TaxTMI 
TaxTMI 
2024 (1) TMI 1185
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....ct matter of the assessment before the Assessing Officer. In other words, the direction of the order of the Appellate Assistant Commissioner was to satisfy himself about the source of investment of the assets. It is axiomatic that failure to prove the sources of investment will result in addition in the hands of assessee under a different provision of law and will not have much relevance in disallowance of interest income, travelling expenses and staff welfare expenses on ad-hoc basis. ii) The Commissioner Appeals ought to have followed the ratio laid down by Hon'ble Delhi Court in the case of Commissioner of Income Tax vs. Union Tyres - Delhi High Court 240 ITR 556 which summarized three orders of the Hon'ble Supreme Court as regards power of appellant authority holding that any addition on account of unexplained investments would constitute a new source of income which was not the subject matter before the Assessing Officer and therefore, it was not open to the first appellate authority to direct Assessing Officer to conduct enquiry regarding it. iii) The Commissioner Appeals also ought to have followed judgment of Hon'ble Delhi High Court in the cas....
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....ring." 3. The assessee has raised as many as ten grounds in the appeal memo. They are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963, and are a blend of descriptive and argumentative contents. In fact, a perusal of these grounds demonstrate that the assessee is aggrieved by the action of the Revenue in disallowing (i) travelling expenses of Rs. 26,25,945/-; (ii) disallowance of interest expenses of Rs. 16,07,853/- on borrowed funds, and (iii) disallowance of Rs. 50,000/- on account of staff welfare expenses. Therefore, we proceed to adjudicate the effective issues raised by the assessee hereinafter. 4. Brief facts of the case are that during assessment proceedings, the AO noted the assessee to be in the business of being a commission agent. On scrutiny of the books of accounts of the assessee he noted anomalies therein pertaining to the travelling expenses, which he found were not duly evidenced with regard to their business purpose, and with respect to salary expenses which he noted differed from the amount paid by the assessee through banking channel as compared to that claimed by the assessee in its books of accounts. Noting these anom....
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....ere not even within the radar of the assessment of the AO, and which was not even confronted to the assessee during the appellate proceedings; iii) That in terms of provisions of section 251 of the Act, which enshrined the powers of the ld.CIT(A) to expand the scope of the assessment, the ld.CIT(A)could not have exceeded the jurisdiction of the AO and dealt with issues which were completely untouched by the AO. He relied upon the following decisions in this regard - a) CIT Vs. Union Tyres, 240 ITR 556 (Del) b) CIT Vs. Sardarlal& Co., (2002) 120 taxman 595 (Del) c) CIT Vs. Shapoo ji Pallanji Mistry, (1962) 44 ITR 891(SC); d) Motilal Champaria (1967) 56 ITR 443 (SC) 8. The assessee also pleaded that while making specific disallowance of interest expenses and staff welfare expenses, the assessee was not even confronted with the same, and therefore, the disallowance were made in violation of principle of natural justice. The submissions in this regard in writing were filed before us as under: 9. We have heard contentions of both the parties, and we have carefully gone through the orders of the authorities below. As emanates from the....
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....ice and the additions made by him are not sustainable for this reason alone. As for the arguments of the ld.counsel for the assessee that disallowance of staff welfare expenses and interest expenses was beyond the power of the ld.CIT(A), we find merit in the same. Though section 251 of the Act gives power to the ld.CIT(A) to expand scope of the assessment made, but the Hon'ble Supreme Court in various decisions has held that the scope cannot be expanded to discover new source of income. While explaining the wide scope of powers conferred on the first appellate authority by section 251 of the Act so as to include even enhancement of assessments, courts have held that they are not ordinary courts of appeals since only one party to the original decision is entitled to appeal and not the other party. That in view of this peculiar position the statute has conferred very wide powers on the first appellate authority once an appeal is preferred to him. That accordingly once an assessment comes before the first appellate authority, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee, but ranges over the whole assessment an....
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....an appeal to Commissioner of Income Tax [Appeals 2]- Vadodara. Based on facts and supporting submitted by the appellant company with CIT- Appeal- 2, material on records, legal provisions and applicable case laws judgements, the learned CIT Appeals observed that: kant S. Shah & [a] In case of Salary Expenditure differences," As a matter of Fact, only net salary always paid after various deductions and hence it cannot be said that the appellant has incurred expenditure on account of salary only to the tune of amount paid through bank. Undisputedly, the gross expenditure has to be allowed." [ Reference Para No. 4.2.1 on page no.23 of appellate order which is also submitted at the time of filing form 36 and ground of appeal] [b] In case of Travelling Expenditure, out of total Travelling domestic expenditure of Rs 1,02,42,990/-, the A.O has found non availability of purpose of travel in seven vouchers amounting to Rs 68,559/- [0.06%] cannot be basis for rejection of audited books in toto. So as concluding decision, the learned CIT Appeals -2, has passed and order with following observation [ para 4.2.5 of CIT order -page 25 of the order] t....
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.... never asked for. In F.Y 2010-2011 relevant to Asst Year 2011-2012 out of travelling expenses of Rs 6014859/- no additions were made being purpose was openly mentioned to increase sales of two companies and earned commission. This was verified from the resulted travelling expenses. The issue of travel expenditure disallowances amounting to Rs 26,25,946/- [i.e. 20% of total travel exp] has been raised without considering the material on record. The fact is that the appellant company is getting commission income as main source of income, right from financial year 2008-09 and the commission income has increased from Rs.3,03,98,079 to 6,30,81,963/-. Almost income increased by 100%. The A. O as well as CIT has no objection to increase in commission income. They ought to have linked up with two components, one earning of Commission Income Vs expenses of travelling and salary without which commission would not have been earned or increased so magnificently. All throughout both has mentioned grievances that purpose is not shown. Both assessing authorities has never understood that in travelling vouchers expenses to and fro travelling expenses ti....