TaxTMI 
TaxTMI 
2026 (4) TMI 1385
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....the fact that the Ld. CIT(A) does not have power to enhance the assessment by discovering a new source, which was not considered by the Ld. AO in the order appealed against. In the present case, the Ld. AO has not dealt with the issue relating to capitalization of Rs. 12 Crores under WIP in the assessment order, therefore, CIT(A) has no jurisdiction to enhance the same under section 251 of the Act. 2. Without Prejudice to Ground No.1 and on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in reducing Rs. 11.97 Crore from Closing WIP without considering the fact that the assessee has offered the undisclosed income with respect to the undisclosed expenditure, which was not disputed by the revenue in the original assessment, therefore, the corresponding expenses incurred out of such income should also be allowed. Hence, the assessee has correctly increased the WIP by the expenditure incurred. 3. Without Prejudice to Ground No.1 and on the facts and in the circumstances of the case and in law, the Ld. CIT(A)-50 erred in reducing Rs. 11.97 Crore from Closing WIP without considering the fact under double entry system of accounting, if any,....
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.... an appeal before the FAA, who had partly allowed the appeal of assessee along with certain enhancements to the assessed income. 3.1 While deciding the appeal of assessee, the ld. CIT(A) had decided the issue of addition under section 2(22)(e) for Rs. 17,59,910/- in favour of the assessee with the following observations: "11. The AO made the addition on the grounds that the company SMPL is of the same management since all the partners of the appellant firm holds 59.66% of the shares in SMPL. Similar addition of Rs 23.63 lakhs was made u/s 2(22)(e) in the assessment order passed for the A.Y 2009-10 on the amount of security deposits received of Rs 54,68,90,000. The Ld CIT (A) vide order dated 21.09.2012 has held that the entire amount of security deposits received of Rs 54,68,90,000 cannot be said to business receipt because market value of land itself has been valued by stamp valuation authority at the time of registration at Rs 42,41,44,500. Therefore, the excess amount received by the appellant of Rs 12,27,45,500 over and above the stamp duty value cannot be considered as business receipts. Accordingly, CIT(A) directed the A.O to considered the amount of Rs 12.27 cror....
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....s directed to delete the same. This grounds of appeal is allowed accordingly. 4. Further on the issue of addition made on account of additional value of consideration on Joint Development Agreement for Rs. 17,66,44,500/- being on protective basis, ld. CIT(A) had directed the ld. AO to delete the addition with his opinion, as under: "19. For the year under consideration, it is observed that the AO has relied on the findings of the Ld. CIT(A) in A.Y. 2009-10. Thus, to arrive at the consideration of the JDA, the AO has substituted Rs. 42,41,44,500 being the stamp duty value as per municipal records in place of Rs. 24,75,00,000 suo moto offered by the appellant. Thus, what the AO has failed to appreciate that the asset under consideration being development rights has been classified as a stock-in-trade by the appellant in the books of accounts and thus impliedly applied provisions of section 50C to a business asset is not justified in light of decisions rendered by the Hon'ble ITAT in the appellant's own case for A.Y. 2009-10. Nevertheless, the provisions of section 43CA of the Act could not have impugned year as the same have been inserted with effect been invoked ....
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....s. This in very first place appears to be an incorrect approach as what the appellant will get as a consideration is only 16,500 sq. mtrs of constructed area and what it is partying by way of the JDA is a plot of land. Thus, applying the market value of the plot of land as a consideration for the JDA is incorrect as consideration is a value that will flow to the appellant which will be in a form of FSI equivalent to 16,500 sq. mtrs of constructed area. It appears that the AO has completely ignored the consideration clause of the JDA and recomputed the income on the basis of the market value of the entire plot in place of value to be derived out of the JDA. Therefore, the addition made by the A.O cannot be sustained. The A.O is directed to delete the addition made of Rs. 17,66,44,500. Accordingly appeal on Ground No. 3 & 4 is ALLOWED." 5. As both the additions made by ld. AO are deleted by the ld. CIT(A), the revenue is in appeal before us, whereas the ld. CIT(A) had referred to a survey action under section 133A of the Act on the business premises of the assessee, conducted on 20.01.2012 and observed that during the course of survey by statement of Shri Narottam Sharma, partner ....
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....nged by the revenue before the Hon'ble Supreme Court, reported in (1962) 44 ITR 891 (SC), wherein the issue of powers of FAA to make enhancement of income was discussed and the appeal of revenue dismissed, by enshrining the following principle of law. "Section 251 of the Income- Act, 1961 (Corresponding to section 31(3) of the Indian Income-tax Act, 1922) - Commissioner (Appeals) - Powers of - Assessment year 1947-48 - Whether it would not be open to 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 by ITO - Held, yes" 9. The ld. AR further placed his reliance on the decision of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443(SC), wherein Hon'ble Supreme Court has held as under: "Section 251 of the Income-tax Act, 1961 [Corresponding to section 31(3) of the Indian Income-tax Act, 1922] - Commissioner (Appeals)- Power of Assessment year 1952-53 - Whether power of enhancement of AAC under section 31(3) of 1922 Act is restricted to subject matter of assessment or source of income which have been considered expressly or by clear....
