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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 ..... 260 A of the Income Tax Act ("the Act"), the Department assails the order, dt. 29-11-2007, of the Income Tax Appellate Tribunal, Cochin Bench, in ITA No. 161/2006. 4. For the Assessment Year 1995-96, the assessee, an individual, filed its return of income on 22 August 1995 disclosing a total income of Rs. 13,840/-. After processing the return, the Assessing Officer (AO) noticed that the assessee had not fully disclosed his income. So he issued a notice under section 148 of the Act. In April 1997, the assessee filed another return reiterating the income he had originally shown. Later, in March 1998 the assessee filed a revised return declaring total income of Rs. 38,030/-. In all the returns, the assessee reflected his status as "Resident". After processing the return under section 143 (3) of the Act, the AO determined the total income at Rs. 7,80,160/-. 5. Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)-II, Calicut ("the Appellate Authority"). Through his order, dt.09.01.2006, the Appellate Authority, in fact, enhanced the assessee's income by Rs. 2,215,116/-. He has found unexplained income in the statement of receipts and payments submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the assessee's wife, Rs. 7,00,000/- remained unexplained. Or so both the AO and Appellate Authority concluded. The Addition or Enhancement by the Appellate Authority: 11. During the appeal proceedings, the Appellate Authority noticed that that the assessee had declared an income of Rs. 22,15,116/- from abroad. He perused the assessee's original return filed on 22.8.1995 and the revised return filed on 11.3.1998. He noticed that the assessee had claimed the status of "resident". In the Appellant Authority's opinion, as the assessee has claimed the status of resident, he should have offered his "global income" for taxation. So, the Appellate Authority brought to tax the income of Rs. 22,15,116/- declared by the assessee as income from abroad. He issued a notice of enhancement u/s. 251(1)(i) of the Act. Though the assessee resisted the proposal, the Appellate Authority sustained the enhancement. The Tribunal's Findings: 12. As to the undisclosed income of Rs. 5,00,000/-in the account of the assessee's wife, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in enhancing the assessment by taking the assessee's status as 'residnet' and by bringing to tax the income earned by him outside India? 2. Given the first appellate authority's special powers under the Income Tax Act,1961 is the Tribunal right in (a) interfering with the enhancement effected by the appellate authority, (b) holding that the enhancement contemplated under Sec. 251 cannot be equated with that available to the AO under Section 147 of the Act? 3. Is the Tribunal justified in raising a dispute about the assessee's status? And has the Tribunal rightly concluded on the assessee's status? 4. Has the assessee discharged his burden of proof on the source of learned counsel has taken pains to drive home her contention that 5,00,000/- the assessee deposited into his wife's account? Or is the Tribunal justified in deleting the addition of learned counsel has taken pains to drive home her contention that 5,00,000/-? Discussion: 21. Succinctly stated, we need 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before the Tribunal to hold that a sum standing in the books of the assessee to the credit of a third party belonged to the assessee. The Bombay High Court discussed cash credits in such cases. It observed that when cash credits appear in the accounts of an assessee, whether in his own name or in the name of third parties, the Income-tax Officer is entitled to satisfy himself on the true nature and source of the amounts entered, and if, after investigation or inquiry, he is satisfied that the assessee does not explain those entries, he could regard them as representing the undisclosed income of the assessee. When these credit entries stand in the name of the assessee himself, the burden is undoubtedly on him to prove satisfactorily the nature and source of these entries and to show that they constitute no part of his business income liable to tax. When, however, entries stand, not in the assessee's own name, but in the name of third parties, there has been some 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 st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flects income. 30. Where the explanation offered by the assessee about sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz; the receipt of money, the burden is on the assessee to rebut the same and, if he fails to rebut, it can be held against the assessee that it was a receipt of an income. So held the Supreme Court in CIT v. Smt. P.K. Noorjahan. [1999] 237 ITR 570 (SC) 31. Culling out from a Catena of case law, Kanga & Palkhivala's The Law and Practice of Income Tax 10th Ed., Lexis Nexis, N. Delhi, p.1360 (Vol.I) has observed that if the assessee has adduced evidence to establish prima facie the source of cash credit, the onus shifts to the Department. The cogent evidence of the assessee cannot be rejected based on conjectures and assumptions. At the same time, the assessee must produce cogent evidence to rebut the presumption; a bald explanation is not enough. The mere furnishing of or the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his other returns about gift tax and wealth tax, he mentioned his status as 'non-resident'. The Ambit of Appellate Power: 37. To begin with, let us examine section 251 of the Act. As the assessment year was 1995-96, we will examine the provision as stood then. Before the amendment by Act 18 of 2008, section 251 read as: 251. Powers of the [* * *] Commissioner (Appeals).- (1) In disposing of an appeal, the [* * *] Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment he may confirm, reduce, enhance or annul the assessment; [* * *] (b) 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; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The [* * *] Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken, held the Supreme Court in Commissioner of Income Tax, M.P., Bhopal vs. M/s. Nirbheram Deluram 224 ITR 610 to this view as the Act places no restriction or limitation on exercising appellate power. Even otherwise, an appellate authority while hearing the appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitation, if any, prescribed by the statutory provisions. Absent any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have. 42. In CIT v. Shapoorji Pallonji 44 ITR 891 the assessment year was 1947-1948, and the case was finally decided in 14.02.1962. So the Act considered was pre-Independence 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Delhi High Court in CIT v. Union Tyres, Delhi, [1999] 240 ITR 556 has observed that Daluram did not comment whether these wide powers also include the power to discover a new source of income. So, Union Tyres concludes that the principle of law laid down in Shapoorji and Chamaria still holds the field. 48. The principle emerging from various pronouncements of the Supreme Court, Union Tyres observes, is that the first Appellate Authority is invested with very wide powers under Section 251(1)(a) of the Act 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 makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only regarding a matter raised by the assessee in appeal but also regarding any other matter considered by the Assessing 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 inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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