TaxTMI 
TaxTMI 
2019 (12) TMI 487
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....nous evidence, which was tendered to the Assessing Officer in response to his questionnaire dt 12.01.2016 and showcause notice dt 23.02.2018 issued by the Ld. CIT(Appeal). iii)The Ld. CIT (Appeal) erred in passing the impugned order in breach of the principles of natural justice by issuing show-cause notice dt. 23.02.2018 without conveying reason for the proposed additions and also by not considering the appellant's explanation submitted to him on 15.3.2018. iv) The Ld. CIT (Appeal) erred in making addition of Rs. 4,51,21,897/- as unexplained "cash in hand" though it formed part of closing bank balance as reported in audited financial statements for which confirmation were duly placed on record before the Ld. CIT (Appeal) and the Assessing Officer. 2. (i) That on the facts and in circumstances of the case, the Ld. CIT (Appeal) erred in making further addition of Rs. 10,77,29J43/- by treating 50% of outstanding trade liability as per Balance Sheet of the appellant as its income. (ii) Without prejudice, the Ld. CIT (Appeal) erred in passing a selfcontradictory order by treating 50% of outstanding trade liability of the appellant as bogus though tre....
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.... counsel of the assessee filed paper-books in five volumes along with the supplementary paper-book and submitted that ld. CIT(A) has made addition on the basis of incorrect appreciation of facts and erroneous computation of availability of the cash during financial year 2012-13 and erred in not taking into account opening balance of trade receivables and not making adjustment for other non-cash expenditures like depreciation, forex loss booked etc. The Ld. counsel submitted that the learned CIT(A) is not justified in enhancing the income of the assessee on the issues which has already been investigated by the Assessing Officer and found satisfactory by him. 4. On the merit of the addition, the Ld. counsel of the assessee referred to various pages of the paper book and submitted that the learned CIT(A) has wrongly computed availability of the cash in books of account at Rs. 2.11 crore as against availability of Rs. 6.43 crores. The Ld. counsel also submitted that the learned CIT(A) is not justified in making addition for outstanding liabilities in absence of any waiver of liability in the year under consideration. He submitted that even the current liability raised in the year un....
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....on for delay in payment to the AEs as follows:- "The company has incurred loss of Rs.,2,403,915 (PY: Rs. 9,283,378) during the year and has accumulated losses as at March 31, 2013 of Rs. 20,839,091 9PY: Rs. 18,435,176) against the paid up capital of Rs. 17,000,000 (PY: Rs. 17,000,000) which was resulted in erosion of company net worth. The company proposes to funds its operations for the year ended March 31, 2014 primarily from the support by holding company, which will enable it to settle its obligations as and when they fall due and operate as a going concern." The holding Italian company provided the financial cushion to the assessee company so that it does not lack competition and is able to complete against the cheaper Chinese products. 2) Erroneous observations in paragraph 19 of CIT(A) Order:- The Ld. CIT(A) states that the Appellant has not provided any evidence in respect of purchase of goods imported from Pneumax Spa Italy, (the parent company). This is a baseless and factually incorrect allegation. In para 2 of his order, the AO states: "The assessee has furnished various details during the assessment proceedings. Boo....
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....ounts in favour of the sister concern and has been waiting for an opportune moment to remit the money to Italy" It may be noted that the CIT(A) has not rejected the audited account u/s 145 of the Act; hut because of the way business is conducted by the assessee, he treats the outstanding liabilities as 'bogus'. He does not explain as how liabilities on account of loans & purchase of the goods imported from the AE are bogus. In this connection, attention is invited to Notes 24-28 of Accounts giving details of the impugned International Transactions. (Pg. 80-84/Vol-I). Show-cause notice u/s 251 is at Pg. 1048/Vol-V. It may also be noted that the assessee company in response dt. 15.3.2018 to show cause notice explained to the CIT(A) as to how it discharged the outstanding liabilities of Rs. 17 crores upto 20.11.2015 in the subsequent years (Pg. 1050 at 1058/Vol- Vr. w. Pg. 684-839/Vol- V). The assessee company also furnished details and documentary evidence of the remittances made through the Banks (Pg. 684-839/Vol-IV). These remittances were fully accepted in subsequent assessment u/s 143(3) Pg. 53/Supp. PB. The parent company also did not charge interest on the out....
