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TMI Blog2019 (2) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by AO. There was no inquiry made by the ld AO on the issue of capital gain shown by the assessee. AO has not at all considered the issue of sales consideration received by the assessee on sale of house as an issue of dispute before him. Therefore according to us, CIT (A) could not have made enhancement on the issue holding that capital gain shown by the assessee itself is not in accordance with the law and given a finding that no capital gain has accrued to the assessee. CIT (A) further held that funds received by the assessee is unaccounted income of the assessee and chargeable to tax u/s 68 of the act. Hence, enhancement u/s 251 (1) (a) of the act is prohibited on the issues which have not at all been considered by the AO during assessment proceedings. This gives the common understanding that the ld CIT (A) cannot enhance income of the assessee on altogether ‘new Source‘. Therefore it is clear that CIT(A) is not competent to enhance the assessment taking an income which income was not considered expressly or by necessary implication by the Assessing Officer at all. Such is the mandate of the decisions of various high courts such as in CIT vs. National Company Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly arbitrary and is thus unsustainable in law. 2. That even when enhancing, the income, the learned CIT(A) has neither stated the income by which the total income is enhanced or even the source of income or head of the income, which is stated to have been enhanced. 3. That the order of the learned CIT(A) in confirming the assessment is based on misconceived and erroneous assumption and on non-existent facts and hence is unsustainable in law. 4. That the learned CIT(A) has failed to appreciate that the assessee had sold its 1 /3rd share of property bearing No. R - 515, New Rajinder Nagar, New Delhi, under an registered agreement of sale of which possession had been handed over to the vendee, who took the possession thereof, which had been duly confirmed. The finding that the assessee had not transferred the property is entirely erroneous and is based on no valid material. 5. That the learned CIT(A) has failed to appreciate that having established the vendee had entered into an agreement of sale and had paid the consideration through cheques, which had duly been recorded in the accounts of the vendee who took the possession, could not have held that the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. That further the learned CIT (A) has also failed to comprehend that the assessee had discharged his onus, when it had furnished the confirmation from the vendee, who had acquired the property from the assessee and paid the consideration which consideration, had been paid by the vendee through its accounts. The learned CIT (A) has not only misread the evidence but has drawn erroneous inferences. The inferences drawn by the learned CIT(A) is on complete misreading of the evidence and is based on a biased and pre-determined approach and is thus vitiated in law. 13. That further the adverse finding recorded by the learned CIT (A) in her order that the transaction was colorable is entirely and wholly erroneous. In fact she has failed to comprehend that the assessee having obtained the balance sheet in support that the vendee has not disputed the purchase of property which is duly reflected iii their account, could not have ignored the balance sheet. 14. That in enhancing the income, the learned CIT(A) has failed to appreciate that the Full Bench of Delhi High Court in 251 ITR 864 which is binding on the learned CIT(A) has held that the learned CIT(A) in appeal before him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee Mr. Madan Mohan Sharma has also raised identical grounds of appeal. 4. Ground no 1,2,3,14,1,5 and 16 are with respect to enhancements of assessment by CIT (A), Ground no 9,10,11, 12 and 13 are with respect to addition u/s 68 on enhancement made by CIT (A), Ground no 4,5 and 8 are with respect to sales of the house property which has been held by CIT (A) on enhancement that assessee has not sold the house and hence there is no capital gain earned by the assessee but the sales consideration is chargeable to tax u/s 68 of the act, Ground no 6 and 7 on claim of deduction u/s 54 of the act and ground no 17 on violation of natural justice by not affording proper opportunity of hearing. 5. Brief facts of the case as extracted from the orders of Shri Hari Mohan Sharma shows that assessee is an individual, engaged in the business of brokerage and deriving income from house property, income from capital gains, business income and income from other sources. He filed his return of income declaring an income of INR 15830870/ on 31/10/2014. His case was selected by The Assistant Commissioner of Income Tax, Circle 63 (1), New Delhi (the learned AO) for a limited scrutiny through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vised return. Therefore the learned AO held that assessee cannot be allowed deduction under section 54 of the income tax act also. Accordingly the deduction claimed by the assessee u/s 54F of the act of ₹ 55611328/- was denied and claim of the alternative deduction under section 54 of the act was also rejected. Accordingly the total income of the