M/S GINNI GOLDLIMITED,NEW DELHI vs. ACIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘B’: NEW DELHI (Through Video Conferencing)

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER

ITA No.673/Del/2015 Assessment Year : 2009-10

M/s Ginni Gold Limited, Vs. Additional Commissioner of Income 2606/4, Shop No.105, Tax, 1st Floor,Solitaire Plaza, Circle-12(1), Gurudwara Raod, Karol Bagh, New Delhi New Delhi-110005 PAN-AACCG9728Q

(Appellant) (Respondent)

Appellant by : Sh. Hiren Mehta, CA Respondent by : Sh. Jagdish Singh, Sr. DR

Date of hearing : 09.02.2021 Date of pronouncement : .04.2021

ORDER PER R.K. PANDA, AM :

This appeal filed by the assessee is directed against the order dated

28.11.2014 of the learned CIT(A)-4, New Delhi, relating to Assessment Year-

2009-10.

engaged in the business of trading in business of bullions and manufacture

and trading of silver and gold ornaments. The assessee filed its return of

income on 29.09.2009 declaring total income of Rs.65,59,963/-. During

the course of assessment proceedings, the assessee produced books of

account, which were test check by the Assessing Officer. The Assessing

2 ITA No.673/Del/2015

Officer on the basis of various details filed before him noted that the

assessee company has advanced an amount of Rs.2,20,00,000/- to its

suppliers M/s Lakshya Overseas for two days. He noted that the nature of

the business of the assessee company does not require to lending sums for

procuring goods from its suppliers. He, therefore, invoking the provisions of

section 36(1)(iii) of the Income Tax Act, 1961 (in short ‘the Act’) made

addition of Rs.14,194/- being interest @12% per annum.

Rs.13,000/-to two trusts namely Prem Lal Praksh Trust Rs.10,000/- and

Udantika Manav Sewa Sansta of Rs.3,000/-. Since, the assessee could not

produce any evidence in support of the same, the Assessing Officer

disallowed Rs.13,000/- claimed by the assessee on account of donation.

being filing fees paid to the ROC on the ground that the amount is paid

towards increasing its authorized share capital, which is not an allowable

expenditure u/s 37(1) of the Act.

job work basis. For the same purpose, the Gold bars are issued to job work

contractors and recorded in issue side of stock register of Gold Bars

through stock journal and value is recorded at notional rates. Similarly,

upon receipt of manufactured goods from job workers, the goods are

recorded in Gold Jewellery item in stock register at notional value.

3 ITA No.673/Del/2015

assessee company had issued gold bars weighing 87000 grams and

recorded them at value of Rs. 10,72,03,710/- and paid a sum of

Rs.9,17,115/- as job charges in respect of the same (Total Rs.

10,81,20,825/-). Upon receipt of these goods, the same have been recorded

in receipt side of the stock register in Gold Jewellery item. However, as per

statements submitted during course of proceedings, the amount of Gold

Jwellery (manufactured/production) has been recorded at Rs.

10,67,92,970/-. No reason for decrease in value of gold has been given by

the assessee in the process of manufacturing the ornaments. Since, the

value of closing stock at the end of the year in arrived at with the help of

computer at values recorded, the closing stocks of manufactured jewellery

thus, is under valued by a sum of Rs. 13,27,855/- and thus, the profits of

the company are understated to that extent. Hence, the Assessing Officer

made addition of Rs. 13,27,855/- to the total income of the assessee. The

Assessing Officer, accordingly determined the total income of the assessee

at Rs.80,20,500/-.

addition of Rs.14,194/- on account of disallowance u/s 36(1)(iii) of the Act,

disallowance of Rs.13,000/- on account of donation, disallowance of

Rs.1,05,484/- on account of filling fees paid to ROC. So far as, the

disallowance of Rs.13,27,855/- on account of valuation closing stock is

4 ITA No.673/Del/2015

concerned, the learned CIT(A) sustained the addition of Rs.6,27,165/- and

deleted the balance addition.

noted that the assessee company is a trader in Gold Bar, Gold jewellery

and Buliions. From the same premise other related concerns also trade in

gold:, bullion and gold jewellery. During the course of appellate proceeding,

the Learned CIT(A) further observed that the assessee company had

entered into frequent transactions of purchase and sale of Gold Bar 995,

Gold Bar 999 and finished Gold jewellery with its sister concerns. Several

opportunities were extended to the assessee to produce the copy of the

ledger account of the sister concerns of the assessee in its books to justify

whether such transactions were at arm's length basis. The assessee

furnished the following details of purchases with persons specified u/s

40A(2)(b):

