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TMI Blog2019 (9) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... self. Issuance of fresh notice of enhancement by the CIT (A) has no relevance, once the order of the Tribunal as well as CIT (A) was set aside by this Court on 10.12.2014 restoring the appeal back to CIT (A) for reconsideration and fixing 31th December, 2014 as last date for the appellant to file all required information and documentary material and to appear before CIT (A) on 05th January, 2015. The question of law raised by the assessee is of no consequence as he, thereafter, had filed the documents before CIT (A) and had appeared, thus, the question of issuance of fresh notice for enhancement does not arise and the CIT(A) rightly decided the question so raised before it. Argument of assessee cannot be accepted so as to restrict the power of Commissioner (Appeals) on the ground of new source of income, as Section 251 clearly envisages the power of the appellate authority for considering and deciding any material arising out of proceedings in which order appealed against was passed. In the present case, all the materials looked upon by the appellate authority was before the assessing authority, as such the Commissioner (Appeals) rightly proceeded to decide the same as it arose out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G.P rate of 17.79% in this year as compared to 13.79% in A.y 2005-06, specially when all the expenses were vouched and verifiable being the books of accounts are duly audited u/s 44AB of the Act, in the absence of its rejection and the books have not been rejected. (iv) whether the ITAT has rightly sustained the addition of ₹ 15 lacs out of Sundry Creditors for onus of discharge of verification after 7 years, on appellant while legal observation to preserve the books of Accounts and other documents, for 6 years from the relevant assessment years and third party is under no obligation to provide confirmation or verification beyond 6 years from the relevant assessment years." 3. On 03.05.2019, the above mentioned question of laws were incorporated by the appellant in the paper-book as question nos. III and IV. Assessee/ appellant is in business of civil contract, and for assessment year 2006-07 disclosed his job work receipts amounting to ₹ 90,35,009/- and declared gross profit of ₹ 16,07,474/- whereas net profit was shown as ₹ 3,62,113/-. Return of income was filed on 31.10.2006 and the same was processed under Section 143(1) of the Act on 14.09.2007. Case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of ₹ 36,019/- and ₹ 20,000/- were deleted, while additions of ₹ 11.50 lacs and ₹ 15.00 lacs were confirmed. Against this order an appeal was filed by the assessee/ appellant before the Tribunal which was also partly allowed on 24.02.2016 confirming the addition of amount of sundry creditors to extent of ₹ 15.00 lacs, while disallowance on labour charges of ₹ 5.95 lacs being made. It is against this order that the present appeal has been filed by the assessee. 7. Learned senior counsel appearing for the assessee submitted that Assessing Officer had made three additions which were deleted by the CIT (A) but had wrongly made addition of ₹ 11.50 lacs and ₹ 15.00 lacs towards labour expenditure and sundry creditors, as he did not had the jurisdiction to introduce a new source of income and assessment was to be confined to those items of income which was subject matter of original assessment, that is the three additions made by AO of ₹ 76,019/-, ₹ 20,000/- and ₹ 54,375/- only. 8. It was submitted that Section 251(1)(a) of the Act only envisages for the appellate authority that is CIT (Appeal) to confine its assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Apex Court cited above. Reliance has also been placed on the decision of the Supreme Court in case of Additional Commissioner of Income Tax v. M/s. Gurjargravures (P.) Ltd. [1978] 111 ITR 1 (SC), following the earlier two decisions of the Apex Court. Counsel for the assessee vehemently argued that the power of the first appellate authority does not go beyond what has been considered by the Assessing Officer in appeal and reliance upon the decision of a Full Bench in case of CIT v. Sardari Lal and Co. [2001] 251 ITR 864 (Delhi) has been placed wherein it has been held as under:- "7. The learned counsel for the revenue also submitted that this conclusion of the Division Bench needs a fresh look. We have considered this submission in the background of what had been stated by the Apex Court in Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 and CIT v. Nirbheram Daluram [1997] 224 ITR 610. In Jute Corporation of India Ltd.'s case (supra), the Apex Court while considering the question whether AAC has jurisdiction to allow the assessee to raise an additional ground in assailing the order of assessment before it, referred to Shapoorji Pallonji Mistry's case (supra), and draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us High Courts including the Bombay High Court judgment in Narrondas Manordass [1957] 31 ITR 909 and also the decision of this Court in McMillan and Co. [1958] 33 ITR 182 and held that, in an appeal filed by the assessee, the AAC has no power to enhance the assessment by discovering new sources of income not considered by the ITO in the order appealed against. It was urged on behalf of the revenue that the words 'enhance the assessment' occurring, in section 31 were 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. The Court observed that there was no doubt that this view was also possible, but having regard to the provisions of sections 34 and 33-B, which made provision for assessment of escaped income from new sources, the interpretation suggested on behalf of the revenue would be against the view which had held the field for nearly 37 years......" (p. 692) [Emphasis supplied] 8. Looking from the aforesaid angles, 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nirbheram Deluram [1997] 91 Taxman 181 (SC), CIT vs. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) as well as Jute Corporation of India vs. CIT [1991] 187 ITR 688 (SC), in which the Apex Court in depth considered the power of the Appellate Assistant Commissioner while exercising power under Section 251 of the Income Tax Act. Further, the Apex Court in Jute Corporation of India (supra) distinguished the judgment passed in case of Gurjargravures (P.) Ltd. (supra) and held as under:- "4. Section 31 of the Income-tax Act, 1922 ('the Act') also conferred power on the AAC to hear appeal against the assessment order made by the ITO. Chagla, C. J. of the Bombay High Court considered the question in detail in Narrondas Manordass v. CIT, [1957] 31 ITR 909 and held that the AAC was empowered to correct the ITO not only with regard to a matter which had been raised by the assessee but also with regard to a matter which may have been considered by the ITO and determined in the course of the assessment. The High Court observed that since the AAC had been the revising authority against the decisions of the ITO; a revising authority not in the narrow sense of revising those matters, which the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew, holding that in the absence of any claim made by the assessee before the ITO regarding relief, he is not entitled to raise the question of exemption under Section 84 of the Act before the AAC hearing appeal against the order of the ITO. In that case the assessee had made no claim before the ITO for exemption under Section 84, no such claim was made in the return nor any material was placed on record supporting such a claim before the ITO at the time of assessment. The assessee for the first time made claim for exemption under Section 84 before the AAC who rejected the claim but on further appeal the Tribunal held that since the entire assessment was open before the AAC there was no reason for his not entertaining the claim, or directing the ITO to allow appropriate relief. On a reference the High Court upheld that view taken by the Tribunal. On appeal this Court set aside the order of the High Court as it was of the view that the AAC had no power to interfere with the order of assessment made by the ITO on a new ground not raised before the ITO, and, therefore, the Tribunal committed error in directing the AAC to allow the claim of the assessee under Section 84. Apparently this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivision Bench of this Court in case of Commissioner of Income Tax v. Kashi Nath Candiwala [2005] 144 Taxman 840 (All.) relying upon the judgment of Nirbheram Deluram (supra) and Jute Corporation of India (supra) held that in view of Explanation to Section 251 of the Act the appellate authority is empowered to consider and decide any matter arising out of proceedings in which the order appealed against was passed. "7. We have heard Sri A.N. Mahajan, learned standing counsel for the revenue and nobody has appeared on behalf of the respondent-assessee. The learned counsel for the Revenue submitted that under the Explanation to section 251 of the Act, the Appellate Authority is empowered to consider and decide any matter arising out of proceedings in which the order appealed against was passed notwithstanding the fact that such matter was not raised before him by the appellant and therefore, even though the trading results were not subject-matter of the appeal before the Commissioner of Income Tax (Appeals), he was justified in going into the trading results and substituting it by his own findings. Shri Mahajan has relied upon a decision of Apex Court in the case of CIT v. Nirbheram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded 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; (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 the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant." 20. A careful reading of Section 251 reveals that power vest in Commissioner (Appeals), in an appeal against an assessment order, where he can confirm, reduce enhance or annul the assessment. Explanation to Section 251 further clarifies the position and empowers Commissioner ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 251 of the Act had in case of Nirbheram Deluram (supra) and Jute Corporation of India (supra) had held that power of Appellate Assistant Commissioner is coterminous with that of Income Tax Officer and he can do what the Income Tax Officer can do and also direct him to do what he has failed to do. 25. In the present case, the CIT (A) had deleted addition made by the Assessing Officer and had made two additions of the labour charges and sundry creditors on the basis of the profit and loss account, and balance-sheet filed by the assessee along with his return. Thus, there was no new source of income as claimed by the assessee. The case law relied upon by the assessee in case of Sardari Lal & Co. (supra) and Shapoorji Pallonji Mistry (supra) are all distinguishable in the facts of the present case, and the Hon'ble Courts in those cases had only dealt with the situation wherein AAC found new source of income and made additions to the income, while in the present case no such addition was made from any new source of income but from the return so submitted by the assessee himself. 26. The second question as regards the issuance of fresh notice of enhancement by the CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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