TaxTMI 
TaxTMI 
2018 (10) TMI 1436
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....AO) has called for the details and verified the books of accounts. Since the assessee failed to produce the stock register, sale bills with the quantity of sales item wise and the quantitative details of valuation of closing stock etc., the AO rejected the books of accounts and estimated the net profit at 20% of the purchases put to sale. 4. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and requested to accept the book results or to estimate the income @ 5% as per the decision of the Hon'ble ITAT, Visakhapatnam in the case of Tangudu Jogisetty in ITA No.96/Vizag/2016 dated 02.06.2016. The Ld.CIT(A) was of the view that the profit cannot be uniformly adopted in all cases and it requires to be considered on the facts of each case. The Ld.CIT(A) further observed that the Government itself has accepted before the Hon'ble High Court of A.P., that there were huge violations in the liquor trade with regard to the sale prices. Therefore, the Ld.CIT(A) was of the view that the decision of the ITAT, Visakhapatnam in the case of Tangudu Jogisetty cited supra is not applicable in the assessee's case and accordingly directed the AO to recompute the income esti....
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....tly allowed. 7. Ground No.4 is related to the separate addition of Rs. 37,83,000/- made by the Ld.CIT(A) u/s 68 during the appeal proceedings, thereby enhancing the income. The assessee went on appeal before the Ld.CIT(A) with a grievance for estimation of income @20% of the cost of goods sold which is very high in this line of business. During the appeal hearing, the Ld.CIT(A) noticed the investments of Rs. 37,83,000/- made by the assessee towards the advance license fee, DD for purchases of I.M.F.L and the bank margin money etc. The Ld.CIT(A) further observed that the AO has neither caused any enquiries nor called for the details and the assessee also did not furnish the sources for investments. The Ld.CIT(A) stated that there was inconsistency in respect of explanation for the sources of investment. Initially the assessee explained that out of Rs. 37.83 lakhs, Rs. 30 lakhs was invested by him from his own sources and Rs. 7.83 lakhs was made out of regular sales and cash flow. Later on the assessee has changed the version and explained that 16 individuals of them have formed the firm and pooled the sum of Rs. 31.5 lakhs and the said firm has invested/advanced the amount to do th....
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....taining quantitative details of the stock sold etc. which are very common in all the IMFL cases. All the purchases were made through Andhra Pradesh Beverage Corporation Ltd., and sold across the counters in cash. Non-maintenance of proper sale bills, quantitative details is a common defect in liquor shops and such defect should not lead to the addition u/s 68/69 of the Act. The Ld.AR further submitted that the assessee is in appeal before the Ld.CIT(A) for adjudicating the reasonableness of estimation of income but not on any other issue. The Ld.CIT(A) has taken all together a different issue and issued enhancement notice for a different head of income or the new source of income which is not a part and parcel of the income assessed by the AO and the same is not permissible as per the provisions of the Act. The source of income in litigation was the estimation of income and the Ld.CIT(A) has made the enhancement on account of introduction of capital and the investment of source relating the payment of Licence fee and the initial purchases which was already examined by the AO in the original assessment proceedings and this is not permissible by the Ld.CIT(A) and out of his jurisdict....
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.... for enhancing the addition. The issue with regard to unexplained sources is very much available in the assessment itself and the Ld.CIT(A) did not find any new source. The Ld.CIT(A) has verified the genuineness of sources for investment made and exercised his jurisdiction as per law and argued that the Ld.CIT(A) did not travel beyond the jurisdiction and the enhancement made by the Ld.CIT(A) is within the ambit of law and also argued that the decision of Hon'ble Delhi High Court has no application in the assessee's case. 10. During the appeal hearing, the assessee submitted additional ground which reads as under : "On the facts and circumstances of the case, whether the enhancement of the assessment made by the Learned CIT(A) is outside the scope of his powers as conferred u/s 251(1) of the Act and consequently the enhance is liable to be set aside?" 11. The assessee filed petition for admission of additional ground stating that the only issue contested in the appeal was estimation of profit, the other issues of investments in business and sources thereof were not contested before the Ld.CIT(A). The Ld.A.R submitted that the powers conferred u/s 251 of the Act, the Ld.CIT(A) ....
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....ent order, it is clear that the AO has called for the details and verified the sources for investment and cash credits. Further verification of sources for investments into business by the Ld.CIT(A) is nothing but reexamination of the same issue which was already examined and accepted by the AO. At best it can be termed as inadequate enquiry, but cannot be held that there is lack of enquiry. From the above, it is clear that the enhancement is towards altogether a new and different source of income and tantamount to redoing the entire assessment. The issue in this case is whether the Ld.CIT(A) is permitted enhance the assessment on new source of income and re do the assessment. The Ld.CIT(A) is vested with the powers u/s 251(1)(a) to confirm, reduce or enhance the assessment. For ready reference, we extract relevant part of section 251(1)(a) of the Act which reads as under : "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;" 12.1. The Act has conferred a right and vested the power in Ld.CIT(A) to make the enhancement of asses....
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....utroy Motilal Chamaria (1967) 66 ITR 443 (SC) TC 7R.590. That also related to a case under s. 31(3) of the old Act. It was held that the power of enhancement under s. 31(3) of the old Act was restricted to the subject-matter of assessment or the source of income, which had been considered expressly or by clear implication by the AO from the point of view of taxability and that AAC had no power to assess the source of income, which had not been taken into consideration by the AO. It is to be noted that strong reliance was placed by learned counsel for the Revenue on the decision of the apex Court in CIT vs. Nirbheram Daluram (1997) 139 CTh (SC) 484 (1997) 224 DR 610 (SC) TC S7.878. It was submitted that a different view was expressed about the scope and ambit of the power of the first appellate authority vis-a-vis, the sources considered by the AO even if the action of the first appellate authority related to a new source of income not considered by the AO, it was not impermissible. It is to be noted that in Union Tyres' case (supra), this decision was 'also considered by this Court in the background of what had been stated in Daluram's case (supra) and it was observed t....
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....he course of assessment. It is also relevant to note that in the Jute Corporation's case (supra), the apex Court inter alia observed as follows "The AAC, on an appeal preferred by the assessee, had jurisdiction to invoke, for the first time, the provisions of r. 33 of the Indian IT Rules, 1922 (in short, the Rules'), for the purpose of computing the income of a non-resident even if the ITO had not done so in the assessment proceedings. But, in Shapoorji's case (supra), this Court while considering the extent of the power of the AAC, referred to a number of cases decided by various High Courts including the Bombay High Court judgment in Narrondas's (1957) 31 ITR 909 (Born) TC 7R.427 and also the decision of this Court in Mc.Millan's (1968) 33 ITR 182 (SC) :TC 7R.653 and held that, in an appeal flied by the assessee, the AAC has no power to enhance the assessment by discovering new sources of income not considered by the ITO in the order appealed against. It was urged on behalf of the Revenue that the words enhance the assessment occurring, In s. 31 were not confined to the assessment reached through a particular process but the amount which ought to have been ....