Sl. Name of Co. Amount in Rs. Designation Name of person No. Goel Exim India Pvt. 1 Ltd. 111,243,140 Director Ashok Goel, Rraveen Gupta 2 Goel Impex 227,423,145 Proprietor Praveen Gupta 3 Priyansh Gold 30,049,505 Proprietor Pradeep Goel 4 Royal Gold 12,807,644 Proprietor Jai Prakash Gupta 5 Bnavya Gold 184,453,619 Partner Jai Singh Goel, Cheten Gupta 6 Ginni Holdings 58,818,238 Partner Pradeep Goel, Praveen Gupta 7 L P Overseas 156,913,690 Partner Jai Prakash Gupta, Sandeep Gupta Shree Balaji 8 Commodities 37,178,972 Partner Ashok Goel, Reena Goel Shree Ganpati 9 Impex 296,474,012 Partner Jai singh Goel, Ashok Goel 10 Sparsh Gold 17,029,703 Partner Ashok Goel, Reena Goel Shree Raj Mahal 11 Jewellers 12,717,000 Partner Ginni Devi, Pradeep Goel G. Total 1,145,108,666

5 ITA No.673/Del/2015

sale price of such items from related parties vis-a-vis outside parties and

noted that the assessee had paid excessive purchase price in respect of the

same item as compared to outside parties on the same day or within 1 or

two days. Similarly, the transaction of the sales made to sister concern in

respect of same item, on the same day or within 1-2 days, which are under

valued, as compared with sales made to outside parties. He accordingly

issued an enhancement notice to the assessee to explain as to why

disallowance in respect of purchases made from related concern u/s

40A(2)(b) should not be made and why demand should not be enhanced.

The relevant extract of the said notice reads as under:-

"2. During the course of the appellate proceeding your representative was asked to furnish the quantity-wise and value- wise details of purchase, sale of closing stock and stock issued for job work purpose of Gold Bar 995, Gold Bar 999 and gold Jewellary. 3. In respect of the details furnished relating to Gold Bar 999, I observe that in respect of purchase of 4500 Gram of gold bar 999 on 1.12.2008 from Bhavya Gold, the purchases were shown at Rs.1245 per gram, whereas from 23.10.2008 till 5.12.2008, the gold bar 999 was sold within the range of 1207.92 (as on 23.10.2008) to Rs.1216 per gram (as on 5.12.2008). I was informed by the id. Counsel that the Bhavya Gold was covered u/s 40A(2)(b). However, in the Tax Audit Report in the item No. 10 related to notes of accounts,, it was reported that there was no related party disclosure. 3.2 Further, Gold Bar 999 was purchased @ Rs.1263.50 gram in respect of 5,000 gram Gold Bar 999 purchased on 20.10.2008 from Shree Ganpati Impex, whereas as mentioned above, the prevailing rate used for selling the same item has been within the range of 1207.92 to 1216 per gram. You are required to explain as to whether any of the purchases were made from related parties or any sales were made to related party u/s 40A(2)(b). Also in case of

6 ITA No.673/Del/2015

such transaction related to such related party, you are required to explain as to why excessive purchase price may not be disallowed u/s 40A(2)(b). In the similar format, you are required to furnish the details of Gold bar 995 and finished gold jewellery purchased or sold to the related concern with the explanation as to why any amount which is not at arm’s length may not be taken towards addition to the total income.” 10. Rejecting the various explanation given by the assessee the

learned CIT(A) observed that the assessee being a bullion dealer, all

transactions were to be at fair market value and there is no reason as to

why most of the purchases made from related concern were at a higher rate

than market rate which is taken from the rate of purchases made from

unrelated concerns. Further, on many occasions on the same date, sales of

some item were made to related concern at a much lower price as compared

with the purchase price from other (related or unrelated) concern. Thus, the

assessee has inflated purchase price from related concern and sold at

lesser price to related concerns to suppress its profit. Since, according to

him the assessee could not offer any justification as to why sales were

made to related concern operating from the same premise at below the rate

at which sales were made to outside parties and purchases made at higher

price from related concerns, therefore, he enhanced the assessment to the

extent of Rs.3,57,53,276/-.

in appeal before us by raising following grounds of appeal:- 1. On the facts and circumstances of the case and in law the CIT (A) erred in holding that necessary details and explanation as to bullion transactions were not placed before him while the impugned order is replete with such details; 2. On the facts and circumstances of the case and in law

