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TMI Blog2023 (6) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the circumstances of the instant case to enhance the taxable income of the assessee on these three issues. It is not open for the ld. CIT(A) to travel outside the assessment order with a view to find out new sources of income. There must be something in the assessment order to show that Ld. AO had applied his mind to the particular subject matter with a view to its taxability or its nontaxability and not to any incidental connection. It is not a case where the three issues have been considered but addition on that account is not made in the assessment order by the ld. AO. Had it been such a case, it would clearly follow that ld. AO had determined the same in the course of assessment by deciding not to make any addition empowering the ld. CIT(A) to invoke the provisions in respect of enhancement subject to fulfilment of conditions prescribed for the same u/s 251 of the Act. Exercise of power by the ld. CIT(A) to enhance the income of the assessee by raising the new issues not germane out of the assessment order is not tenable. Accordingly, additions/disallowances made by exercising such power are deleted. Grounds taken by the assessee in this respect are allowed. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee comprises of income from shipping business amounting to ₹1,03,70,590/- based on Tonnage tax scheme as per section 115VA of the Act. Assessment was completed under section 143(3) of the Act wherein assessed total income is ₹28,09,97,170/- by making following three disallowances/additions which were contested in appeal before the Ld. CIT(A): i) Late payment of contribution to PF - ₹92,352/- ii) Provision for leave encashment - ₹3,76,778/- iii) Provision for Bad debt - ₹8,46,000/- 3.1. In the course of first appellate proceedings, Ld. CIT(A) apart from dealing with the above three issues contested by the assessee, observed from the profit and loss account and tax computation of the assessee that assessee has earned income from shipping business of ₹109.86 Crores and income from non-shipping activity of ₹28.59 Crores. Ld. CIT(A) noted that assessee has common expenditure of ₹ 2.52 Crores which have been bifurcated by the assessee as under: i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him, such an exercise of power by Ld. CIT(A) is arbitrary and not in accordance with the provisions of law contained in section 251 of the Act. Ld. Counsel submitted that the three additions/disallowances made by the Ld. AO in the assessment for which assessee came up in appeal before the Ld. CIT(A) are altogether different from the three issues raised by the Ld. CIT(A) in the course of first appellate proceedings. By raising the three new issues in the first appellate proceedings, Ld. CIT(A) has brought into picture new source of income which were not the subject matter of the assessment completed by the Ld. AO. The basis adopted by the Ld. CIT(A) for exercising the power of enhancement as noted by him is the books of account submitted by the assessee and the tax computation filed during the course of assessment which according to the Ld. Counsel is not in accordance with the law. 4.1. Ld. Counsel submitted that when in the course of assessment, ld. AO has not applied his mind on the three issues raised by the ld. CIT(A), no enhancement can be made as these three issues do not germane out of the assessment completed by the ld. AO. According to him, ld. Counsel has travelled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered expressly or by clear implication by the Ld. AO from the point of view of taxability of the assessee. 6.2. In the present case, it is manifest that ld. AO did not consider the issues relating to allocation of common expenses in terms of provisions contained in section 115VJ requiring a reasonable basis, disallowance to be made under section 14A of the Act and deduction claimed under section 80GGB and 80G of the Act. It is also manifest that ld. CIT(A) had raised the three above noted issues from the point of view of their taxability. Since ld. AO had not applied his mind to the question of taxability or non-taxability of the three issues, ld. CIT(A) had no jurisdiction in the circumstances of the instant case to enhance the taxable income of the assessee on these three issues. It is not open for the ld. CIT(A) to travel outside the assessment order with a view to find out new sources of income. There must be something in the assessment order to show that Ld. AO had applied his mind to the particular subject matter with a view to its taxability or its nontaxability and not to any incidental connection. 6.3. It is held by the Hon ble Supreme Court in the case of CIT vs. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions are fulfilled. It is inconceivable that in the presence of such specific provisions, a similar power is available to the first appellate authority. 7.2. Also, Hon ble High Court in the case of Gurinder Mohan Singh Nindrajog vs. CIT [2012] 348 ITR 170 (Del) had succinctly dealt with possible situations which may arise in respect of an assessment completed under the Act by an Assessing Officer for which various remedial measures are available under the Act contained in sections 147, 154, 251(1)(a) and 263 of the Act. Relevant paragraph is extracted below: 14. We have considered the submissions of both the parties. There is no doubt about the fact that while framing the assessment even under Section 143(3) of the Act, the Assessing Officer may omit to make certain additions of income or omit to disallow certain claims which are not admissible under the provisions of the Act thereby leading to escapement of income. The Income-Tax Act provides for remedial measures which can be taken under these circumstances. While framing an assessment under Section 143(3) of the Act, any of the following situation may occur:- (a) The Assessing Officer may accept the return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance 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 grounds of the appeal raised before him. In other words, the CIT(A) has a power of enhancement in respect of such item or items of income which has been dealt with in the body of the order of the assessment, and arose for his consideration as per the grounds of appeal raised before him, being the subject matter of appeal.[emphasis supplied by us by bold and underline] 7.3. Present case of the assessee does not fall in the category (b) listed above so as to apply the provisions of section 251(1)(a) for the purpose of enhancement of income resorted by the ld. CIT(A). 8. Considering the facts and circumstances of the case, position of law and judicial precedents, all of which have been elaborately discussed above, we are of considered view that exercise of power by the ld. CIT(A) to enhan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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