TaxTMI 
TaxTMI 
2016 (7) TMI 1511
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....section 251(1) of the Act. The second grievance of the assessee is assessability of additions made towards unexplained investment on merits. No other Grounds were pleaded before us in the course of the hearing. The Additional Grounds on correctness of the action of the CIT(A) towards enhancement of assessed income being pure question of law is admitted in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963. The assessee has filed voluminous Paper Book. However, the Ld. AR did not refer to its contents in the course of hearing in toto. The Revenue has also filed a Paper Book containing extract of certain documents seized during search and statement of the assessee recorded under section 132(4) and section 131 of the Act. The documents referred to in the course of hearing by the assessee as well as the Revenue has been taken due cognizance at the appropriate place in the order while deciding the issues involved. 3. The facts, in brief, are that a search action under section 132(1) of the Act was conducted by the Income Tax Department on 28.09.2006 in Luthra Group of cases at Nashik. The original return of income was filed by the assessee under section 139 on 31.03.....
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.... were seized during search at the premises of the assessee. The CIT(A) also observed that another document marked as Annexure A-1 was seized wherein page 2 and 3 thereof refers to certain payments made in cash to various parties. The CIT(A) with reference to Annexure A-1 noted that the assessee claimed to have been given Rs. 61.65 lakhs as loans to his friends and relatives in assessment year 2002-03 (29.10.2001 to 05.02.2002), the cash recovery of which is stated to be utilized towards payment of aforesaid amount of Rs. 70,11,000/- towards aforesaid purchase of land and balance payment of Rs. 8.46 lakhs was admitted as undisclosed income for the assessment year 2003-04 for the reason that the assessee was not in a position to provide any documentary evidence to explain the source of cash payment of Rs. 61.65 lakhs in assessment year 2002-03 and Rs. 8.46 lakhs in assessment year 2003-04. The CIT(A), however, did not accept the theory propounded by the assessee that the payment of Rs. 70,00,000/- in cash relevant to assessment year 2003-04 was a part financed to the extent of Rs. 61.65 lakhs out of purported cash recovery of loans given to friends and relatives in the earlier year i....
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....60 lacs paid on 09/04/2002 and the balance of Rs. 10 lacs paid in August 2002. 2. In your statement recorded u/s 132(4) of the Act on 13/10/2006 you had admitted that the cash payments of Rs. 70,11,000/- were made from undisclosed sources. This was admitted as undisclosed income. However, subsequently you had changed your contention and said that the cash payments were made from known sources i.e. out of withdrawals of Rs. 47,25,838/- from M/s Luthra Construction, a firm in which you are one of the partners. You further contended that the remaining cash balance of Rs. 14,75,000/- was with your wife late Smt. Urmila K Luthra. However, in a subsequent communication dtd. 29/12/2008 to the AO, you once again changed your stand and agreed to surrender Rs. 61.65 lac. This sum of Rs. 61.65 lac was however added by AO as your undisclosed income for the AY 2002-03. The said addition of Rs. 61.65 lac has been upheld by both CIT(A)-II, Nashik and the hon'ble ITAT, Pune. 3. In the appeal before hon'ble ITAT you had taken a plea that only Rs. 11,000/- was paid on 26/03/2002 out of the total undeclared consideration of Rs. 70,11,000/- and remaining balance was paid in 2003-04. Henc....
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....e 2 & 3 of Annexure A-1. 7. I have perused Annexure A-1. Pg. 2, 3, 4, 6, 7 and 7 A when read together reveal that you had made payment of Rs. 61.65 lac towards works executed for Tapovan and Ras Bihari. Page 4 reveals that there was an old balance of Rs. 17.85 lac. Page 3 gives details of payment of Rs. 79.55 lacs (Rs.61.70 + Rs. 17.85). Out of Rs. 79.55 lac Rs. 13 lac was received back by you by cheques (Rs.5 lac + Rs. 5 lac + Rs. 3 lac). Balance Rs. 66,55,500/- was receivable on account of payments made for work done for Tapovan & Ras Bihari. A perusal of the seized papers further suggests that investment made by you from 01/11/2001 to 31/01/2002 was utilized for execution of old work. Page 2 establishes clearly that you had made an investment of Rs. 79,55,500/- including a hand loan (interest free) of Rs. 2 lac and another hand loan of Rs. 2.70 lacs from VIP (2 + 0.70). It is also understood that the work was done by you in partnership/ association of Shri Vijay Luthra who got the payments on account of bills raised but never gave you the money. To work together, a joint bank account was opened in Centurion Bank with a deposit of Rs. 10,500/-. While you did W.B.M. Work, Shri ....
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.... perusal of page 7 further corroborates my earlier mentioned findings. It states: (i) Rs. 79.55 were given up from 29/10/2001 to 05/02/2002 for old works and spared one Tipper". (ii) Received 13.00 and invested for Tapovan and Rasbhihari by K.S.L. for individual work, so far not received from Vijay inspite of Bills received". 8. In view of the above discussion I hold as follows: (i) That Rs. 61.65 lacs (mentioned at Page 2 & 3 of Annexure A-1) was your cash investment for the work done by you in AY 2002-03. Your submission that this represented advance to friends is without any basis and therefore rejected outrightly. (ii) In view of (i) above, there was no question of receiving back any money from friends as claimed by you. (iii) In view of (ii) above, cash payment of Rs. 70,00,000/- out of Rs. 70,11,000/- towards Phalke Smarak Property in AY 2003-04 was made out of your other undisclosed income. The payment of cash of Rs. 70,11,000/- has clearly been reflected in Ann-A-34 and this fact has already been accepted by you even before hon'ble ITAT. (iv) In view of (iii) above, I propose to enhance your income by Rs. 70,00,00....
