J.M. HOUSING LTD.,DELHI vs. DCIT, CC-2, NOIDA

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ITA 2080/DEL/2026Status: DisposedITAT Delhi05 October 2026AY 2022-234 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) could not travel beyond the subject matter of assessment to bring an entirely new source of income under the guise of enhancement. The CIT(A) issued a show cause notice for enhancement on an issue that was not part of the assessment proceedings. The name of Shri Santosh Kumar was not mentioned in the notices issued by the AO u/s.133(6). The issue before the AO was the genuineness of sundry creditors, whereas the CIT(A) sought to enhance based on an amount received from Shri Santosh Kumar. The Tribunal noted that the assessee had accounted for Rs.90,69,000/- as 'Booking amount forfeited' in its Profit and Loss account for the year ended 31.03.2022, which included the Rs.13,50,000/-. Since the amount was reflected in the books and offered to tax, it could not be taxed again. Relying on the Supreme Court's decision in CIT vs. Rai Bhadur Hardutroy Motilal Chamaria, the Tribunal held that the CIT(A) lacked jurisdiction to assess a source of income not processed by the AO. Therefore, the enhancement of Rs.13,50,000/- was directed to be deleted.

What were the facts?

The assessee, J.M. Housing Ltd., filed an appeal against the order of the CIT(A)-3, Noida, dated 02.01.2026, for Assessment Year 2015-16. The Assessing Officer (AO) had made an addition of Rs.40,79,84,000/- as unexplained credit entries u/s.69 r.w.s. 115BBE of the Income Tax Act, 1961, due to non-receipt of replies from sundry creditors. The AO also disallowed Rs.97,00,000/- as miscellaneous expenses. The CIT(A) substantially deleted the addition u/s.69 and the disallowance of Rs.97 lakhs. However, the CIT(A) issued a show cause notice for enhancement of Rs.13,50,000/- from Shri Santosh Kumar. The assessee contended that this amount was part of an advance received for property purchase, which was forfeited and offered to tax in FY 2021-22, and that the CIT(A) could not enhance on a new source of income.

What were the issues?

1. Whether the CIT(A) had the jurisdiction to make an enhancement on a source of income not considered by the Assessing Officer, turning on Section 251(1) of the Income Tax Act, 1961. Assessee's arguments: - The amount of Rs.13,50,000/- was not part of the subject matter of assessment before the AO, and therefore, the CIT(A) could not make an enhancement on a new source of income. Reliance was placed on CIT vs. Shapoorji Palolonji Mistry, CIT vs. Rai Bhadur Hardutroy Motilal Chamaria, and CIT vs. Sardari Lal & Co. - The amount was already offered to tax in FY 2021-22 as 'Booking Amount forfeited' in the Profit and Loss account, and making an enhancement would result in double taxation. Revenue's arguments: - The amount was received from Shri Santosh Kumar and forfeited within a short span. The assessee failed to provide supporting documents for the genuineness of the transaction, the identity of Shri Santosh Kumar, and the circumstances of forfeiture. - The CIT(A)'s finding in making the enhancement was supported.

Which sections of the Income-tax Act were involved?

Section 68,Section 69,Section 115BBE,Section 133(6),Section 251(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: SHRI VIKAS AWASTHY & SHRI S RIFAUR RAHMAN

For Respondent: Shri Rajesh Kumar Dhanesta, Sr

PER VIKAS AWASTHY, JUDICIAL MEMBER: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-3, Noida [in short ‘the CIT(A)’] dated 02.01.2026, for Assessment Year 2015- 16.

2.

Shri C.S. Anand, appearing on behalf of the assessee submits that the assessee in appeal has assailed the order of CIT(A) in making enhancement of Rs.13,50,000/- u/s.68 of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’). Narrating facts of the case, the ld. Counsel submits that during the course of scrutiny assessment the Assessing Officer (AO) questioned genuineness and creditworthiness of sundry creditors amounting to Rs.40,79,84,000/- declared by the assessee. The AO issued notices u/s.133(6) of the Act to twenty such creditors to confirm their identity and creditworthiness and genuineness of the transaction. Since, no reply was

ITA 2080/DEL/2026 J.M. HOUSING LTD. received from the sundry creditors from whom purchases amounting to Rs.3,33,96,093/- during the year under consideration were made by the assessee, the AO made addition of said amount as unexplained credit entries u/s.69 r.w.s. 115BBE of the Act. Further, the AO disallowed assessee’s claim of expenditure amounting to Rs.97,00,000/- under the head “Miscellaneous expenses return off”. Aggrieved by the assessment order dated 29.03.2024, the assessee filed appeal before the CIT(A). The CIT(A), in First Appellate proceeding substantially deleted the addition made by AO u/s.69 of the Act and also deleted the addition of Rs.97 lakhs. However, the CIT(A) issued show cause notice for enhancement in respect of credit of Rs.13,50,000/- from Shri Santosh Kumar. The assessee gave a detailed reply and also objected to the notice of enhancement. The assessee explained before the CIT(A) that amount received from Shri Santosh Kumar was subject matter of appeal during AY 2021-22. Shri Santosh Kumar had entered into an agreement with assessee for purchase of property during FY 2020-21 and had paid advance of Rs.69,00,000/-. He further paid Rs.13,50,000/- as part of advance during FY 2021-22. Since, Shri Santosh Kumar backed out of the deal, the entire amount of Rs.82,50,000/- (Rs.69,00,000/-+13,50,000/-) was forfeited and credited to profit and loss account for FY 2021- 22. To substantiate his submissions, the ld. Counsel has drawn our attention to P&L account for the year ended on 31.03.2022 and Note 18 of the said P&L account that refers to ‘Booking Amount forfeited’ Rs.90,69,000/-. The ld. Counsel vehemently argued that in the first instance the subject matter of enhancement by CIT(A) was not subject matter of assessment, hence, no enhancement could have been made by the CIT(A) on new source of income. In support of his submissions, the ld. Counsel placed reliance on following decisions:-

