TaxTMI 
TaxTMI 
2016 (7) TMI 1504
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....Commissioner of Income Tax (Appeals) erred in estimating 1/5th of allege total suppressed sales of Rs. 66,00,720/- as additional capital required thereby making an addition of Rs. 13,20,144/-being additional investment for carrying alleged secret/undisclosed sales by invoking provisions of section 69 merely on the basis of estimation without any cogent evidence on record. The appellant craves for to leave, add, alter, modify, delete above ground of appeal before or at the time hearing, in the interest of natural justice. 3. Both these appeals relating to different assessees on similar issue were heard together and are being disposed off by this consolidated order for the sake of convenience. However, reference is being made to the facts in ITA No. 791/PN/2016 to adjudicate the issue raised in the two appeals. 4. The issue raised by the assessee is against the enhancement made by the Commissioner of Income Tax (Appeals) which as per the assessee is a new source of income and such an action is beyond the scope of section 251(1)(a) of the Act. The ground of appeal No. 2 has been raised against the merits of the addition i.e. on account of additional capital required for....
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....e explained that it was procuring the material on credit basis and hence no working capital was locked in conducting the business. Another plea raised by the assessee was that the issue raised on account of the suppressed enhancement was in respect of a new source of income, which was beyond the scope of the Appellate Authority. However, the Commissioner of Income Tax (Appeals) rejecting both the accounts held that 1/5th of total suppressed sale at Rs. 66,00,720/- was the additional capital required. Accordingly, an addition of Rs. 13,20,144/- was added under section 69 of the Act. 7. The assessee is in appeal against the order of Commissioner of Income Tax (Appeals) in this regard. 8. The learned Authorized Representative for the assessee stressed that the enhancement powers exercised by the Commissioner of Income Tax (Appeals) in the present case were not warranted. The learned Authorized Representative for the assessee further pointed out that the issue of powers of Commissioner of Income Tax (Appeals) viz-a-viz enhancement stand covered by the order of the Pune Bench of the Tribunal in M/s. Vijay Builders Vs. The Income Tax Officer in ITA No. 863/PN/2013, relating to asse....
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....f Income Tax (Appeals), the powers are governed by the stipulated provisions of the Act. The Commissioner of Income Tax (Appeals) has to function within those conditions while deciding any appeal and he cannot exceed his power in making an addition on account of new source of income. In the facts of the present case before me the Assessing Officer had made the addition only on account of the suppressed production. There is no whisper in the order of the Assessing Officer viz-a-viz purchases component and its investment in the goods relating to suppressed production. Once, issue has not been raised by the Assessing Officer while computing the assessment proceedings, who in turn was abreast of the total facts of the case i.e. the investigation carried on by the Sales Tax Department and the suppressed sales found for the relevant period. The Commissioner of Income Tax (Appeals) in this regard while issuing the notice of enhancement for making addition on account of factum of alleged purchases utilized for carrying out the suppressed production, tantamounts to enhancement by way of addition on account of new source of income. Such exercise cannot be carried out by the Commissioner of I....
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....ncome of the assessee by Rs. 25 lakhs. The Hon'ble Supreme Court in the case of CIT Vs. Shapoorji Pallonji Mistry (Supra) has held that it would not be open to the AAC to introduce into assessment new sources, as his power of enhancement is restricted only to income which was subject matter of consideration for purposes of assessment. The Hon'ble Supreme Court in the case of Rai Bahadur Hardutroy Motilal Chamaria (Supra) has held that the power of enhancement of AAC is restricted to subject matter of assessment or sources of income which have been considered expressly or by clear implication by ITO from point of view of taxability of assessee. Therefore, AAC had no jurisdiction to assessee a source of income which had not been processed by ITO and which was not disclosed either in return filed by the assessee or in assessment order. We find that following the above decisions the Hon'ble Delhi High Court in the case of Sardarilal and Company (Supra) has held that whenever question of taxability of income from a new source of income is concerned which has not been considered by the AO, jurisdiction to deal with same in appropriate cases may be dealt with u/s.147/148 and section 263 i....
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....the subjectmatter of original assessment. 13. Applying the above well-settled principles of law to the facts of the instant case, we are of the view that the Tribunal was justified in holding that in calling for a remand report on the aforenoted four points, the Commissioner had exceeded his jurisdiction. While computing the total business income of the assessee, the Assessing Officer had estimated the sales at an enhanced figure and had applied a higher rate of gross profit. Thus, the only matter dealt with by the Assessing Officer in the assessment order was the estimation of profits and gain of the business of the assessee. None of the aforenoted four points had any bearing on the question of estimation of either the sales or the gross profit rate. From the observations, extracted above', it is evident that the Commissioner had his doubts about the capacity of the assessee to raise finances for the purchase of goods and show a huge turnover in the very first year of his business. In other words, the enquiry ordered by the Commissioner was to satisfy himself about the source of investment by the assessee. It is axiomatic that failure to prove the sources of investmen....