Cheil India Pvt. Ltd vs. ITO (ITAT Delhi)

The ITAT directed that the assessee be granted sufficient opportunity to rebut the evidence used by the Assessing Officer regarding the addition of Rs.89,39,92,188 made by the Assessing Officer on account of alleged short receipts declared in the profit and loss account violating the principles of natural justice. In compliance, the Assessing Officer made the assessment on the issue afresh under sec. 254 read with 143(3) of the Act making the addition of Rs.4,55,41,557 out of Rs.89,39,92,188 which was questioned before the CIT(Appeals). The CIT(Appeals) not only upheld the addition of Rs.04,55,41,557 made on account of short receipts declared in profit and loss account but enhanced the income by directing the Assessing Officer to disallow payments made by the assessee under sec. 40(a)(ia) of the Act. The assessee claimed that by directing the Assessing Officer to make the disallowance of payments made by the assessee under sec. 40(a)(ia) of the Act, the CIT(Appeals) has introduced in the assessment a new source of income, which is not allowed in an assessment which was made by the Assessing Officer strictly in compliance of the order of the ITAT for reconsideration of addition of Rs.89,39,92,188 after examining the evidence and upholding opportunity of being heard to the assessee. HELD by the Tribunal:

(i) The direction to the Assessing Officer by the CIT(Appeals) to disallow payments made by the assessee under sec. 40(a)(ia) of the Act was a question of taxability of income from a new source of income which has not been considered by the Assessing Officer, hence it was exceeding of jurisdiction by the CIT(Appeals) in a set aside matter by the ITAT in the present case. Though the CIT(Appeals) has co-terminus powers as of the Assessing Officer and is empowered to do what an Assessing Officer can do for the assessment, the directed disallowance was new source of income, which was not the subject matter of setting aside order by the ITAT, in compliance of which assessment under sec. 254 read with section 143(3) was framed.

(ii) The power of the CIT(Appeals) to set aside assessment, which does not involve a proposal for enhancement cannot be used for the purpose of expending the 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 sec. 147/148 of the Act and section 263 of the Act, if requisite conditions are fulfilled. It is inconceivable that in the presence of such specific provisions, a similar power is available to the appellate authority (CIT vs. Sardari Lal & Co. – 251 ITR 864 (Del) followed).