Tribunals
Summary and Review of Case Laws Decided by Income Tax Appellate Tribunals
Wednesday, 27 April 2016 15:07

Powers of CIT(A) - CIT(A) was not empower to enhance an income on an issue which was not the subject matter of the assessment - CIT(A) cannot touch upon an issue which does not arise from the order of the assessment - Delhi Tribunal Featured

Written by
Rate this item
(0 votes)
Powers of CIT(A) Powers of CIT(A)

Powers of CIT(A) to Enhance Income

1. The CIT(A) acted beyond its power by directing the Assessing Officer to tax the capital gains in respect of sale of land at Gurgaon, though, there was no addition made by the Assessing Officer in the assessment order to that respect

2. Capital gain is an independent and different source of income and was not the subject matter of appeal before him nor was the issue considered by the Assessing Officer by framing an assessment order

3. CIT(A) was not empower to enhance an income on an issue which was not the subject matter of the assessment

4. CIT(A) cannot touch upon an issue which does not arise from the order of the assessment and was outside the scope of the order of the assessment

Facts

1. The assessee filed return of income of Rs. 57,12,774/- on 30.09.2009

2. The return was processed under Section 143(1) of the Income Tax Act, 1961 at an income of Rs. 76,22,919/-

3. The assessee has shown income from salary, business, house property and other sources

4. Under the proprietary business, the assessee has shown receipts at Rs.19,95,610/- against which net profit of Rs. 2,96,060/- was declared

5. As recorded in assessment order, notice under Section 142(1) of the Act dated 09.12.2011 was issued and assessee was asked to furnish the details/information and the case was fixed for hearing on 16.12.2011 but on the said date no one attended the proceedings

6. Accordingly, the Assessment was completed ex-parte on merits on the basis of the information available on record

7. At the beginning of the assessment year, assessee was holding agricultural land valuing Rs. 2,54,30,709/- and during the year, it purchased land valuing Rs. 5,78,92,966/- and after selling the agricultural land of Rs. 2,97,12,813/- closing balance of the Agricultural land was declared at Rs. 5,36,10,862/-

8. The assessee during the course of the assessment proceedings, produced the list of the agricultural land purchased during the year along with the property documents of the agricultural land purchased during the year

9. The assessee also furnished all the document relating to the sale of the agricultural land sold during the year and it was specifically submitted that though the documents of sale would show that amount payable to the assessee was Rs. 3,11,00,000/-, however, three cheques of Rs. 13,7,187/- was not honored as such, consideration of the sale of the agricultural land was declared at Rs. 2,97,12,813/-

10. The Assessing Officer made an addition of Rs. 14,85,641/- towards a commission as brokerage at 5% on the made by the assessee of its own land

11. Assessing Officer further disallowed 50% of total agricultural income of Rs.19,10,149/-, he relied on the judgment of Punjab and Haryana High Court in the case of Smt. Kusum Sharma Vs. CIT(A) 158 Taxman 303

12. The A.O firstly added entire income by way of agricultural income of Rs.19,10,149/- in the intimation u/s 143(1) and thereafter in the assessment order u/s 143(3) of the Act. But further added Rs.9, 55,074/- being 50% of the total agricultural income

13. The Assessing Officer further disallowed one fourth of the vending machine expenses at around Rs.10,05,299/-. The Assessing Officer observed there were no details given for vending machine expenses by the Assessee

14. The assessee went in appeal before the CIT (A)

15. The CIT (A) directed the Assessing Officer to tax capital gains in respect of income earn by the assessee on the sale of land at Gurgaon

16. Thus, he upheld the order of the assessment, when he directed the Assessing Officer to compute the commission earn by the assessee in respect of both sale as well as purchase of agricultural land carried out during the year i.e. at 5%, on Rs.3,11,00,000/- and Rs.4,33,85,625/-

17. Honb. Tribunal allowed the appeal 

Adjudication

The A.O has proceeded to compute income of the assessee on the basis of the income as per intimation u/s 143(1) of the Act; whereas the A.O was required to compute the income of the assessee on the basis of income returned. This was a ground raised before the CIT(A) and is a part of ground of appeals in the present appeal. It being wholly legal ground of the appeal deserves to be adjudicated. The Assessing Officer has acted beyond the jurisdiction by computing income of the assessee on the basis of the income as per Section 143(3) where as the intimation was u/s 143(1). The CIT(A) acted beyond its power by directing the Assessing Officer to tax the capital gains in respect of sale of land at Gurgaon, though, there was no addition made by the Assessing Officer in the assessment order to that respect. Capital gain is an independent and different source of income and was not the subject matter of appeal before him nor was the issue considered by the Assessing Officer by framing an assessment order. Instead, the Assessing Officer termed the same as commission on the sale of land. The Ld. AR has relied on the various case laws more preciously that of Shapoorji Pallonji Mistry Vs. CIT reported in 34 ITR 342 (confirmed by the Apex Court in 44 ITR 891) wherein the Hon’ble Bombay High Court while dealing with the powers of the CIT(A) held that CIT(A) was not empower to enhance an income on an issue which was not the subject matter of the assessment. The ratio laid down in the judgment of full Bench of Delhi High Court in the case of CIT vs. Sardari Lal & Co. reported in 251 ITR 864 is also relevant in assessee’s case that the CIT(A) cannot touch upon an issue which does not arise from the order of the assessment and was outside the scope of the order of the assessment. The order of the CIT(A) does not sustain.

Cases referred to

1. Shapoorji Pallonji Mistry Vs. CIT reported in 34 ITR 342

2. CIT vs. Sardari Lal & Co. reported in 251 ITR 864

3. Kusum Sharma Vs. CIT(A) 158 Taxman 303

Additional Info

  • Order Date: Wednesday, 13 April 2016
  • Court: Tribunals
  • Cout Name: Delhi Tribunal
  • Section: 143(1), 143(3), 251(2), 246A
  • Favouring: Assessee
Read 5462 times Last modified on Wednesday, 04 May 2016 11:55
Taxpundit

Founder & CEO with over 20 years of total professional experience spread across Internal Audit, IT Audit, Enterprise Risk Management, Financial statement audit & Business Finance Management.

https://www.linkedin.com/in/taxpundit | This email address is being protected from spambots. You need JavaScript enabled to view it.

Leave a comment

Thank you for reading! We welcome and appreciate your comments, but at the same time, make sure you are adding something valuable to this article. If you have any serious queries, suggestions or anything related to this article, feel free to share them, we really appreciate that.

If you want to give us any feedback or report any errors, you can email your concerns on taxpundit@taxpundit.org and we'll revert back soon.

Recommended Articles

 

Have you done Analysis of any Case? Tell Us About It.

SITE INFORMATION

All content herein is the copyright of Taxpundit. No images, text, or any other content may be, reproduced or redistributed without the express written consent of Taxpundit.

All Rights Reserved. All Content Copyright.

Newsletter

Subscribe to our newsletter and stay updated on the latest developments and special offers!

Company Master Data Since 1900. More than 1.75 Million Records. Register/Login to get FREE access. Read more
Toggle Bar