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TMI Blog2020 (8) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... al filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-3, Kolkata [ CIT(A) for short] dated 16.04.2019 u/s 250 of the Income Tax Act, 1961 ( the Act for short) for AY 2013-14. 2. The assessee is a domestic company and filed its return of income for the AY 2013-14 on 29.10.2013 declaring total income at ₹ 10,340/-. The AO completed assessment u/s 143(3) of the Act on 31.12.2015 determining the total income of the assessee at ₹ 12,19,571/- after making disallowance u/s 14A of the Act r.w. Rule 8D of the Income Tax Rule. 3. Aggrieved, the assessee carried the matter in appeal. The first appellate authority deleted the addition made u/s 14A of the Act by the AO. Nevertheless he enhanced the assessment by giving a notice of enhancement. In this notice of enhancement, he proposed to disallow salary expenses claimed by the assessee to the tune of ₹ 11,21,250/- for various reasons. The assessee relied upon the judgement of Hon'ble Delhi High Court in the case of Sardari Lal Co. 120 Taxman 595 (Del.) and argued that, the ld. CIT(A) has no jurisdiction to make an enhancement on a new source of income. 4. The ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. The question is whether the ld. CIT(A) has such powers of enhancement u/s 251(1) of the Act. This bench of the Tribunal in the case of Manjit Management Services Pvt. Ltd.(supra) from para 7 onwards held as follows: 7. Section 251(1)(a) of the Act, reads as follows:- (a) In an appeal against an order of assessment he may confirm, reduce, enhance or annul the assessment, or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by the Commissioner (Appeals) and after making such further inquiry as may be necessary, and the Assessing Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment; 7.1. This Section has been interpreted by the Hon ble Courts as follows:- CIT vs. Rai Bhadur Hardutroy Motilal Chamaria (1967 SCR (3) 508) The principle that emerges as a result of the authorities of this Court is that the Appellate Assistant Commissioner has no jurisdiction, under s. 31(3) of the Act, to assess a source of income which has not been processed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must, at least, fall within the words enhance the assessment , if they are not to be rendered wholly nugatory. The controversy in this case is about his discovering new sources, not mentioned in the return and not considered by the Income-tax Officer. The High Court held following its earlier view in Narrondas Manordass v. Commissioner of Income-tax [1957] 31 ITR 909, that the Appellate Assistant Commissioner has revisional powers, but that they are confined to what was before the Income-tax Officer and considered by the latter. The correctness of this view is challenged in this appeal by the Commissioner of Income-tax, Bombay.The earliest case, which considered the meaning of section 31(3), was Jagarnath Therani v. Commissioner of Income-tax AIR 1925 Pat. 408 decided by the Patna High Court. In that case, the assessee had three businesses at Purnea, Jalpaiguri and Calcutta. His income from Purnea only was assessed by the Income-tax Officer. On appeal by the assessee, the Appellate Assistant Commissioner assessed him with regard to the income from the other two businesses. The head of income was the same within section 6 of the Income-tax Act, but the sources of income were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In dealing with the case, the High Court held that the powers of remand were extremely wide, but it quoted with approval the decision of the Patna High Court in Jagarnath Therani v. Commissioner of Income-tax AIR 1925 Pat. 408 and also the above observation of the Madras High Court. The learned Chief Justice on that occasion added that there was a distinction between the subject-matter of the appeal and the subject-matter of the assessment, and that the Appellate Assistant Commissioner's powers under section 31 were not confined to the subject-matter of the appeal but extended to the subject-matter of the assessment. Those powers included a power of remand to include in the assessment something which ought to have been so included by the Income-tax Officer, and a remand in that case was, therefore, proper. The matter also came before this court in Commissioner of Income-tax v. McMillan Co. [1958] 33 ITR 182 (SC); but the question, with which we are concerned, was left open. There is, however, a passage in the judgment, approving of the observations of Chagla, C.J., in Narrondas Manordass v. Commissioner of Income-tax [1957] 31 ITR 909 to the following effect: I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this view is also possible. On the other hand, it must not be over looked that there are other provisions like sections 34 and 33B, which enable escaped income from new sources to be brought to tax after following a special procedure. The assessee contends that the powers of the Appellate Assistant Commissioner extend to matters considered by the Income-tax Officer, and if a new source is to be considered, then the power of remand should be exercised. By the exercise of the power to assess fresh sources of income, the assessee is deprived of a finding by two tribunals and one right of appeal. The question is whether we should accept the interpretation suggested by the Commissioner in preference to the one, which has held the field for nearly 37 years. In view of the provisions of sections 34 and 33B by which escaped income can be brought to tax, there is reason to think that the view expressed uniformly about the limits of the powers of the Appellate Assistant Commissioner to enhance the assessment has been accepted by the legislature as the true exposition of the words of the section. If it were not, one would expect that the legislature would have amended section 31 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the return or considered by the ITO are beyond the scope of powers of the AAC. The case relied on by the learned counsel for the petitioner about the power of setting aside the assessment order remanding the case for re-consideration of the whole matter including the evasion by the assessee, is not applicable to the facts of the present case because the matter arising in that case was one which arose out of the proceedings before the ITO. The question was not about new and fresh material for the purposes of enhancement. On the contrary, the case is clearly covered by the decisions of the Supreme Court in CIT v. Shapoorji Pallonji Mistry's case (supra) wherein it has been held that, In an appeal filed by the assessee the Appellate Assistant Commissioner has no power to enhance the assessment by discovering new sources of income not mentioned in the return of the assessee or considered by the Income-tax Officer in the order appealed against , and in the case of Rai Bahadur Hardutroy Motilal Chamaria (supra) wherein it has been held that, It is not therefore open to the Appellate Assistant Commissioner to travel outside the record, i.e., the return made by the assessee or th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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