7 ITA No.673/Del/2015

the CIT (A) erred in rejecting the books of accounts u/s 145 of the Act; 3. On the facts and circumstances of the case and in law the CIT(A) erred in making an enhancement of the assessed income by making an addition of Rs.2,19,63,025/- u/s 40A(2)(b) of the Act in respect of purchases made from sister concerns even though the same had been made as per the current gold rate; 4. On the facts and circumstances of the case and in law the CIT(A) erred in making an enhancement in respect of allegedly suppressed sale in a sum of Rs.1,37,90,251/- even though the details as to fair market value were admittedly before him. 5. On the facts and circumstances of the case and in law the CIT (A) erred in confirming the application of section 36 (l)(iii) of the Act in respect of the sums advanced to these sister concerns; 6. On the facts and circumstances of the case and in law the CIT (A) erred in sustaining the disallowance of Rs.l3,000/-in respect of donation; 7. On the facts and circumstances of the case and in law the CIT (A) erred in sustaining the disallowance on account of valuation of closing stock in a sum of Rs. 13,27,855/-. 12. The assessee has also taken following additional ground:- “That on the facts and circumstances of the case and in law the CIT(A) erred in enhancing the income of the appellant as he did not have jurisdiction u/s 251(1)(a) of the Income Tax Act to enhance income in the form of a new source of income which had not been considered by Assessing Officer and was therefore not subject matter of appeal against the proposition settled by the full bench of Delhi High Court in the case of CIT vs.” 13. The learned counsel for the assessee submitted that above

additional ground is purely a legal ground and does not require verification

of new facts. Relying on the decision of the Hon’ble Supreme Court in the

case of NTPC vs CIT 229 ITR 383 (SC) and the decision of the Hon’ble Delhi

High Court in the case of CIT vs Parabolics Print Pvt. Ltd. 276 ITR 42 (Del.),

he submitted that additional ground raised by the assessee should be

8 ITA No.673/Del/2015

admitted for adjudication.

the additional ground raised by the assessee is purely a legal ground and

does not require verification of any new facts, the additional ground raised

by the assessee is admitted for adjudication.

dismissed.

by the assessee relate to the order of the learned CIT(A) in enhancing the

income of the assessee u/s 40A(2)(b) of Rs.3,57,53,276/- which comprises

of enhancement of Rs.2,19,63,025/- in respect of purchases made from

sister concern and an amount of Rs.1,37,90,251/- being enhancement on

account of suppressed sale to the sister concern.

order of the learned CIT(A) in issuing the enhancement notice on the

ground that the First Appellate Authority is not empowered to make

enhancement in respect of a new source of income, which is not subject

matter of the assessment order and which has not been considered by the

Assessing Officer. Referring to the latest decision of the Co-ordinate Bench

of the Tribunal in the case of Hari Mohan Sharma vs ACIT reported in 110

Taxmann.com 119 (Delhi ITAT), copy of which is placed at page 57 to 75 of

the case law compilation, the learned counsel for the assessee submitted

9 ITA No.673/Del/2015

that the co-ordinate Bench of the Tribunal after considering various

decisions including decisions of Hon’ble Supreme Court and various

Hon’ble High Courts has held that enhancement u/s 251(1)(a) of the Act is

prohibited on the issue which has not at all been considered by the

Assessing Officer during the course of assessment proceedings. Therefore,

the learned CIT(A) could not have enhanced the income of the assessee on

account of altogether a new source of income, since, he is not competent to

enhance the assessment taking an income which income was not

considered expressly or by necessary implication by the Assessing Officer.

He submitted that if such power would have given to the learned CIT(A)

then the powers u/s 263 of the CIT or the power of the Assessing Officer

u/s 147 will become redundant. He, accordingly, submitted that the

learned CIT(A) should not have and could not have enhanced the income of

the assessee on altogether a new source of income which has not been

considered by the Assessing Officer. The learned counsel for the assessee

also placed reliance on the following decisions:-

i. CIT vs Sardari Lal & Co. 120 Taxman 595 (Del.)(FB) ii. CIT vs Union Tyers 107 Taxman 447 (Del) iii. CIT vs Shapoorji Pallonji Mistry 44 ITR 891 (SC) iv. CIT vs Rai Bahadur Hardutrey Motilal Chamaria 66 ITR 443 (SC) v. CIT, Thrissur vs. B.P. Sharafudin 252 Taxman 326 (Ker) vi. Bikran Singh vs DCIT 82 Taxmann.com 230(Del.) vii. Ram Infrastructure Ltd. Vs JCIT, Jalgaon, ITA No.764/PN/2013

10 ITA No.673/Del/2015

of the learned CIT(A).

sides, perused the orders of Assessing Officer and learned CIT(A) and the

paper book filed on behalf of the assessee. We have also considered the

various decisions cited before us. We find the only issue to be decided in

the above grounds relates to the order of the learned CIT(A) in enhancing

the income of the assessee by Rs.3,57,53,276/-, on an issue which was not

considered by the Assessing Officer but was considered by the learned

CIT(A) through enhancement notice. It is the submission of the learned

counsel for the assessee that the learned CIT(A) is not empowered to make

enhancement in respect of a new source of income which is not the subject

matter of the assessment order and which has not been considered by the

Assessing Officer. A perusal of the assessment order shows that the

Assessing Officer has not made any addition on account of purchase from

or sales made to the related concerns. Therefore, the question that arises

is as to whether the learned CIT(A) is competent to enhance assessment by

taking an income which was not considered expressly or by necessary

implication by the Assessing Officer during assessment proceedings.