assessee was assessed at INR 71442200/ against the returned income of INR 1 5830870 by an order u/s 143 (3) of the income tax act, 1961 on 27/12/2016. Appellate proceedings before CIT (A) 9. The assessee aggrieved with the order of the learned AO preferred an appeal before The Learned Commissioner of Income Tax (Appeals) 20, New Delhi. It was submitted before her that the AO should have granted deduction under section 54 of the act as it was a revised claim of the assessee alternatively. The assessee also relied upon several decisions of the coordinate benches and the circular number 14 (XL 35) dated 11/4/1955 stating that the assessing officer was to consider even claims of refunds even if not made by the assessee by drawing attention of the assessee to his rights. Accordingly assessee submitted that if the claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter for each unit in lieu of his one third undivided share of the property. The assessee also produced a partition deed dated 24/10/2017 for a consideration of INR 60,100,000. Therefore as per the terms and conditions of the agreements of the deed , appellant is the joint owner of the entire built up property of 1/3 undivided share in the company as 2/3rd undivided share. The assessee also stated that one third share which is sold to Sri Brij Mohan Sharma was never registered because of the property being hypothecated to the finance company. B. Enquiry made by CIT (A) for capital gain shown by the assessee i. Now the CIT A desired to know about the sale of the property made by the assessee on which he has earned the capital gain. CIT asked the learned assessing officer to conduct further enquiry regarding the authenticity of the sale made by the appellant of the property at Rajendra Nagar as assessee has produced only the agreement to sale and registered sale deed was not produced by the appellant. The AO did conduct enquiry which showed that a) Till the date the property is not registered in the name of the purchaser HUF nor was the possession of the property handed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT A also continued the further bank enquiry through the assessing officer which revealed that appellant and his 2 brothers have transferred the amount of INR 52,500,000 each on 29/10/2013 which in a circular route came back to the assessee which resulted into the so-called sale consideration received by the assessee. As per the report of the AO, three brothers transferred INR 52,500,000 each to one company Logic Commercial Enterprises Private Limited, which in turn issued the sums to Om Shivam Informatics Pvt Ltd, Paramount infra developers private Limited, Divya Jyoti Softech P Ltd , and Trinity farms P Ltd. All these companies in turn transferred the sum to Sri Devki Nandan Taneja ( HUF) and then that HUF transferred the sum of INR 62,500,000 to each of the brothers. Therefore another enhancement notice under section 251 (1) and 251 (2) was issued to the assessee to show cause why a sum of INR 62,500,000 should not be treated as unexplained as the claim of the sale consideration received from the HUF was found to be a false claim. vii. On 27/3/2017, assessee submitted objecting to the enhancement notice stating that the CIT A is tackling a new source of income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the power of the learned CIT A 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. She further referred to the powers of the learned CIT A under section 251 of the income tax act and held that the powers are validly executed by her. She relied on the decision of the honourable Supreme Court in case of jute Corp of India Ltd vs. CIT 187 ITR 688 and 224 ITR 610. She further relied upon the decision of honourable Punjab and Haryana High Court in 297 ITR 72 and stated that the only precondition mentioned for exercising the powers to enhance the income is that the same should be done only after providing adequate opportunity of hearing to the assessee. She further stated that there is no restriction under the act that the information which could form the basis of the enhancement of income could not be sourced from the assessing officer. She therefore rejected the argument of the assessee against the power of the learned CIT A of enhancement. x. On the merits o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 115BBE of the act and further the capital gain shown by the assessee of INR 6,01,54,171/ is not chargeable to tax in the hands of the assessee. xi. Consequently , Learned assessing officer passed an order under section 250 read with section 143 (3) of the income tax act on 15/05/2018 reducing the assessed income of the assessee of INR 7,14,42,200/ by the capital gain offered by the assessee on the sale of property of INR 6,01,54,171/- and making an addition on account of enhancement made by the learned CIT A under section 68 read with section 115 BBE of the income tax act of INR 62,500,000/- . Thereby net income of the assessee was enhanced by INR 23,45,829/- resulting into the net taxable income of the assessee of INR 7,37,88,029/ . Assessee, aggrieved with the order of the learned CIT A, has preferred this appeal. Submission of the Assessee 10. The learned authorised representative has made the extensive arguments on the following points:- i. That the learned CIT A has deleted/reduced the income of the assessee