MANEK PLASTICS,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 17(1), MUMBAI

PDF · subscribers
ITA 1997/MUM/2026Status: DisposedITAT Mumbai14 May 2026AY 2011-124 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that while the CIT(A) has the power of enhancement, it failed to provide the assessee with a reasonable opportunity to be heard on the suo motu disallowed short-term capital loss. Therefore, the order of the CIT(A) was set aside.

What were the facts?

The assessee's case was reopened based on information about the sale of land. The AO made an addition under Section 50C, which the CIT(A) deleted. However, the CIT(A) suo motu disallowed a short-term capital loss without providing the assessee an opportunity to be heard.

What were the issues?

Whether the CIT(A) erred in disallowing short-term capital loss suo motu without providing a reasonable opportunity to the assessee, violating principles of natural justice.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 50C,Section 250,Section 251(1)(a),Section 251(2)

AI-generated summary — verify with the full judgment below

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “D” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSIAN, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.1997/MUM/2026 (AY: 2011-12) Manek Plastics vs. Assistant Commissioner of Income Tax - Circle 17(1) 201B, Juhu Sai Darshan, Gulmohar Cross Road No.5, JVPD Scheme, Room No. 117, 1st Floor, Kautilya Mumbai-400049. Bhavan, C-41 to C-43, G Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051. PAN/GIR No: AAGFM9538D (Appellant) (Respondent) Assessee by Shri Jainam Sonaiya Revenue by Shri Annavaram Kosuri (SR AR) Date of Hearing 14.05.2026 Date of Pronouncement 11.08.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

This appeal filed by the assessee emanates from the order passed under

section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the Commissioner of

Income Tax, Appeal, ADDL/JCIT (A)-3, Bengaluru [in short, ‘CIT(A)’], dated

31.12.2025 for the assessment year (AY) 2011-12.

2.

The grounds of appeal raised by the assessee are as under:

“1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in affirming the action of AO of reopening the case u/s 147 whereas no income escaped assessment and therefore 148 proceedings does not survive.

2.

On the facts and circumstances of the case and in law, the Learned CIT(A) erred in directing the AO to disallow short term capital loss of Rs 9,41,579 without providing a reasonable opportunity to the appellant to explain as to why such loss should not be disallowed.

ITA No.1997/MUM/2026 Manek Plastics 3. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in directing the AO to disallow the short-term capital loss of Rs 9,41,579 on the erroneous premise that no asset other than the factory building was sold during the year, whereas the financial statements and return of income filed by the appellant clearly reflect the sale of all the assets, and thus short-term capital loss has been rightly computed by the appellant in accordance with the provisions of Section 50 of Income-tax Act, 1961.”

3.

Facts of the case, in brief, are that the assessee filed return of income for the AY 2011-12 on 30.07.2011 declaring total income at Rs.51,61,093/-. The case was reopened based on the information received from ITO, Silvasa that assessee has sold NA land at Silvasa. The value of the property was Rs.80,00,000/- as per the stamp duty valuation but the sale consideration was shown at Rs.57,60,000/. After hearing the assessee, the AO added the difference of Rs.22,44,000/- u/s 50C of the Act. 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). He issued notices to the assessee and thereafter, deleted the addition of Rs.22,44,000/- made u/s 50C of the Act. However, the CIT(A) disallowed claim of loss of Rs.9,41,579/- on sale of plant & machinery and furniture, as per discussion at para 5.2 of the appellate order. 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Ld. AR, at the outset, submitted that the disallowance of short-term capital loss was suo-motto adjudicated by the CIT(A) despite the fact that such issues does not even arise out of assessment proceedings. No specific grounds were raised before CIT(A) vide Form 35. Moreover, even after deciding to suo- motto adjudicate a fresh matter, no opportunity of being heard was given to the appellant. This leads to denial of principles of natural justice. The Ld. AR has filed 2

ITA No.1997/MUM/2026 Manek Plastics a copy of all the CIT(A) notices which hereby evidences that no opportunity was given pertaining to disallowance of STCL. The action of CIT(A) vide para 5.2 of appellate order is without jurisdiction and bad in law. 6. On the other hand, the Ld. Sr. DR supported the order of lower authorities. He would, however, have no objection if the matter is restored to the file of CIT(A) for fresh decision. 7. We have heard both sides and perused the materials on record. We find that the AO has not made any addition on account of disallowance of short-term

capital loss of Rs.9,41,579/- in the assessment order. Hence, it is a fresh issue

decided by the CIT(A) during appellate proceedings. The power of enhancement by the CIT(A) in respect of a new sources of income has attracted judicial attention

in a number of cases. Section 251(1)(a) of the Act grants the CIT(A) statutory

power of enhancement in an appeal against an order of assessment. As held by the Hon’ble Supreme Court in case of CIT v. Kanpur Coal Syndicate, 53 ITR 225

(SC), the scope of CIT(A) power is co-terminus with that of AO. He can do what the AO cannot do and also direct him to do what he has failed to do. These are

special and exceptional attributes of the jurisdiction of the first appellate

authority, which is not bestowed even upon in the higher appellate authorities. In absence of any statutory provision, the CIT(A) is vested with all the plenary

powers which the subordinate authority may have in the matter. Amounts relating

to new sources of income of items not considered by the AO from the point of view of their assessability can be added by the CIT(A) in the appeal before him, as

ITA No.1997/MUM/2026 Manek Plastics held by the Hon’ble Supreme Court in CIT v. Nirbhheram Deluram, 24 ITR 610 (SC).

However, it is seen that the assessee was not provided a reasonable opportunity

of showing cause against such enhancement, as per the requirement of sub

section (2) of section 251 of the Act. Hence, there was failure on part of the CIT(A)

to fulfill the statutory conditions of sub-section (2) of section 251 of the Act.

Considering the facts discussed above, in the interest of justice, we deem it proper

to set aside the order of the CIT(A) and remand the issue to his file for de novo

adjudication after granting adequate and reasonable opportunity of being heard

to the assessee.

8.

In the result, the appeal of the assessee is allowed for statistical purpose.

Order is pronounced on 11.08.2026.

Sd/- Sd/- (SANDEEP GOSAIN) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER *Aniket Chand; Sr. PS MUMBAI Date: 11.08.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File By Order

Assistant Registrar ITAT, MUMBAI

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →