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TMI Blog2021 (4) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from both short term capital gains and from long term capital gains at Rs. 33,83,89,890/- and assessed the total income of the assessee under the normal provisions of the Act at Rs. 14,23,83,070/-. The Assessing Officer did not compute the book profits U/s. 115JB of the Act. He did not consider the issue as to whether book profit is to be computed U/s. 115JB of the Act. 2.1. Aggrieved with the disallowance made by the Assessing Officer, while assessing the total income under the normal provisions of the Act, the assessee carried the matter in appeal. The assessee also agitated the non-grant of set off of, brought forward unabsorbed depreciation under the long term capital gains during the year. The Ld. First Appellate Authority decided all the grounds of appeal raised by the assessee, in favour of the assessee, by deleting 10% adhoc disallowance made towards travelling expenses and 10% ad hoc disallowance made towards miscellaneous expenses and also granted set off of brought forward depreciation of earlier years. On the issue of grant of, set off of unabsorbed brought forward depreciation against long term capital gains, the Ld. CIT(A) held the issue in favour of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that the Assessing Officer has not computed income U/s. 115JB of the Act and consequently, the Ld. CIT(A) does not have power to compute the same, as this issue was not dealt by the Assessing Officer at all, was rejected by the Ld. CIT(A). Thereafter, he referred to Section 115JB of the Act and held that the wordings of this Section are different from the wordings of Section 115JA and consequently, the judgment of the Jurisdictional High Court in the case of M/s. Vishnu Sugar Mills Ltd. [supra] and the order of the ITAT in the case of Neeraj Vanijya P. Ltd. [supra] are not applicable to the facts of the case. At para 8.9., of his order, he held that the decision of ITAT in the case of Vishnu Sugars [supra], for the Assessment Year 2002-03, where the provisions of Section 115JB of the Act applies, are sub-silentio and unfit to be considered as a factual precedent. Referring to the judgment of the Kolkata Bench of the ITAT in the case of M/s. Bahtkawa Tea Industries vs. ACIT [2010] ITA No. 813/Kol/2010, Assessment Year 2005-06, he held that the ITAT, did not follow its earlier order and had admitted an inadvertent error. Thereafter, he relied on the decision of the Luck ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment, making computation U/s. 115JB of the Act and this was quashed by the Ld. CIT(A) and the Tribunal as well as the Hon'ble High Court has upheld this order of the Ld. CIT(A) and subsequently based on this decision, no income was computed U/s. 115JB of the Act, wherever the GTI and TI, was Nil and there was no tax payable. He read out Section 251(2) of the Act and submitted that the Ld. CIT(A) is empowered to decide only such matters which arise out of the proceedings in which the order was appealed and in a case where the Assessing Officer has not dealt with an issue during the course of the assessment proceedings or in the assessment order, the Ld. CIT(A) has no power to deal with the same and enhance the income of the assessee. For this proposition, he relied on a number of case-law including:- * Gurinder Mohan Singh Nindrajog vs. CIT reported in 348 ITR 170 * CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) * CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) * CIT vs. Union Tyres reported in 240 ITR 556 [Delhi] * CIT vs. Sardarilal & Co. [2001] 251 ITR 864 [Delhi] * CIT vs. National Co. Ltd. (1993) 199 ITR 445 (Cal) 4.1. He ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003 [1] KLT 280, for the proposition that, when a Court decides a principle issue, it is presumed that all aspects of law and facts have been taken into account and the judgment cannot be disputed on the ground that certain aspects of the case was not considered by the Hon'ble Supreme Court or certain provisions of law were not brought to the notice of the Hon'ble Supreme Court. He vehemently contended that the judgment of the Hon'ble Jurisdictional High Court is binding on the authorities below and that the Ld. CIT(A) has committed a grave error in following the decision of the Lucknow Bench of the Tribunal in the case of M/s. L.H. Sugar Factory Ltd. [supra], in preference to the judgment of the Hon'ble Jurisdictional High Court. He pointed out that the Lucknow Bench of the Tribunal in its order in the case of M/s. L.H. Sugar Factory Ltd. [supra] refused to follow the judgment of the Hon'ble Jurisdictional High Court for the reason that, it is not the Jurisdictional High Court and submitted that, the Ld. CIT(A) has no such liberty. He once again emphasised that the Hon'ble Jurisdictional High Court has held that Section 115JB of the Act cannot be applied w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue as to whether the book profits have to be computed U/s. 115JB of the Act, in the facts of the case. The possible reason might me that in the earlier Assessment Years, no such computation of book profits U/s. 115JB of the Act, was made and when the same was made in the Assessment Year 2005-06, the Ld. CIT(A) as well as the ITAT had held in favour of the assessee and the Hon'ble Jurisdictional High Court had upheld this decision of the ITAT. After the Ld. CIT(A) has granted relief to the assessee of set off of brought forward of unabsorbed depreciation and had deleted the ad hoc disallowance made by the Assessing Officer, the gross total income of the assessee as well as the total income was Nil and there was no tax payable. 