by not considering the long-term capital gain offered by the assessee in the return of income. The revenue has not cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the act. He further relied on the decision of the coordinate benches to substantiate his claim. v. With respect to the enhancement made by the learned CIT A he challenged it vehemently and stated that it is beyond the powers of the learned CIT A to find out the new sources of the income. He further stated that the subject matter of the appeal was limited to the allowability of the claim of deduction under section 54 of the income tax act and the learned CIT A has tackled a new source of income which is not permitted under the law. He stated that while examining the allowability of claim of deduction under section 54 of the act the learned CIT A has altogether held that the sale of the property is false and the amount of INR 62,500,000/- received by the assessee towards the sale of the property, which is confirmed by the buyer, is an unaccounted income of the assessee. He stated that such powers are not vested with CIT Appeal. vi. He relied upon the decision of the honourable Supreme Court in commissioner of income-tax (central), Calcutta v.Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443, decision of the honourable Delhi high court in commissioner of income-tax v. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nhancing income of the assessee? ii. Whether the ld CIT (A) has correctly made the addition of income u/s 68 of the act of ₹ 62500000/-, iii. In the given facts , Whether the assessee is entitled to deduction u/s 54 of the act or not Decision and Reasons 14. Coming to the first issue of challenge to powers of enhancements by the ld CIT (A), Powers of ld CIT (A) are enshrined u/s 251 of the act as under :- 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 ; (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment ; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or expenditure, incurred and claimed is not at all considered and an assessment is framed, as a result thereof, a prejudice is caused to the Revenue, or (f) where an item of income which ought to have been taxed remained untaxed, and there is an escapement of income, as a result of the assessee's failure to disclose fully and truly all material facts necessary for computation of income. 20. To ensure for each of such situations, an income which ought to have been taxed and remained untaxed, the Legislature has provided different remedial measures as are contained in sections 251(1)(a), 263, 154 and 147 of the Act. 21. In the category stated in (a), obviously if an income escapes an assessment, the provisions of section 147 of the Act can be invoked, subject to the condition stated in the proviso to the said section. In the category of cases falling in category (b), section 251(1)(a) provides the Commissioner of Income-tax (Appeals) could enhance such an assessment qua the under assessed sum, i.e., where the Assessing Officer had dealt with the issue in the assessment and was the subject-matter of appeal. In category falling in (c) and (e), the Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of such items of income U/s 263 of the act d where the Assessing Officer inadvertently omits to tax an amount which ought to have been taxed and in respect of which he does not make any enquiry u/s 147 of the act e where an item or items of income or expenditure, incurred and claimed is not at all considered and an assessment is framed, as a result thereof, a prejudice is caused to the Revenue, U/s 263 of the act f where an item of income which ought to have been taxed remained untaxed, and there is an escapement of income, as a result of the assessee's failure to disclose fully and truly all material facts necessary for computation of income u/s 147 of the act 17. In the same decision honourable Delhi High court after considering the provision of section 251(1) (a) of the act further held that 25. In CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC) where the Supreme Court interpreted the corresponding provision under the old Income-tax Act, 1922, the legal posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner had no jurisdiction, in the circumstances of the present case, to enhance the taxable income of the assessee on the basis of this amount of ₹ 5,85,000 or of any portion thereof. As we have already stated, it is not open to the Appellate Assistant Commissioner to travel outside the record, i.e., the return made by the assessee or the assessment order of the Income-tax Officer with a view to find out new sources of income and the power of enhancement under section 31(3) of the Act is restricted to the sources of income which have been the subjectmatter of consideration by the Income-tax Officer from the point of view of taxability. In this context 'consideration' does not mean 'incidental' or 'collateral' examination of any matter by the Incometax Officer in the process of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non taxability and not to any incidental connection. In the present case, it is manifest that the Income-tax Officer has not considered the entry of ₹ 5,85,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce of income which had been considered expressly or by clear implication by the Income-tax Officer from the point of view of taxability and that the Appellate Assistant Commissioner had no power to assess a source of income which had not been processed by the Assessing Officer. 