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....n. It is not the case where the revised return is filed beyond the time limit under section 139(5) for the AO to ignore the revised return since the assessee has filed the revised return on 17.03.2019 which is well within the time limit. The AO considering the loss as per revised return in the computation, in our view cannot be a reason to argue that the AO has under assessed the income after considering the issue of allowability of ESOP expenses. Given this, in assessee's case the CIT(A) has decided the issue of allowability of ESOP expenses which has not earlier been considered by the AO. In this regard we notice that the Hon'ble High Court of Delhi in the case of CIT v Sardari Lal & Co. [2002] 120 Taxman 595/[2001] 251 ITR 864 has considered a similar issue wherein it is held that- "The inevitable conclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147/148 and section 263, if requisite conditions are fulfilled. It is inconceivable that in the presence of such spe....
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.... the same is dealt with by the ld. AO, whereas nothing could be established on merits so as to support the capitalization of unaccounted expenditure in WIP. Under such circumstances ld. CIT(A) has correctly enhanced the income of assessee by reducing the amount of work-in-progress. 13. In rebuttal the ld. AR submitted that once the assessee has accepted unaccounted expenditure in the construction activities of the assessee and have offered the said unaccounted amount as income of the assessee in the Profit & Loss A/c, the assessee is entitled to increase the work-in-progress on account of expenditure incurred. The ld. AR placed his reliance on the decision of ITAT, Rajkot in the case of Aaryaland Enterprises & Co. vs. DCIT Circle-(1), Rajkot (2022) TMI 1311-ITAT, Rajkot, wherein the issue of declaration of income, disclosed under a survey under section 133A of the Act was offered by the assessee and also have increased the work-in-progress by the construction expenses which was denied by the ld. AO, while the deduction has been claimed by the assessee. The Tribunal has allowed such increase in work-in-progress. 14. We have considered the rival submissions, perused the materia....
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....f the lender company, the amount in question cannot be treated as the dividend. It is further submitted that the issue has been taken before the Hon'ble Bombay High Court by the revenue, wherein Hon'ble High Court had dismissed the appeal of assessee stating that the question as formulated does not give rise to a question of law, thus not entertained while granting the aforesaid decision, the question before the Hon'ble High Court was as under: "Consequently, the effect of clause (e) of section 2(22) is to broaden the ambit of the expression 'dividend' by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition does not alter the legal position that dividend has to be taxed in the hands of the shareholder. Consequently, in the present case the payment, even assuming that it was a dividend, would have to be taxed not in the hands of the assessee but in the hands of the shareholder. The Tribunal was, in the circumstances, justified in coming to the conclusion that, in any event, the payment could not be taxed in the hands of the assessee." 21. It i....
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....e decision of ITAT and Hon'ble Bombay High Court in the assessee's own case. 23. We, thus, respectfully following the aforesaid decision in assessee's own case on the same issue emerging from the part payment of security deposits which has been decided in favour of assessee for AY 2009-10, de hors any fresh material, decision or argument by the Department, are of the considered opinion that the ld. CIT(A) has rightly and judiciously adjudicated the issue in favor of the assessee following the decision of ITAT, which was approved by the Hon'ble Bombay High Court in assessee's own case. Accordingly, we approved the decision of ld. CIT(A) with no modification to the same. 24. In result, Ground No. 1 of the revenue's stands dismissed. 25. Ground No. 2 regarding the addition of Rs. 17,66,44,500/- being Business Income in the guise of security deposit received by the assessee. 26. At the outset ld. CIT-DR reiterated the facts of issue, referred to P&L A/c of the assessee, stating that the aforesaid addition was not treated as income by the assessee, whereas the possession of project was already handed over to the partners and the assessee do not have any authority to sell the....
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.... stock-in-trade only when the constructed premises are sold and not at the time when development agreement was entered into. ITAT has held that the development rights can be said to be transferred only in the FY 2011-12 relevant to AY 2012- 13 and not in the year when JDA was entered into. Accordingly, the amount received by assessee for Rs. 24,75,00,000/-, which was suo moto offered as income by the assessee shall be the income of assessee for the relevant year, which cannot be substituted by the stamp duty value of land which is of entire land parcel consisting of 32262 sq. mtrs. Therefore, the ld. CIT(A) has rightly adjudicated the issue in favour of the assessee with observation that the assessee will get consideration for only 16500 sq. mtrs of constructed area out of the JDA, therefore market value of plot of land as a consideration for JDA is incorrect approach to adopt as income of the assessee and therefore the addition made by ld. AO by completely ignoring the consideration clause of JDA and recomputing the income on the basis of market value of the entire plot in place of value to be derived in terms of JDA was bereft of substance and devoid of merits, the same therefore....