter by the creditor is by itself not enough to shift the onus on to the Department, although these facts may, along with other facts, be relevant in establishing the genuineness of the transaction. 32. Here, initially, the assessee changed version three times about the source of ₹ 5,00,000/-: that the amount was remitted from abroad; that his NRE friends lent the money; that he sold the bars of gold. The AO examined five witnesses; none inspired confidence or sounded even remotely truthful. True that the assessee provided the particulars of the other alleged purchasers, too. Equally true is the fact that the principle of falsus uno, falsus omnibus does not apply to the testimonies in the courts of India. In other words, those unsummoned witnesses might have thrown more light on the issue, and the falsity of the witnesses already examined could have posed no hurdle. But, at the same time, we cannot discount the diligent efforts by the AO to get at the truth. 33. To put it simply, we may observe that by changing his versions frequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.-In disposing of an appeal, the [* * *] Commissioner (Appeals) may consider and decide any matter arising out of proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the [* * *] Commissioner (Appeals) by the appellant. 38. The provision clarifies that in an appeal against an order of assessment, the Appellate Authority may confirm, reduce, enhance, or annul the assessment. In an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. The explanation to the provision further emphasizes that the Appellate Authority may consider and decide any matter arising out of proceedings in which the order appealed against was passed, though such matter was not raised before him by the appellant. Precedential Position: 39. A Full Bench of this Court in the CIT v. Best Wood Industries and Saw Mills 331 ITR 63 (Ker) (FB) has examined the powers of the AO, but not the Appellate Authority. It has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enactment. Examining section 31 of the old Act, the Supreme Court has held that there is no doubt that the appellate authority can enhance the assessment . This power must, at least, fall within the words enhance the assessment , if they are not to be rendered wholly nugatory. 43. Now, we may examine the authorities that also have dealt with the powers of the appellate authority but seem to have taken a divergent path. 44. In CIT v. Rai Bahadur Hardutroy Motilal Chamaria, 66 ITR 443 a three-Judge Bench of the Supreme Court has observed that it is only the assessee who has a right conferred under section 31 to prefer an appeal against the order of assessment made by the Income-tax Officer. If the assessee does not appeal the order of assessment becomes final subject to any power of revision that the Commissioner may have under section 33B of the Act. Therefore, it would be wholly erroneous to compare the powers of the appellate authority with the powers possessed by a court of appeal, under the Civil Procedure Code. The Appellate Assistant Commissioner is not an ordinary court of appeal. It is impossible to talk of a court of appeal when only one party to the original decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer and determined in assessment. 49. There is a solitary but significant limitation, according to Union Tyres, to the power of revision: It is not open to the Appellate Commissioner to introduce in the Assessment a new source of income and the assessment must be confined to those items of income which were the subject-matter of the original assessment. 50. In course of time, Union Tyres was doubted. In CIT v. Sardari Lal Co., 251 ITR 864 (Del) (FB) the same issue-whether the appellate authority has the power under section 251 to discover a new source of income-was referred to a Full Bench. After examining the authorities holding the fielding on that issue, the learned Full Bench has held that the inevitable conclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the assessing officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147, or section 148, or even section 263 of the Act if requisite conditions are fulfilled. It is inconceivable, according to Sardari Lal, that in the presence of such specific provisions, a similar power is avail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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