27. At the same time, the court also clarified that the power of the first appellate authority is not restricted to examine only those aspects of assessment about which the assessee makes a grievance but it covers the whole assessment to correct the order of the Assessing Officer not only with regard to the 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. This principle can be traced to the following discussion in the said judgment (page 561) : 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) 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 assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) has held that under section 31(3)(a), in disposing of an appeal, the appellate authority may confirm, reduce, enhance or annul the assessment ; under clause (b), he may set aside the assessment and direct the Income-tax Officer now AO to make a fresh assessment. The appellate authority has, therefore, plenary powers in disposing of an appeal. The scope of his power is conterminous with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do . 41. As we can see, CIT v. P. Mohanakala [2007] 291 ITR 278 (SC) deals with the powers of the High Court in interfering with the findings of fact-and concurrent findings, at that by re-appreciating the evidence. The Supreme Court has held in the negative. The Supreme Court in Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC) has stated that the declaration of law is clear that the power of the appellate authority is co-terminus with that of the Income-tax Officer, and if that is so, there appears to be no reason why the appellate authority cannot modify the assessment order on an additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act to assess a source of income not processed by the Income-tax Officer and which is not disclosed either in the returns filed by the assessee or in the assessment order, and therefore the appellate authority cannot travel beyond the subject-matter of the assessment. In other words, the power of enhancement under section 31(3) of the Act is restricted to the subject-matter of assessment or the sources of income considered expressly or by clear implication by the Income-tax Officer from the viewpoint of the taxability of the assessee. 46. A question regarding powers of the first appellate authority came up for consideration before the Supreme Court recently in CIT v. Nirbheram Daluram [1997] 224 ITR 610 (SC). Following the earlier decisions in Kanpur Coal Syndicate and Jute Corporation of India, the Supreme Court reiterated that the appellate powers conferred on the Appellate Commissioner under section 251 could not be confined to the matter considered by the Income-tax Officer, as the Appellate Commissioner is vested with all the plenary powers which the Incometax Officer may have while making the assessment. 47. Indeed, examining Daluram's holding, a Divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Tyres, 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. 52. Therefore, we are in respectful agreement with the view taken by the Full Bench of the High Court of Delhi in Sardari Lal. As a corollary, we hold that the Tribunal's deleting the enhancement of ₹ 22,15,116 and cancelling the order of the Commissioner of Incometax (Appeals) on that issue call for no interference. [Underline supplied by us] 19. The principle culled out from the above judicial precedents clearly shows that words enhance the assessment are confined to the assessment reached through a particular process. It cannot be extended to the amount which ought to have been computed. There being other provisions which allow escaped income from new sources to be taxed after following a certain prescribed procedure. So long as a certain item of income had been considered and examined by the Assessing Officer from the point of view of its assessability and so long as the CIT(A) doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on the issues which have not at all been considered by the AO during assessment proceedings. This gives the common understanding that the ld CIT (A) cannot enhance income of the assessee on altogether new Source . Therefore it is clear that Therefore, the CIT(A) is not competent to enhance the assessment taking an income which income was not considered expressly or by necessary implication by the Assessing Officer at all. Such is the mandate of the decisions of various high courts such as in CIT vs. National Company Ltd. (1993) 199 ITR 445 (Cal), Sait Bansilal and Raggisetti Veeranna vs. CIT (1972) 83 ITR 750 (AP), Sterling Construction Trading Co. vs. ITO (1975) 99 ITR 236 (Kar) and Lokenath Tolaram vs. CIT (1986) 50 CTR (Bom) 237 : (1986) 161 ITR 82 (Bom). Hence issue no 1 I enlisted in para no 13 of the order is decided in favour of the assessee. In view of our decision on issue no (i), issue no (ii) does not survive and issue no (iii) is dealt with separately. In view of this we allow ground no 1,2,3,14,15 and 16 of the appeal of the assessee. 21. As we have held that ld CIT (A) has exceeded his jurisdiction in enhancing the income of the assessee by considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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