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....ct, 1961 asked the appellant to show cause why its income liable to tax be not enhanced on the issues raised in the said notice and the appellant having received the said notice filed a written brief contesting the said notice and justifying the correctness of its financial results as disclosed by it in its return of income. 9. The appellant on the issue of the jurisdiction of this office to take up the issue of enhancement of the income liable to tax stated that this office has no jurisdiction to enhance the income of the appellant. The reliance was placed on the law laid down by the Hon'ble Apex Court in the case of "CIT Vs. Shapoorji Pallanji Mistry 44 ITR 891 SC'! and the law laid down by Hon'ble Delhi High Court in the case of "CIT Vs. Sardarilal & Co. (2001) 251 ITR 864 Delhi" and sought the filing of the notice issued to the appellant u/s 251(2) qua enhancement of its income liable to tax. 10. The reliance being placed by the appellant on the authorities of the Hon'ble Apex Court and Hon'ble Delhi High Court is of no help. The said authorities are in respect of a new source of income and not the existing source of income. T....
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....estion before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO." 8.2 The Hon'ble Supreme Court in the case of CIT Vs Nirbheram Deluram (supra) has observed as under: "3. Having regard to the decision in Jute Corporation of India Ltd. (supra), it must be held that the High Court was in error in holding that the appellate power conferred on the AAC under s. 251 was confined to the matter which had been considered by the ITO and the AAC exceeded his jurisdiction in making an addition of Rs. 2,30,000 on the basis of the other 10 items of hundis which had not been explained by the assessee. This means that even if question No. 2 is answered in the affirmative, questions Nos. 1 and 3 must be answered in the negative. The appeal is, ther....
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....f the IT Act, 1952, which it is urged impliedly precludes evidence in support of an increased assessment being produced by the Inspector of Taxes : and see the observations of Lord Diplock in In re Vandervell's Trusts (1970) 46 TC 341, at p. 372 ; (1971) AC 912, at p. 942 (HL). It would be anomalous if the General Commrs., having power under s. 52(6) to make an increased assessment, had no power to admit or invite evidence adduced on behalf of the Crown, who alone would have an interest to adduce it, designed to enable the General Commrs. to exercise the power which Parliament has conferred upon them. It would also be anomalous if the Crown, adducing evidence in support of an existing assessment, was precluded by the effect of s. 52(2) from adducing evidence of the taxpayer's true income because it would thereby be adducing evidence leading to an increased assessment". Similarly, in Way vs. Underdown (H.M. Inspector of Taxes) (1974) 49 TC 215, 231 (CA), in disposing of a petition similar to the one raised herein, Plowman J. stated as follows : Even if it is right that the Inspector can only give reasons in support of the assessment and is not entitled to argue tha....
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....the authority of the learned CIT(A) in enhancing the income. The grounds of appeal of the assessee in this respect are accordingly dismissed. 9. As far as issue of merit of the addition is concerned, we find the learned CIT(A) has observed as under: " 13. Per merits, it was found that the appellant had enormous outstanding liabilities of Rs. 15,30,51,417/- being the trade payables at the beginning of the accounting period and which increased to Rs. 21,54,59,486/- at the time of closure of the accounting period. It was seen that the appellant was not paying for its purchases and almost 60% of the purchases was kept outstanding and which cause the pile up of huge trade payables. It was further found that against the consumption of inventories of Rs. 8,18,18,269/- the appellant was keeping a huge stock of inventory for Rs. 6,45,53,883/- which was almost 60% of the inventories consumed by the appellant. Likewise, out of the total receipts of Rs. 14.37,98,408/- the appellant has shown trade receivables of Rs. 6,03,17,764/- which meant A that the cash received in the business was only Rs. 8,34,80,644/-. Out of this cash received the appellant paid Rs. 6.23.41.326/- in cash. ....
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....d the issue that opening balance of trade receivables has not been taken into account by the learned CIT(A) and also no adjustment has been made for other non-cash expenditure like depreciation, forex loss booked, etc. The learned CIT(DR) has submitted that issue needs verification at the end of lower authorities. We are in agreement with the learned DR because this is a matter of factual verification on the basis of financial statement of earlier year as well as financial statement of the year under consideration. Accordingly, we set aside the finding of the learned CIT(A) on the issue of addition of Rs. 4,51,21,897/- and restore the matter back to the file of the Ld. CIT(A) for deciding afresh after providing adequate opportunity of being heard to both the assessee as well as to the Assessing Officer. The Ground No. 1(iv) of the appeal is accordingly allowed for statistical purposes. 10. As far as the issue of addition for 50% out of trade payables is considered, the Ld. CIT(A) observed as under : "19. Admittedly, the appellant has booked huge amount of liabilities from its sister concern, M/s Pneumax SpA Italy. The appellant has brought nothing on record to justif....