i. CIT vs. Shapoorji Palolonji Mistry, 44 ITR 891(SC); ii. CIT vs. Rai Bhadur Hardutroy Motilal Chamaria, 66 ITR 443 (SC); & iii. CIT vs. Sardari Lal & Co., 251 ITR 864. Secondly, the said amount was already offered to tax, hence, enhancement made by CIT(A) has resulted in double taxation of the same amount. The ld. Counsel thus, prayed for deleting the enhancement made by the CIT(A).

3.

Per contra, Shri Rajesh Kumar Dhanesta, representing the Department vehemently supporting finding of the CIT(A) in making enhancement submits that the amount was received by the assessee from Shri Santosh Kumar on various dates in the months of February, March, April and June 2021. Thereafter, within a short span of four month, in the month of June 2021, the amount has been forfeited by the assessee. No supporting documents to show genuineness of the transaction and identity of Shri Santosh Kumar and circumstances under which the

ITA 2080/DEL/2026 J.M. HOUSING LTD. amount was forfeited was brought on record by the assessee. The ld. DR thus prayed for dismissing appeal of the assessee.

4.

We have heard the submissions made by rival sides and have examined the orders of authorities below. The limited issue for consideration before us is the enhancement of Rs.13,50,000/- made by CIT(A). The CIT(A) had issued show cause notice to the assessee to explain credit amount of Rs.13,50,000/- from Shri Santosh Kumar. At the outset, we have observed that the CIT(A) had issued show cause for enhancement on an issue which was not subject matter of enhancement. The name of Shri Santosh Kumar did not find mention in the list of parties to whom AO had issued notice u/s.133(6) of the Act. In any case, the issue in consideration during assessment proceedings was the genuineness of the sundry creditors declared by the assessee, whereas, the CIT(A) had issued show cause for enhancement in respect of amount received from Shri Santosh Kumar. The ld. Counsel referring to Statement of Profit and Loss account for the year ended on 31.03.2022, has pointed that the assessee in his books has accounted has recorded Rs.90,69,000/- received from Shri Santosh Kumar, as ‘Booking amount forfeited’. Thus, the amount received from Shri Santosh Kumar was dully reflected in books of account and has been offered to tax under the head revenue from operations. Once, the amount was duly reflected in the books of account and has been offered to tax, the same amount cannot be tax again.

5.

Dehors, the fact that the assessee had already offered the amount to tax, the CIT(A) could not have issued show cause for enhancement in respect of an issue which was not subject matter of assessment. It is a settled legal position that the CIT(A) cannot travel beyond the subject matter of assessment to bring entirely a new source of income under the guise of enhancement. The Hon’ble Supreme Court of India in the case of Rai Bhadur Hardutroy Motilal Chamaria (supra) while deciding the issue of power of enhancement of AAC under section 31(3) of the Income Tax Act, 1922 (pari materia with section 251(1) of the Act) considered the judgements rendered in the case of Shapoorji Palolonji Mistry (supra), Narrondas Manordass vs. CIT 31 ITR 909 (Bombay) and CIT vs. McMillan & Co. 33 ITR 182 (SC) and held as under:

"The principle that emerges as a result of the authorities of this court is that the Appellate Assistant Commissioner has no jurisdiction, under section 31(3) of the Act, to assess a source of income which has not been processed by the Income-tax Officer and which is not disclosed either in the returns filed by the assessee or in the assessment order, and therefore the Appellate Assistant Commissioner cannot travel beyond the subject-matter of the assessment. In other words, the power of enhancement under section 31(3) of the Act is restricted to the subject-

ITA 2080/DEL/2026 J.M. HOUSING LTD. matter of assessment or the source of income which have been considered expressly or by clear implication by the Income-tax Officer from the point of view of the taxability of the assessee. " In the instant case as is emanating from records, the CIT(A) has made enhancement of income on an issue which was not subject matter of assessment proceedings. In other words, the CIT(A) made enhancement on a new source of income, which is not permissible. Thus, in light of undisputed facts and the law expounded by Hon’ble Apex Court, the addition of Rs.13,50,000/- is directed to be deleted.

6.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on Monday the 05th day of October, 2026.

Sd/- Sd/- S RIFAUR RAHMAN VIKAS AWASTHY ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi Dated: 05.10.2026 NV/- Copy to: J.M. HOUSING LTD., 312/3 T/F 5 PRATAP BHAWAN BHAHADUR 1 SHAH ZAFAR MARG, CENTRAL DELHI, DELHI-110002 DCIT, CC-2, 2 -, NOIDA-201301, UTTAR PRADESH 3 THE PCIT / CIT, 4 THE D.R., ITAT, DELHI BENCH 5 GUARD FILE

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