Bench of the Tribunal in the case of Hari Mohan Sharma vs ACIT reported

in 179 ITD 310. We find the Tribunal after considering various decisions

including the decision of the Hon’ble Supreme Court held that the

11 ITA No.673/Del/2015

Commissioner (Appeals) has exceeded his jurisdiction in enhancing the

income of the assessee considering the new source of income not at all

considered by the Assessing Officer and accordingly set-aside the order of

the learned CIT(A). The relevant observations of the Tribunal from para 14

onwards read as under:-

“

12 ITA No.673/Del/2015

13 ITA No.673/Del/2015

subject to the condition stated in the proviso to the said section. In the category of cases falling in category (b), section 251(1)(a) provides the Commissioner of Income-tax (Appeals) could enhance such an assessment qua the under assessed sum, i.e., where the Assessing Officer had dealt with the issue in the assessment and was the subject-matter of appeal. In category falling in (c) and (e), the Commissioner of Income-tax has been empowered to take an appropriate action under section 263 of the Act In the category of cases falling under clauses (d) and (f), appropriate action under section 147 of the Act can be taken to tax the income which has escaped assessment or had remained to be taxed. There can be situations where an item has been dealt with in the body of the order of assessment and the assessee being aggrieved from the addition or disallowances so made, had preferred an appeal before the Commissioner of Income-tax (Appeals) against the said addition and disallowance, the said disallowance and addition being the subject- matter of appeal before the Commissioner of Income-tax (Appeals) in such cases, the Commissioner of Income-tax (Appeals) has been empowered under section 251(1)(a) of the Act to enhance such an income where the Assessing Officer had proceeded to make addition or disallowance by dealing with the same in the body of order of assessment by under assessing the same as the same was the subject-matter of the appeal as per the grounds of the appeal raised before him. In other words, the Commissioner of Income-tax (Appeals) has a power of enhancement in respect of such item or items of income which has been dealt with in the body of the order of the assessment, and arose for his consideration as per the grounds of appeal raised before him, being the subject-matter of appeal.”

14 ITA No.673/Del/2015

inadvertently omits to tax an amount which ought to have been taxed and in respect of which he does not make any enquiry e where an item or items of income or U/s 263 of the act expenditure, incurred and claimed is not at all considered and an assessment is framed, as a result thereof, a prejudice is caused to the Revenue, f where an item of income which ought to u/s 147 of the act have been taxed remained untaxed, and there is an escapement of income, as a result of the assessee's failure to disclose fully and truly all material facts necessary for computation of income

15 ITA No.673/Del/2015

with a view to test the genuineness of the entries relating to Rs. 4,30,000 in the books of the Forbesganj branch. It is manifest that the Income-tax Officer did not consider the remittance of Rs. 5,85,000 in the process of assessment from the point of view of its taxability. It is also manifest that the Appellate Assistant Commissioner has considered the amount of remittance of Rs. 5,85,000 from a different aspect, namely, the point of view of its taxability. But since the Income-tax Officer has not applied his mind to the question of the taxability or non-taxability of the amount of Rs. 5,85,000 the Appellate Assistant Commissioner had no jurisdiction, in the circumstances of the present case, to enhance the taxable income of the assessee on the basis of this amount of Rs. 5,85,000 or of any portion thereof. As we have already stated, it is not open to the Appellate Assistant Commissioner to travel outside the record, i.e., the return made by the assessee or the assessment order of the Income-tax Officer with a view to find out new sources of income and the power of enhancement under section 31(3) of the Act is restricted to the sources of income which have been the subject-matter of consideration by the Income-tax Officer from the point of view of taxability. In this context 'consideration' does not mean 'incidental' or 'collateral' examination of any matter by the Income-tax Officer in the process of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non taxability and not to any incidental connection. In the present case, it is manifest that the Income-tax Officer has not considered the entry of Rs. 5,85,000 from the points of view of its taxability and, therefore, the Appellate Assistant Commissioner had no jurisdiction in an appeal under section 31 of the Act, to enhance the assessment." 26. To the same effect is the judgment of another Division Bench of this court in CIT v. Union Tyres [1999] 240 ITR 556 (Delhi) reiterating that the first appellate authority cannot consider new scope of income under section 251(1) of the Act. The following question from the same judgment can aptly be (page 559) : "Section 251 of the Act prescribes the power of the Appellate Assistant Commissioner, now the Commissioner (Appeals). Section 251(1)(a) of the Act empowers the Appellate Assistant Commissioner in disposing of an appeal by the assessee against an order of assessment to confirm, reduce, enhance or annul the assessment or to set aside and refer the case back to the Income-tax Officer for making fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner. The Explanation to section 251 provides that the Appellate Assistant Commissioner may hear and decide any matter arising out of the proceedings in which the order appealed against was passed notwithstanding that such a matter was not raised before the Appellate Assistant Commissioner by the appellant.