7.1. The powers of enhancement of the CIT(A) are discussed as follows:- "251. (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, afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there are other provisions which enable escaped income from new sources to be brought to tax after following the special procedure. The powers of the AAC extends to matters considered by the ITO 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 the finding by two Tribunals and one right of appeal. In the instant case, the assessment in question was made by the ITO long before the appellate order for the assessment year 1962-63, was passed. Therefore, in view of the principles laid down by the Supreme Court in the aforesaid case, the AAC had no jurisdiction to assess the said sum and enhance the assessment for the assessment year 1963-64 taking an income which was not considered by the ITO at all." The Hon'ble Delhi High Court in the case of CIT vs. Union Tyres reported in 240 ITR 556 [Delhi], held as follows:- "The first appellate authority is invested with very wide powers under section 251(1)(a) and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not fall under one or other of the three heads mentioned above. What is the substance of the objection of the assessee? The assessee denied his liability to be assessed under the Act in the circumstances of the case and pleaded that the members of the association would be assessed only individually. The expression 'denial of liability' is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances. In either case the denial is a denial of liability to be assessed under the provisions of the Act. In one case the assessee says that he is not liable to be assessed to tax under the Act, and in the other case the assessee denies his liability to tax under the provisions of the Act if the option given to the appropriate officer under the provisions of the Act is judicially exercised. It was, therefore, held that such an assessee has a right of appeal under section 30 of 1922 Act against the order of the ITO assessing the association of members instead of the members thereof individually. If an appeal lies, section 31 of 1922 Act describes the powers of the AAC in such an appeal. The AAC has, therefore, pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addl. CIT v. Gurjargravures (P.) Ltd. [1978] 111 ITR 1 held that the AAC had no jurisdiction to consider the new entries which were not considered at all by the ITO and to add the amount of Rs. 2,30,000 to the total income of the assessee. According to the High Court, the items representing the said amount constituted new sources of income which were not the subject-matter of assessment before the Assessing Officer and, therefore, it was not open to the AAC in appeal to consider the new sources and to assess them. The Hon'ble Delhi High Court in the case of CIT vs. Sardari Lal Co. reported in [2001] 251 ITR 864 (Delhi) held as follows:- "Section 251 of the Income-tax Act, 1961 - Commissioner (Appeals) - Powers of Whether whenever question of taxability of income from a new source of income is concerned which had not been considered by Assessing Officer, jurisdiction to deal with same in appropriate cases may be dealt with under section 147/148 and section 263 if requisite conditions are fulfilled and it is inconceivable that in presence of such specific provisions a similar power is available to first appellate authority - Held, yes" The Hon'ble Delhi High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falling in category (b), section 251(1)(a) provides the CIT(A) could enhance such an assessment qua the under-assessed sum i.e. where the AO had dealt the issue in the assessment and was the subject matter of appeal. In category falling in (c) & (e), the CIT has been empowered to take an appropriate action under section 263 of the Act In category of cases falling under clause (d) and (f), appropriate action under section 147 of the Act can be taken to tax the income which has escaped assessment or had remained to be taxed. There can be situations where an item has been dealt with in the body of the order of assessment and the assessee being aggrieved from the addition or disallowances so made, had preferred an appeal before the CIT(A) against the said addition and disallowance, the said disallowance and addition being the subject matter of appeal before the CIT(A) in such cases, the CIT(A) has been empowered U/s. 251(1)(a) of the Act, to enhance such an income where the Assessing Officer had proceeded to make addition or disallowance by dealing with the same in the body of order of assessment by under assessing the same as the same was the subject matter of the appeal as per the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The case of the Revenue, on the other hand is that the AO had already considered the seized document and had asked for the explanation of the assessee and found the explanation to be acceptable because of which the AO did not mention anything in the assessment order regarding the two items. On the other hand, the CIT(A) found some factual error in the explanation of the assessee and in these circumstances, he made the enhancement of income. It was, therefore, not a case of the discovery of new source of income which was not considered by the Assessing Officer. To appreciate the rival contentions, we reproduce the provisions of Section 251(1)(a) of the Act:- "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 annual the assessment." 18. In Rai Bahadur Hardutroy Motilal Chamaria (supra) where the Supreme Court interpreted the corresponding provision under the old Income-Tax Act, 1922, the legal position was stated as under:- "The principle that emerges as a result of the authorities of this Court is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 s. 31(3) of the Act is restricted to the sources of income which have been the subject-matter 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 Income-tax Officer in the proves 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 Rs. 5,85,000 from the points of view of its taxability and therefore the Appellate Assistant Commissioner had no jurisdiction in an appeal under s. 31 of the Act, to enhance the assessment". 19. To the same effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer." 