9911796707
TMI Blog1982 (6) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... s Industrial Ceramic Pvt. Ltd. It will be out of place to mention that the said factory did not function during 1961-64. After the said factory was taken on lease by the assessee-firm, its managing director Sh. L.C. Madan was granted power of attorney to manage the affairs of the factory. On 13th March, 1971, the Central Excise Officers effected a surprise raid in the factory premises and certain material was seized by the Central Excise Department. Projecting the irregularities on the basis of material seized in the course of surprise raid, a show-cause notice was issued by the Central Excise Department, according to which, in short, as many as 99 kilns were not accounted for by the assessee in RGI which was required to by maintained statutorily and the said 99 killns in accounted for were in respect of year under consideration and last two years. The allegation of the Central Excise Department was that due to the said discrepancy goods worth Rs. 3,71,250 were sold outside the books without payment of excise duty. The show cause notice issued by the Excise department is placed at pages 27 to 41 of the paper book II. The said show-cause notice was replied to be the assessee and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot account for 99 kilns in the statutory records maintained by the firm for the last three years and, therefore, the goods produced worth Rs. 3,71,250 were sold outside the books without payment of Excise duty. When the issue came before the AAC, he sustained the application of G.P. rate of 30 per cent on disclosed turnover which meant an addition of Rs. 24,054 beside, after giving an enhancement notice to the assessee, instead of confirming 33 per cent G.P. rate on Rs. 1,12,000 un accounted for sale in respect of 28 kilns made the addition of Rs. 1,12,000 in entirely. Beside the AAC confirmed the addition of Rs. 27,000 on account of cash credits. 5. It is these three actions of the AAC which are disputed by the assessee in its appeal before us. First of all, the ld. Counsel for the assessee Mr. Mody. P.N. Monga challenged the jurisdiction of the AAC and in addition to the assessee's paper book I running from pages 1 to 80, filed another paperbook called paper book No. II carrying pages 1 to 134 and regarding its admission he submitted that it in this paperbook which is referred to by the AAC in para 5 of the order. He also submitted that in the course of proceedings before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee's reply dt. 19th Aug 1980 placed at pages 47 and 48 of the paperbook I before the AAC. He submitted that the AAC vide her order dt. 22nd Aug 1980 made an addition of Rs. 1,12,000 in respect of unaccounted for turnover on one in hand and confirmed the rate of 30 per cent G.P. on sales of Rs. 3,92,866 resulting in confirmation of addition of Rs. 24,054. He submitted that the AAC has no jurisdiction to do that as she had gone into a case which was not before the ITO. He placed his reliance on the cases of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITO 443 (SC) CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) and Addl. CIT vs. Gujargravures P. Ltd. (1978 CTR (SC) 1: (1978 111 ITR 1 (SC). In order to impress upon us that it is quite a different ground on which the AAC caused the enhancement, he read the assessment and the AAC's orders at length. He submitted that Explanation to s. 251 had been added subsequently by Finance (No. 2) Act 1977, w.e.f., 10th July 1978. He submitted that the AAC is not authorised to go to an issue which is not raised before the ITO or dealt with by him in the course of assessment proceedings. He submitted that in case he s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is co-extensive and co-terminus with that of the ITO. She submitted that the subject matter of the appeal is the same and most of the cases relied upon by the ld. Counsel for the assessee such as RB Hardutory Motilal Chamaria, Shapoorji Pallonji Mistry and Gurjargravures P. Ltd. instead help the case of the revenue. According to her, the AAC has very wide powers and he/she is to look after the interests of the revenue and in support of that she relied on the case of CIT vs. Jay Textile Mills (1981) 21 CTR (P H) 115: (1981) 128 ITR 480 (P H) The assessee's action of not accounting for 28 kilns was the issue on the total value of which of Rs. 1,12,000 the ITO applied a rate of 30 per cent whereas before the AAC also this was the only issue and all that she did was to make the total addition of Rs. 1,12,000 instead of applying G.P. rate. The AAC while enhancing the assessment did not pick up a new source and, according to her, reliance of the ld. counsel for the assessee on the case of CIT vs. Nirbheram Daluram (1980) 17 CTR (MP) 281 : 1981 127 ITR 491 (MP) is misplaced. She submitted that the case of CIT vs. Mc Millon Co. (1958) 33 ITR 182 (SC) supports the revenue's case. She ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilns which was taken at Rs. 1,12,000 that the ITO added the same to the turnover disclosed by the assessee amounting to Rs. 3,92,866 as he applied G.P. rate of 30 per cent on the total turnover of Rs. 5,04,866 (Rs. 3,92,866 + Rs. 1,12,000). It is only in respect of this issue that the AAC gave notice of enhancement to the assessee. The facts of the instant case are not such where the AAC attempted to enhance the assessment on a different issue than what was before the ITO. By thoroughly going through the two orders of the ITO and that of the AAC, it is clear that it is only in respect of unaccounted sales of 28 kilns that they came to make the addition. 