16 ITA No.673/Del/2015

The issue with regard to the scope of powers of the first appellate authority in disposing of an appeal has come up before the courts umpteen times but we do not propose to burden the judgment by making reference to all the decisions on the point. We will notice a few decisions which we consider are relevant to answer the question referred. In CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), while construing the corresponding provisions of the Indian Income- tax Act, 1922, relating to the jurisdiction of the Appellate Assistant Commissioner in such an appeal, the Supreme Court held that, in an appeal filed by the assessee, the Appellate Assistant Commissioner has no power to enhance the assessment by discovering a new source of income, not considered by the Income-tax Officer in the order appealed against. Similar views were expressed by the apex court in CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC). It was held that the power of enhancement under section 31(3) of the 1922 Act was restricted to the subject-matter of the assessment or the source of income which had been considered expressly or by clear implication by the Income-tax Officer from the point of view of taxability and that the Appellate Assistant Commissioner had no power to assess a source of income which had not been processed by the Assessing Officer." 27. At the same time, the court also clarified that the power of the first appellate authority is not restricted to examine only those aspects of assessment about which the assessee makes a grievance but it covers the whole assessment to correct the order of the Assessing Officer not only with regard to the matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment. This principle can be traced to the following discussion in the said judgment (page 561) : "Thus, the principle emerging from the aforenoted pronouncements of the Supreme Court is, that the first appellate authority is invested with very wide powers under section 251(1)(a) of the Act and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment. However, there is a solitary but significant limitation to the power of revision, viz., that it is not open to the Appellate Assistant Commissioner to introduce in the assessment a new source of income and the assessment has to be confined to those items of income which where the subject-matter of original assessment."

17 ITA No.673/Del/2015

18 ITA No.673/Del/2015

terminus with that of the Income-tax Officer, and if that is so, there appears to be no reason why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income-tax Officer. No exception could be taken, held the Supreme Court in CIT v. Nirbheram Daluram [1997] 224 ITR 610 (SC) to this view as the Act places no restriction or limitation on exercising appellate power. Even otherwise, an appellate authority while hearing the appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitation, if any, prescribed by the statutory provisions. Absent any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have. 42. In CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), the assessment year was 1947-48, and the case was finally decided in February 14, 1962. So the Act considered was pre- Independence enactment. Examining section 31 of the old Act, the Supreme Court has held that there is no doubt that the appellate authority can "enhance the assessment". This power must, at least, fall within the words "enhance the assessment", if they are not to be rendered wholly nugatory. 43. Now, we may examine the authorities that also have dealt with the powers of the appellate authority but seem to have taken a divergent path. 44. In CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC) a three-judge Bench of the Supreme Court has observed that it is only the assessee who has a right conferred under section 31 to prefer an appeal against the order of assessment made by the Income-tax Officer. If the assessee does not appeal the order of assessment becomes final subject to any power of revision that the Commissioner may have under section 33B of the Act. Therefore, it would be wholly erroneous to compare the powers of the appellate authority with the powers possessed by a court of appeal, under the Civil Procedure Code. The Appellate Assistant Commissioner is not an ordinary court of appeal. It is impossible to talk of a court of appeal when only one party to the original decision is entitled to appeal and not the other party, and because of this peculiar position the statute has conferred very wide powers upon the appellate authority once an appeal is preferred to him by the assessee. 45. Chamaria goes on to hold that the appellate authority has no jurisdiction under section 31(3) of the Act to assess a source of income not 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 authority cannot travel beyond the subject-matter of the assessment. In other words, the power of enhancement under section 31(3) of the Act

19 ITA No.673/Del/2015

is restricted to the subject-matter of assessment or the sources of income considered expressly or by clear implication by the Income-tax Officer from the viewpoint of the taxability of the assessee. 46. A question regarding powers of the first appellate authority came up for consideration before the Supreme Court recently in CIT v. Nirbheram Daluram [1997] 224 ITR 610 (SC). Following the earlier decisions in Kanpur Coal Syndicate and Jute Corporation of India, the Supreme Court reiterated that the appellate powers conferred on the Appellate Commissioner under section 251 could not be confined to the matter considered by the Income-tax Officer, as the Appellate Commissioner is vested with all the plenary powers which the Income-tax Officer may have while making the assessment. 47. Indeed, examining Daluram's holding, a Division Bench of the Delhi High Court in CIT v. Union Tyres, Delhi [1999] 240 ITR 556 (Delhi) has observed that Daluram did not comment whether these wide powers also include the power to discover a new source of income. So, Union Tyres concludes that the principle of law laid down in Shapoorji and Chamaria still holds the field. 48. The principle emerging from various pronouncements of the Supreme Court, Union Tyres observes, is that the first appellate authority is invested with very wide powers under section 251(1)(a) of the Act and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only regarding a matter raised by the assessee in appeal but also regarding any other matter considered by the Assessing Officer and determined in assessment.

20 ITA No.673/Del/2015

by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147, or section 148, or even section 263 of the Act if requisite conditions are fulfilled. It is inconceivable, according to Sardari Lal, that in the presence of such specific provisions, a similar power is available to the first appellate authority. Eventually, Sardari Lal upheld the decision in Union Tyres. 51. Undeniably, the precedential position on the powers of the first appellate authority under section 251 undulates. There are seeming contradictions. But, as held by Union Tyres, and as affirmed on reference by Sardari Lal, there is a consistent judicial assertion that the powers under section 251 are, indeed, very wide ; but, wide as they are, they do not go to the extent of displacing powers under, say, sections 147, 148, and 263 of the Act. 52. Therefore, we are in respectful agreement with the view taken by the Full Bench of the High Court of Delhi in Sardari Lal. As a corollary, we hold that the Tribunal's deleting the enhancement of Rs. 22,15,116 and cancelling the order of the Commissioner of Income-tax (Appeals) on that issue call for no interference.” [Underline supplied by us] 19. The principle culled out from the above judicial precedents clearly shows that words "enhance the assessment" are confined to the assessment reached through a particular process. It cannot be extended to the amount which ought to have been computed. There being other provisions which allow escaped income from new sources to be taxed after following a certain prescribed procedure. So long as a certain item of income had been considered and examined by the Assessing Officer from the point of view of its assessability and so long as the CIT(A) does not travel beyond the record of the year, there has never been any doubt as to his powers of redoing the categorization and bringing the assessment within the true description of the law 20. In the facts of the present case only issue considered and discussed by the assessing officer is with respect to claim of the assessee u/s 54F of the act which was rejected after inquiry and further claim alternatively made u/s 54 of the act was also rejected relying up on the decision of the Honourable Supreme court. The issue of verification of capital gain was not the issue which was at all dealt with by the assessing officer, or even a question of verification made by ld AO. There was no inquiry made by the ld AO on the issue of capital gain shown by the assessee. The ld AO has not at all considered the issue of sales consideration received by the assessee on sale of house as an issue of dispute before him. Therefore according to us, ld CIT (A) could not have made enhancement on the issue holding that capital gain shown by the assessee itself is not in accordance with the law and given a finding that no capital gain has accrued to

21 ITA No.673/Del/2015

the assessee. CIT (A) further held that funds received by the assessee is unaccounted income of the assessee and chargeable to tax u/s 68 of the act. On the matrix as held by the Honorable Delhi high court the above issue falls within the scope of the provision of section 147 of the act and not u/s 251 (1) (a) of the act. Further the Honourable Delhi high court in para no 27 has also held that power of the first appellate authority is not restricted to examine only those aspects of assessment about which the assessee makes a grievance but it covers the whole assessment to correct the order of the Assessing Officer not only with regard to the matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment. Therefore for the purpose of enhancement of income by CIT (A) , it is necessary that either the matter should be raised in the appeal by the assessee or even otherwise the matter should ld have been considered and determined in the course of assessment proceedings. It is not at all necessary that AO should have made any adjustment to the total income of the assessee. Hence, enhancement u/s 251 (1) (a) of the act is prohibited on the issues which have not at all been considered by the AO during assessment proceedings. This gives the common understanding that the ld CIT (A) cannot enhance income of the assessee on altogether ‘new Source’. Therefore it is clear that Therefore, the CIT(A) is not competent to enhance the assessment taking an income which income was not considered expressly or by necessary implication by the Assessing Officer at all. Such is the mandate of the decisions of various high courts such as in CIT vs. National Company Ltd. (1993) 199 ITR 445 (Cal), Sait Bansilal and Raggisetti Veeranna vs. CIT (1972) 83 ITR 750 (AP), Sterling Construction & Trading Co. vs. ITO (1975) 99 ITR 236 (Kar) and Lokenath Tolaram vs. CIT (1986) 50 CTR (Bom) 237 : (1986) 161 ITR 82 (Bom). Hence issue no 1 I enlisted in para no 13 of the order is decided in favour of the assessee. In view of our decision on issue no (i), issue no (ii) does not survive and issue no (iii) is dealt with separately. In view of this we allow ground no 1,2,3,14,15 and 16 of the appeal of the assessee.” 21. Since, the facts of the instant case are identical to the case

