AI Drafter 
TaxTMI 
TaxTMI 
2018 (8) TMI 1253
X X X X Extracts X X X X
X X X X Extracts X X X X
.... liable to be quashed. 3. The Ld. CIT(A) erred in making enhancement income of Rs. 10,00,000/- on account of investment in building by not allowing deduction u/s 80IB(11C) on said amount offered in survey. 4. The Ld. CIT(A) erred in making enhancement income of Rs. 15,01,852/- in excess cash by not allowing deduction u/s 80IB(11C) on said amount offered in survey. 5. The Ld. CIT(A) erred in confirming in addition of Rs. 1,52,588/- for non deduction of TDS on securities charges. 6. The Ld. CIT(A) erred in confirming in addition of Rs. 55,000/- for non deduction of TDS on AMC charges paid to Siemen Ltd. 7. The Ld. CIT(A) erred in confirming in addition of Rs. 1,42,361/- for non deduction of TDS on Medical and Surgical expenditure. paid to Hoswin Incinerator Pvt. Ltd. Briefly stated the facts are that the case of the assessee was picked up for scrutiny assessment and assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as 'the Act') was framed vide order dated 23.3.2013. The A.O. while framing assessment made addition by invoking the provisions of section 40(a)(ia) of the Act. It is also pertinent to note that a survey a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es processed by the AO, the CIT(A) can enhance the assessment. This power must, at least, fall within the words "enhance the assessment", if they are not to be rendered wholly nugatory. 2. The power of enhancement has been a matter of judicial consideration. It has been settled by the various courts that the powers of enhancement are wide, but they are not unfettered. Ld CIT(A) can do enhancement of "assessment". So he can do enhancement only on points which were subject matter of assessment. 3. The appellant relies on the following cases: a. CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), wherein it was held that It was held inter alia that in an appeal filed by the assessee, the AAC has no power to enhance the assessment by discovering a new source of income not considered by the ITO in the order appealed against. b. CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC) It was held that the power of enhancement under section 31(3) was restricted to the subject matter of assessment or the source of income, which had been considered expressly or by clear implication by the Assessing Officer from the point....
X X X X Extracts X X X X
X X X X Extracts X X X X
....C) was not before the ld CIT(A) nor did it arise out of the order of assessment. The only addition which was challenged before the ld CIT(A) was disallowance u/s. 40(a)(ia). The appellant therefore claims that the ld CIT(A) exceeded his jurisdiction in making an enhancement in the given case. The addition is therefore unjustified and uncalled for. II. Deduction u/s. 80IB(11C) - on surrender during survey u/s. 133A A survey u/s. 133A was conducted at the business premises of the assessee firm. The surrender during survey was on account of unaccounted cash and investment in building. The very important fact as quoted by ld Assessing Officer is as under (at pg. 2 para 2): "2. The assessee firm is running Hospital & Research Center. The assessee has shown gross receipts to the tune of Rs. 2,55,89,106 as against Rs. 78,72,081 shown in the immediately preceding year. The disclosures of Rs. 10,00,000/- on account of investment in building and excess cash of Rs. 15,01,852 made during the course of survey proceedings u/s. 133A conducted on 21/08/2009 were duly offered for taxation in Profit and Loss account as "Income from Hospital"." Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... disallowance u/s. 40(a)(ia) II. Disallowance u/s. 40(a)(ia) is not called for. I. Chapter VI-A is admissible on the profit so enhanced by the disallowance In any case, and without prejudice, if the profit is enhanced u/s. 40(a)(ia), the effect of same would be that the "eligible" income from "Business or Profession" shall be enhanced from the hospital business. The same would qualify for deduction u/s. 80IB(11C). 1. The same has been accepted by CBDT in its Circular no 37/2016 dated 02.11.2016 where the board has accepted the settled position that the disallowance made under section 32, 40(a)(ia),40A(3), 43B etc of the act and other specified disallowances, related to the business activity against which the Chapter VI-A is admissible on the profit so enhanced by the disallowance. 2. Further reliance is placed on the following judgments a. Kewal Construction [2013] 354 ITR 13 (Gujarat) "Even if a certain expenditure which was incurred by the assessee for the purpose of developing housing project was not allowable by virtue of section 40(a)(ia) of the Act, since the assessee had not deducted the tax at source as required....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... b. Malwa Education [ITA No. 917/ IND/ 2016 Order dt. 10.01.2018] Following the judgment of Delhi High Court in Ansal Land Mark (supra), the matter was remanded to the ld Assessing Officer to examine whether the deductee has paid the taxes directly or not. Thus, in light of the above submissions, it is prayed that the addition on account of Sec 40(a)(ia) amounting to Rs. 3,49,949/- may kindly be deleted or in alternate the matter may be remanded back to ld Assessing Officer for examination as to whether deductee has paid taxes directly or not. 5. On the contrary, Ld. D.R. opposed these submissions and supported the orders of the authorities below. He submitted that there is no evidence suggesting that the amount so surrendered during the course of survey was related to the receipts from hospital. In rejoinder, the Ld. Counsel for the assessee submitted that the revenue has not brought any material suggesting that the assessee was having any other source of income whereby he could have earned such income. He submitted there that the Ld. CIT(A) erred in rejecting the claim of deduction on this amount and secondly enhancing the income without giving opport....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct for nondeduction of TDS on security charges. Ld. Counsel for the assessee reiterated the submissions made in the written submissions. 9. Ld. D.R. opposed these submissions. 10. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The submission of the assessee is that these amounts have been duly declared by the payee. We find merit in the contention of the assessee that the disallowance cannot be made where the deductee have disclosed the amount in their respective returns. Therefore, we direct the A.O. to delete this amount. Ground Nos.5 to 7 are partly allowed. Appeal of the assessee is partly allowed. ITA No.1541/Ind/2016: 11. The assessee has raised following grounds of appeal: 1. The Ld. CIT(A) erred in levying the penalty of Rs. 7,73,073/- u/s 271(1)(c). 12. The only effective ground is against imposition of penalty by the Ld. CIT(A) u/s 271(1)(c) of the Act. The facts in brief are that in quantum proceedings during the appellate proceedings, Ld. CIT(A) disallowed deduction in respect of the amount disclosed during the course of survey and also initiated penalty on this....