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....marak property was out of withdrawals from M/s Luthra Construction has also been rejected by the ITAT in ITA No.16/PN/2010, order dated 31.01.2011 relevant to assessment year 2002-03. The CIT(A) inter-alia noted that the assessee was evasive with regard to most of the questions pertaining to pages 2 and 3 of Annexure A-1 in his statement recorded during the search proceedings. For this purpose, he also referred various statements recorded as per para 16 of his order and observed that the assessee was changing his stand quite frequently. The CIT(A) accordingly drew an inference that the assessee has cooked up the entire story to explain the sources of investment in Phalke Samarak property out of cash invested towards road construction projects by propounding theory of recovery cash from friends and relatives. The CIT(A) noted that the figures and other documents mentioned in seized documents particularly in A-1 and A-34 are not mere the jottings on loose papers but a very meticulously written statement of affairs. Further, it is not a case of one single loose paper or one isolated jotting. The CIT(A) observed that there are multiple cross-reference in this regard to the above invest....
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.... the seized annexures particularly A-1 and A-34 are not the mere the jottings on loose papers but a very meticulously written statement of affairs. Further, it is not a case of one single loose paper or one isolated jotting. In fact, as explained in the proceeding papers there are multiple cross-references in regard to the above investments in the said seized annexures. It is important to mention here that the proposed additions are not merely based on the appellant's statement u/s 132(4) / u/s 131. There are adequate incriminating evidences in the form of transactions recorded in the seized annexure A-1 and A-34 which reasonably establish the fact that the appellant's undisclosed cash payments towards Phalke Smarak property in AY 2003-04 were not out of the cash available to him on account of recovery of loans and advances from his friends and relatives as claimed by him. Investment made in relation to road construction project as shown on page 2 & 3 of Annexure A-1 were infact in the nature of payment and the bills for there projects were pending and no amount in this regard was paid to the appellant by his business associate Shri. Vijay Luthra as repeatedly mentioned by ....
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....e Assessing Officer which is not permissible under section 251 of the Act. He, accordingly, pleaded that the legal ground of the assessee that enhancement is without jurisdiction and thus vitiated in law and consequently deserves to be quashed requires to be looked into favaourably. For the proposition that the CIT(A) has no power to find out a new source of income not processed by the Assessing Officer, he cited the decision of the Co-ordinate Bench of the Tribunal in the case of M/s National Auto World vs. ITO in ITA No.376/PN/2012 and others, order dated 29.11.2013. The Ld. Counsel for the assessee next referred to the order of the Pune Bench of the Tribunal in the assessee's own case relating to assessment year 2002-03 in ITA No.816/PN/2010, order dated 31.01.2011 and submitted that surrender of income of Rs. 61.65 lakhs as undisclosed income in the assessment year 2002-03 has been affirmed by the ITAT and therefore it can be judicially presumed that this amount in cash was available at the disposal of the assessee for investment in assessment year 2003-04 and therefore source of investment in relation to purchase of land at Nashik in the subsequent assessment year stands prope....
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....e First Appellate Authority under Income Tax Act are much wider than the power of an ordinary Court of appeal. The First Appellate Authority is not an ordinary Court of appeal owing to the fact that only one party to the original decision taken is entitled to appeal. Once the assessment order comes before the CIT(A), his jurisdiction is not restricted to examine only those issue that have been taken up by the assessee in appeal but ranges over the whole assessment and it is open to him to correct the assessment order not only with regard to the matter taken up in appeal but also with regard to the matters which were considered by the Assessing Officer in the assessment proceedings. He can examine every process which results in ultimate computation of assessed income even if his decision lead to enhancement of income. However, in the area of powers of enhancement, there are judicial decisions to the effect that the power of enhancement is restricted to only those areas and source of income which are considered by the Assessing Officer at the assessment stage and hence such enhancement should not lead to a new source of income. The Co-ordinate Bench of the Tribunal in the case of M/s....
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.... Construction Project and not given as loans & advances as claimed. The aforesaid sum was therefore not available for ploughing as unaccounted portion of investment in land at Nashik. The CIT(A) thus demonstrated that the investment of unaccounted cash towards acquisition of land is independent of the unaccounted cash found relevant to assessment year 2002-03. The observations of the CIT(A) were based on tangible seized material on record of the Assessing Officer. The source of investment in Phalke Samarak property was accepted by the Assessing Officer to be out of cash recovery of Rs. 61.65 lakhs towards loans and advances made to friends and relatives which plea was found to be wholly incorrect by the CIT(A) based on tangible material available on record. The Ld. Counsel for the assessee could not successfully impunge this finding of CIT(A) before us. 12.3 Therefore, in the facts and circumstances of the case, we are of the view that the existing seized material considered by the Assessing Officer while making the assessment and accepting the investment in land were simply reappreciated by the CIT(A). The genesis of the enhancement action lies in the seized material re-appreci....