decided by the Co-ordinate Bench of the Tribunal in the case of Hari Mohan

Sharma cited (supra), therefore, respectfully following the same, we hold

that the learned CIT(A) in the instant case was not justified in enhancing

the income of the assessee in the form of new source of income which has

not been considered by the Assessing Officer and thus he had exceeded his

jurisdiction u/s 251(1)(a) of the Act. Accordingly, grounds no. 3, 4 and

22 ITA No.673/Del/2015

additional grounds are allowed.

of the learned CIT(A) in sustaining addition of Rs.14,194/- u/s 36(1)(iii) of

the Act.

invoked provisions of section 36(1)(iii) of the Act and made addition of

Rs.14,194/- being interest @12% per annum for two days on account of

advance of Rs.2,20,00,000/- given to one of its supplier M/s Lakshya

Overseas. We find the that learned CIT(A) sustained the addition made by

the Assessing Officer on the ground that the assessee is not into business

of lending of money. It is the submission of the learned counsel for the

assessee that in view of the decision of Hon’ble Bombay High Court in the

case of Reliance Utilities and Power Ltd. reported in (313 ITR 340)(Bom.)

wherein, it has been held that where an assessee has own funds as well as

borrowed funds, a presumption can be made that the advances for non

business purpose have been made out of own funds and that the borrowed

funds have not been used for the business purpose. According to the

learned counsel for the assessee, since, own capital and free reserves of the

assessee company, which is more than the advance of Rs.2,20,0000/- given

to the supplier M/s Lakshya Overseas for the period of two days, no

disallowance is called for. We find merit in the above arguments of the

learned counsel for the assessee. A perusal of the audited balance sheet,

copy of which is placed at page 18 of the paper book shows that the share

23 ITA No.673/Del/2015

capital and reserves and surplus of the assessee company at the beginning

of the year was Rs.11,93,456.12/- and at the close of the year was

Rs.11,67,33,870/-. Thus, own capital and free reserves of the assessee

company throughout during the year was much more than the interest free

advance of Rs.2,20,00,000/- given to M/s Lakshya Overseas. We,

therefore, respectfully following the decision of the Hon’ble Bombay High

Court in the case or Reliance Utilities and Power Ltd. cited (Supra) hold

that the learned CIT(A) was not justified in sustaining the addition of

Rs.14,194/- made by the Assessing Officer u/s 36(1)(iii) of the Act.

Accordingly, the ground no.5 raised by the assessee is allowed.

for the assessee for which the learned DR has no objection. Accordingly,

ground of appeal no. 6 filed by the assessee is dismissed as not pressed.

CIT(A) in partly sustaining the disallowance of Rs.6,27,165/- out of

addition of 13,27,855/-.

made addition of Rs.13,27,855/- on the ground that the assessee has

undervalued its closing stock. We find that the learned CIT(A) sustained an

amount of Rs.6,27,165/- by observing as under:-

“6.7.2. I find that the Ld. AO had observed that the appellant had issued Gold Bar 995 (72,500 gm) and Gold Bar 999 (14,500 gm) to certain artisans, aggregating to 87,500 gms, having aggregate purchase price of Rs. 10,72,03,710/-. The appellant had paid an amount of Rs.9,17,115/- in respect of the job work charges for finishing Gold Bar

24 ITA No.673/Del/2015

into furnished gold jewellery. However, on return, it had recorded the. value of gold jewellery manufactured at Rs.10,67,92,970/- in its books, which form part of closing stock. Accordingly, difference of Rs.13,27,855/- was held as undervaluation of closing stock by the Ld. AO. 6.8. On perusal of aggregate quantitative details filed by the appellant vide letter dated 10.2.2014,1 find that the appellant had opening stock of finished gold jewellery of Rs.3,28,27,856/- (valued at Rs.1197.78 per gm). It had purchased finished jewellery having worth Rs.57,60,55,957/- (valued at Rs.1149.20 gm.). Further, during the year, the appellant had issued for job work gold bar 995 (weighing 72,500 gm.) (valued at Rs.1232 per gm.) and gold bar (weighing 14,500 gm.) (valued at Rs.1223.25 per gm.) for job work. The aggregate value of such Gold Bar that were given for job work was Rs.10,72,03,710/-. The appellant has paid job work charges of Rs.9,17,115/- to the artisans for the purpose of job work for manufacturing of such jewellery. I find that these Gold Bars were issued to the artisan on different dates starting from 2.4.2008 till 23.2.2009 and after receipt of the finished goods jewellery from such artisan, none of these jewelleries were sold and are included in the closing stock at a value of Rs.10,67,92,970/-. 6.9. The appellant submitted before me that there was no under- valuation in the closing stock and there was only mis-calculation on 2 instances of issue of Gold Bar to one artisan, Mr. Surjeet, in the Bullion register at the time of issue. It was submitted that the same was in the nature of a clerical error. On careful consideration of the above facts and on verification of the computerized stock register produced by the appellant at the time of hearing, I find no merit in the submission made by the appellant on facts. The quantity-wise and value-wise details of purchase, sales, issue of job work and opening and closing stock in respect of Gold Bar 995, Gold Bar 999 and finished Gold jewellery were taken from the stock register of the appellant and examined on an excel sheet prepared at the time of hearing in the presence of the AR of the appellant. The said details are as under:

25 ITA No.673/Del/2015

The above details clearly show that the appellant had valued the finished Gold jewellery, which should have included the cost of the Gold Bar and the job work charges, at below the cost of inputs itself, for example, the actual cost of Gold Bar 995 that were issued for job work was Rs.1232 per grm., while the actual cost of Gold Bar 999 that were issued for job work was Rs.1233.25. However, the appellant has valued finished Gold jewellery made with the help of the said Gold Bar 999 @1231.49 per gm. In addition, value in respect of the job work charges paid should have been included in the valuation of closing stock of finished jewellery. It is thus evident that the appellant had under-valued its closing stock of Gold jewellary accordingly. As the appellant holds closing stock of Gold jewellery of Rs.5,04,49,302/- as on 31.3.2009 while the balance amount of such jewellery has been sold off, the proportionate addition to closing stock in the ratio of 5,04,39,902: Rs.10,67,92,970 of the above total under-valuation of Rs,13,27,855/- is sustained. Accordingly, the addition of Rs.6,27,165/- is upheld. The appellant gets relief of the balance amount. Accordingly, Ground No.6 is partly allowed. Keeping in view the above, I hold that the Ld. AO was justified in making addition on this amount to the income of the appellant to the extent of Rs.6,27,165/- making addition on this amount to the income of the appellant to the extent of Rs.6,27,165/-.

issue which reads as under:-

“6.2. As to the difference in respect of these items, you would kindly notice from the gold bullion account that on 06.03.2009 gold was issued to three job workers vide voucher Nos. 135, 137 and 139. They were issued to job workers Surjit, Mohammed and Suleiman. Due to a clerical error the issue made to Surjit vide Voucher No. 135 was wrongly valued at Rs. 1574/- per gram instead of Rs. 1388/- per gram. As to the other two viz Mohammed and Suleiman, the valuation on that day was correctly done at Rs. 1,388/- per gram. Once again on 09.03.2009 vide voucher Nos. 141, 143 and 145 issues were made to the same three job workers. In this case too, in the case of Surjit the valuation was wrongly done at Rs.l574.74 per gram instead of Rs. 1388/- per gram. These are genuine clerical mistakes. The rates on the relevant dates were as per those taken in the cases of Mohammed and Suleiman. When the ornaments were received back on 09.03.2009 in 11.03.2009, the valuation in all the three cases was done at Rs. 1277/- per gram. In this way you would

26 ITA No.673/Del/2015

kindly notice that due to the error in recording the correct rate against Surjit in the Gold Bullion Account, there is a rate difference of Rs. 186.70 per gram which multiplied by 2200 grams comes to Rs. 4,10,740/-. Added to this the manufacturing expenses of Rs.9,17,115/- the total becomes a sum of Rs. 13,27,855/-, which fhe AO alleges is on account of under-valuafion. There is no such undervaluation. There is only mis-calculation in the two cases of Surjit in the Gold Bullion register at the time of issue. Further there has been a misunderstanding on the part of the AO with regard to making charges. These two wrong additions have culminated in to an addition of Rs. 13,27,855/- which it is prayed, be deleted.” 28. He submitted that the learned CIT(A) has not considered the

submission of the assessee on this issue properly. He submitted that given

an opportunity, the assessee is in a position to substantiate either before

the Assessing Officer or learned CIT(A) that there is no undervaluation of

closing stock. Considering the totality of the facts of the case and in the

interest of justice, we deem it proper to restore this issue to the file of the

Assessing Officer with a direction to give one final opportunity to the

assessee to substantiate its case that there is no undervaluation of closing

stock and decide the issue as per fact and law. We hold and direct

accordingly. Ground No.7 raised by the assessee is allowed for statistical

purpose.

for statistical purpose.

Order was pronounced in the open court on 15.04.2021.

Sd/- Sd/-

(SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi/Dated- 15.04.2021

27 ITA No.673/Del/2015

f{x~{tÜ