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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SH. BHAVNESH SAINI & SH. L. P. SAHU
This appeal by the assessee has been directed against the order of Ld. CIT(Appeals)-XXVIII, New Delhi dated 12.09.2014 for A. Y. 2010-11.
We have heard the Ld. Representatives of both the parties and perused the material available on record.
On ground No.1, the assessee challenged the ad-hoc disallowance of Rs.1,50,000/- out of labour and contract staff expenses.
The Assessing Officer noted that assessee has claimed labour charges at Rs.41,41,417/- which are paid to workers and labourers. The assessee was asked to furnish the details of work and labour employed for the project under taken alongwith sites. The assessee filed the details in respect of sub contractor / wages expenses for few sites for verifications. The Assessing Officer noted that these wages muster shows that all these vouchers are self generated and payments are made in cash. The vouchers also have discrepancies like non availability of names, address, signature and nature of work etc. The expenses were, therefore, not verifiable. The Assessing Officer accordingly made disallowance of Rs.1,50,000/- to cover up the possibility of leakages of the revenue. The Ld. CIT (A) confirmed the addition.
After considering the rival submissions, we are of the view that the addition is wholly unjustified. The Assessing Officer noted that the turnover, GP and NP is better in assessment year under appeal as compared to preceding years, therefore, financial results were accepted by the Assessing Officer. Thus, there were no reasons for the assessee to inflate the expenses further. Thus, there is no possibility of leakage of revenue as noted by Assessing Officer. No such disallowance have been made in earlier and subsequent assessment years. Rule of consistency should be followed by authorities below. The Assessing Officer has not given any specific details and the amount for which there were no names and address or work assigned have been mentioned in the vouchers. In the absence of any details it appears to be ad-hoc addition. Further nature of business of the assessee i.e. electric contractor shows that assessee has employer labour from unorganised sector and generally cash payments are made to the labour for completion of the work, therefore, reasons given by the Assessing Officer are not satisfactory to make ad-hoc disallowance. We accordingly set aside the orders of the authorities below and delete the addition. This ground is allowed.
On ground No.2, the assessee challenged the addition of Rs. 43,94,594/- on account of commission expenses as enhance by the Ld. CIT (Appeals). It may be noted here that the Assessing Officer while completing the assessment made disallowance of expenses of Rs.1,50,000/- out of labour expenses which have been deleted by us above. The Assessing Officer further made addition of Rs.22,944/- under the head income from house property. No other addition has been made by the Assessing Officer. The Assessing officer accepted final results of the assessee because the GP and NP were better as compared to the earlier years.
The Ld. CIT (Appeals) at the appellate stage asked the assessee to file details of commission expenses. The assessee filed complete details of the commission expenses which are noted for the appellate order. The Ld. CIT (A) noted that the perusal of the commission account showed that the purpose for which commission expenses has been paid and the genuineness of the commission payment was not apparent specially when the assessee is a contractor. The Ld. CIT (Appeals) asked for the copy of the bills of the commission payment, copy of the account of the parties to whom commission have been paid, the nature of work performed by each party, evidence of payment in bank account and details of creditors for expenses. The Ld. CIT(Appeals) noted that assessee had not filed the requisite details, therefore, enhancement notice was given to assessee as to why in the absence of details of the commission expenses, the entire amount should not be enhanced in the appellate order. The Ld. CIT (A) in the absence of details of commission expenses enhance the addition by Rs.43,94,545/-. The appeal was accordingly dismissed by making the above enhancement.
The Ld. Counsel for the assessee submitted that the enhancement of income by Ld. CIT (Appeals) is illegal and invalid and beyond the powers of the CIT (Appeals). The Assessing Officer has not made any addition on account of commission payment. The Ld. CIT (Appeals) cannot make enhancement on the issue which does not arise out of the order of the assessment. According to section 251 (2) the Ld. CIT (Appeals) cannot enhance the assessment on the matter which is not arising out of the assessment proceedings. He has submitted that issue is covered in favour of the assessee by judgment of Hon’ble Bombay High Court in case of Shapoor Ji Pallonji Mistry Vs. CIT 34 ITR 342 and judgment of full bench of Hon’ble Delhi High Court in the case of CIT Vs. Sardari Lal and Co. reported in 251 ITR 864. He has also submitted that similar issue have been considered and decided by ITAT Delhi Bench in the case Bikram Singh Vs. DCIT reported in 82 taxmann.com 230 in which above judgments have been considered and the Tribunal in para 11 held as under :-
We have perused all the records and heard both the counsels, it is pertinent to know that Assessing Officer has not dealt the reply and the enclosures/ documents given on the date of assessment order i.e. 19/11/2011, the same was not testified before the CIT(A). The CIT(A) should have taken cognizance of all those records and the letters. This shows that the CIT (A) has totally ignored this letter along with the enclosures/ documents and passed the order accordingly which is not tenable under the law. The appropriate opportunity was not given to the assessee. 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 income of the assessee 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 V. CIT [1958] 34 ITR 342 (Bom) (confirmed by the Apex Court in CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (Hon'ble Supreme Court) 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 Sardari Lal & Co. (supra) 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.
The Ld. Counsel for the assessee further submitted that the assessee filed details of commission paid on which TDS was also deducted and TDS certificate have been issued. Therefore, the addition is unjustified.
On the other hand DR heavily relied on the orders of the authorities below.
After considering the rival submissions, we are of the view that addition made by enhancement of commission expenses is wholly unjustified. In this case the Assessing Officer did not made disallowance out of commission expenses. The Ld. CIT (Appeals) has taken up the issue of commission expenses suo-moto in the appellate proceedings, therefore, the issue of commission did not arises out of the assessment proceedings.
It is well settled law that Ld. CIT (A) was not empowered to enhance an income which is not matter of assessment. The issue is covered by aforesaid judgments relied upon by Ld. counsel for the assessee. It is, therefore, clear that Ld. 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. Thus, the order of the CIT(A) cannot be sustained in law. This alone is sufficient to delete the entire addition. Further we may note that in A. Y. 2011-12, ITAT Delhi Bench in the case of same assessee in has deleted the similar addition vide order of the even date. There is no basis to make addition.
Considering the above discussions, we set aside the order of the Ld. CIT (A) and delete the addition of Rs.43,94,545/-. This ground is allowed.
In the result the appeal of the assessee is allowed.
Pronounced in the open court on 01.08.2018.