10. The Supreme Court decision in the case of Rai Bahadur Hardutroy Motilal Chamaria instead of instead of helping the assessee, helps the revenue. In the said case, their Lordships held that : "The AAC has no jurisdiction under s. 31(3) of the Indian IT Act, 1922, to assessee a source of income which is not disclosed either in the return filed by the assessee or in the assessment order. It is not, therefore, open to the AAC to travel outside the record, to the AAC to travel outside the record, i.e., the return made by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31(3) of the Indian Income-tax Act, 1922, defining the powers of the AAC in disposing of an appeal. Section 25(1)(a) of the Income-tax Act, 1961, which is the provision applicable to the case before us, is as the High Court has noticed, almost similar in terms to sections 31(3) of the Act of 1922". There is no dispute about the fact that Expln. to s. 251 was added subsequently by the Finance (No. 2) Act, 1977, w.e.f. 10th July 1978 and, if it were not so, the dispute would not have gone the length it has gone to. The facts in the case of Nirbheram Daluram were also different from the instant case in which their lordships held that the AAC had no jurisdiction to consider the new entries which were not considered by the ITO. In the instant case it was 28 kiln value of which was computed at 1,12,000 which was considered by the ITO and it is only on account of the said unaccounted for sales that the AAC enhanced the assessment. Reliance of the ld. counsel for the assessee on the case of Jag Mohan and Others pertaining to the proposition that the Income-tax and the Central Excise and different acts, would also not support the assessee's contention. When their lordships of the Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AAC should decide the matter on the material already on record." It will not be out of place to mention that this was in respect of assessment proceedings pertaining to asst. yr. 1967-68. The Supreme Court decision in the case of Mcmillan Co. also supports the contention of the revenue in which, as per the majority judgement, it was held, though on issue pertaining to applicability of s. 13, that: "it is open to that AAC on an appeal preferred by the assessee to invoke, for the first time, the provisions of r. 33 of the Indian Income-tax Rules, 1922, for the purpose of computing the income of a non-resident even if the Income-tax Officer has not done so in the assessment proceedings." In the light of above discussion and on the basis of facts discussed above that the main issue before the ITO was regarding non accounting of 28 kilns of production and sales thereof amounting to Rs. 1,12,000 on which he applied 30 per cent G.P. rate that the AAC elected to add the whole amount resulting in an enhancement, is an issue which was subject-matter of assessment and the AAC was, therefore, justified in resorting to enhancement. 12. Coming to merit regarding addition of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfactorily explained by the assessee. The Tribunal was right in giving the benefit of the intangible additions to the assessee and we, therefore, answer the questions referred to us in the affirmative, i.e. in favour of the assessee and against the revenue." The above said decision came to be followed in the case of M/s Kesri Oil Emporium (India) by the Delhi Bench of the Tribunal in its order dt. 29th May, 1974. In the said case, the ld. Members of the Tribunal while disposing of the addition at ground of the assessee that in case cash credits are found to be bogus and ungenuine, benefit of intangible addition made in the earlier years should be granted to the assessee and they gave the following finding in that respect: "11. In fact, even the above conclusion will not also be final in the present case because of the additional ground raised before us on behalf of the assessee. The additional ground is that in view of the intangible additions made in the past years and in the very years under appeal, the cash credits should not be separately added. There is no dispute before us that the peak credits even as worked out by the assessee are more than adequately covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of what was considered by the Income-tax department as income from undisclosed sources. It was fair and equitable to allow the assessee to do so because the assessee had already paid the necessary income-tax on that amount." Undoubtedly as per the case of Daluram Pannalal Modi. "It is for the assessee to prove that even if the cash credit represents income, it is income from a source which has already been taxed. "But it is trite law now that in case there are two High Court decisions on an issue, one favouring the subject is to be relied upon, as discussed by the Delhi Bench of the Tribunal in its order in the case of Bawa Jagjit Singh. Then though indirectly but we are supported in our finding by the Punjab and Haryana High Court decision in the case of Ram Sanehi Gian Chand. Reliance of the ld. Deptl. Rep. On the case of Anantharam Veerasinghaiah Co. is misplaced on the facts of the instant case because in that case their lordships held as under: "...........that though the addition to the book profits in the earlier year could constitute a fund from which the assessee might draw subsequently for meeting expenditure or introducing amounts in the account books, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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