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: "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 assessment about which the assessed makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only with regard to a matter raised by the assessed in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T. Nagar That GMS Construction Co. Pvt. Wanted to start the development of some properties at R.T. Nagar, Bangalore along with Mr. Jeetu on joint venture basis. As per their verbal understanding 60% of built up area would go to Mr. Jeetu and the balance 40% to GMS Construction Co. Pvt. Ltd. In consideration of this understanding Mr. Jeetu was to pay Rs. 50 lacs as non-adjustable deposit. That initially a deposit of Rs. 25 lacs was received from Mr. Jeetu and the same was deposited with Canara Bank, Bangalore on 16-10-1995. The copy of Bank statement is enclosed herewith. The balance amount of Rs. 25 lacs was not received as the joint development could not be carried on due to depression in the real estate business and fall in the market prices of the properties. This amount has been adjusted against the amount due to Mr./Mrs. C.M. Singh from Soloman David holding private limited. It may however be stated that the assessee is not connected with this transaction in his individual capacity and the same are not related to his books of account. ii. Shanti Nagar This again was a joint venture proposal by GMS Construction Co. Pvt. Ltd. with Mr. Jeetu for the development of properti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been considered by the Income-tax Officer and had been subjected to the process of assessment, then even though the assessee may not have appealed against that particular source or item, one once the appeal was before the Appellate Assistant Commissioner his power extended not merely to the subject-matter of the appeal, but to the whole subject-matter of assessment. What gave the power to the Appellate Assistant Commissioner was the fact that a particular item or source had been subjected to the process of assessment. Now, the process of assessment would include, not only the subjecting of an item or source to tax, but equally holding that the particular source or item was not subjected to tax." We are of the opinion that the aforesaid item or source had been subjected to the process of assessment. Merely because the ultimate order passed by the Assessing Officer is silent about this item and there is no discussion thereupon would not mean that the Assessing officer had not considered the same. It is trite law that the Assessing Officer is not supposed to frame the assessment order like a judgment of the Court and would discuss each and every item and aspects specifically. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 lacs was neither received nor adjusted cannot be accepted. Therefore the only conclusion possible from these facts is that Rs. 25 lacs was received separately and has not been reflected in the regular books of account. Accordingly, Rs. 25 lacs is treated as unaccounted income of the appellant." 27. The learned Tribunal revisited the issue again discussing the contents of the seized documents at page 21 of the AnnexureA-1, statement of Mr. G.M. Singh and also the explanation of the assessee. Before the ITAT, the assessee had reiterated his contention that Mr. Jitu Virmani paid the remaining balance amount of Rs. 25 lacs in cash and was not correct and dealt with the said contention concluding its discussion as under:- "42. Heard both the parties and perused the record. It is an admitted fact that the seized document has been found as the time of search from the premises of the assessee and was also owned by him. In the light of his fact the assessee should have come with clear hands and take a definite stand while explaining the noting on the seized documents. But we find that the assessee is changing his stand while explaining the Noting on the seized documents. Before the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed error in disturbing the concurrent findings of facts." 31. It cannot be said that the findings are in any way perverse or based upon no evidence This addition is, therefore, sustained. Question No. 1(v): The enhancement of assessment of an alleged undisclosed income of assessee of Rs. 1,05,00,000/- on account of an alleged payment received back in respect of transactions of Chellegata property on the basis of notings in page 21 of Annexure A-1 of the seized documents. 32. Insofar as addition of Rs. 1.05 crores is concerned, it pertains to Chellagatta property. It was again a joint venture between the assessee and Jitu Virmani. From the seized documents it was found that the amount of Rs. 1,35,80,000 was invested in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash which was not accounted for. All explanations offered subsequently are afterthought. Accordingly Rs. 1.05 crores will be treated as income of Sh. G.M. Singh." 33. The ITAT thoroughly reconsidered this matter as well in the light of explanation of the assessee. The Tribunal has reproduced the discrepancy pointed out by the CIT(A) in the explanation furnished by the assessee before the Assessing Officer vide his show cause notice and the reply thereto by the assessee as well as the findings of the CIT(A). The Tribunal further pointed out that notings at page 21 were in the hand writing of the assessee. In his statement dated 5.2.2000 the assessee confirmed that these nothings related to Chellagatta property. On the basis of admitted position and analysis done by the CIT(A) the Tribunal agreed with the findings of the CIT(A). Having regard to the discussion while considering item (iv) pertaining to addition of Rs. 25 lacs above, we are of the view that there is no perversity in the findings of the two authorities below which are factual in nature. The submissions of the learned Senior Counsel appearing for the appellant before us, again, was the same which was pressed before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income could not be allowed and total income at a positive figure was not determine and no tax at all was payable which are preconditions for application of section 115JB. The Ld. AO erred by ignoring the order of the CIT(A) in the A. Years 97-98 and 2001-02 in which by following the decision of the Supreme Court cited in 128 ITR 294 held that provisions of section 115], 115JB are not applicable. According to theAR the AO was wrong in not considering in the separate profit and loss account prepared for determining book profit as required u/s. 115JB(2) and as per the order of Calcutta Tribunal in the case of Balrampur Chini Mills Limited in ITA No. 1061/K/2003 for A.Y. 2000-01 and in ITA No. 1422/C/19 for asstt. Year 1997-98." 10.1. The ITAT 'D' Bench of the Tribunal in the in the assessee's own case in ITA No. 1761/Kol/2005, upheld this order of the ld. CIT(A) by holding that the issue is covered in favour of the assessee by the decision in the assessee's own case as well as by a bunch of appeals filed by the revenue on this issue. The revenue carried the matter before the Hon'ble Calcutta High Court. The Hon'ble High Court held as follows:- "We have pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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