DR.S.MAHALAKSHMI,CHENNAI vs. ITO CORPORATE WARD 1(1), CHENNAI

आदेश / O R D E R ITS Nos.1614 to 1622/Chny/2018 :- 2 -: Dr.S.Mahalakshmi &Dr.L.Saravanan

PER GEORGE MATHAN, JUDICIAL MEMBER filed by Dr.S. Mahalakshmi against the common order of Ld.CIT(A)-4,Chennai in 383, 385, 387 & 389/2016-17/A.Ys.2008-09 to 2012-13/CIT(A)-4 dated 15.03.2018 for assessment years 2008-09 to 2012-13.

4.1 It was a submission that Grounds Nos.6 to 8 in the appeals in to 1616/Chny/2018 are against the action of the Ld.CIT(A) in making enhancement addition in respect of cash payments made for purchase of medicines for invoking the provisions of the section 40A(3) of the Act.

4.2 It was a submission that Grounds Nos.6 to 8 in the appeals in to 1622/Chny/2018 are against the action of the Ld.CIT(A) in making enhancement resulting in addition in respect of cash deposits in the company’s account, which have been made in the name of assessee by not accepting the source of income as explained by the assessee.

4.3 It was further submission that Ground No.7 in all the appeals are against the enhancement per se as made by Ld.CIT(A).

5. In respect of Grounds Nos.2 to 5 in all these appeals, it was submitted by ld.A.R that in the course of assessment it was noticed by the ld. Assessing Officer that the assessee and his wife had drawn ITS Nos.1614 to 1622/Chny/2018 :- 4 -: Dr.S.Mahalakshmi &Dr.L.Saravanan funds from the company and had purchased a landed property in their joint names and constructed a building and had leased out the said building to the company for the purpose of running a hospital. Ld.A.R drew our attention to page No.3 of the assessment order for assessment year 2008-09 wherein the details of the amounts drawn from the company through the current accounts and the accumulated profits of the company, M/s.Abhijay Hospital Pvt. Ltd., for the financial years 2007-08 to 2011-12 has been extracted in a chart form, which is as follows:-

F.Y Reserves & Dr.L.Saravanan Dr.S.Mahalakshmi Surplus Drawal deposits Drawal deposits 2007-08 18,56,453 17,37,957 22,22,377 14,48,893 18,75,312 2008-09 31,61,657 55,24,270 65,24,482 25,62,620 35,56,134 2009-10 60,26,670 4,57,89,271 4,08,21,080 1,35,37,844 1,15,33,972 2010-11 1,03,35,401 2,46,58,065 2,12,06,746 51,08,161 2011-12 1,10,57,253 3,20,62,648 1,88,16,862 1,45,40,542 35,99,514 It was a submission that ld. Assessing Officer held that the assessee had drawn funds from the company, and therefore, held that there was violation of provisions of the section 2(22)(e) of the Act and the Assessing Officer brought to tax the sums drawn as dividend income.

On appeal, Ld.CIT(A) had without considering the explanation of the assessee that the drawings was in the current account and that it was a current account transaction, upheld the order of Assessing Officer.

ITS Nos.1614 to 1622/Chny/2018 :- 5 -: Dr.S.Mahalakshmi &Dr.L.Saravanan It was a submission that the issue was now squarely covered by the decision of the Co-ordinate Bench of the Tribunal in the case of M/s.CAI Industries P Ltd., Vs. The DCIT in ITA No.356/Mds./2017 vide order dated 21.09.2017 wherein it has been held as follows:-

“5.5 We have heard the rival submissions and carefully perused the materials on record. From the facts of the case, it is apparent that both the assessee and its sister company are dealers in automobiles of different nature and engaged in business with close proximity. The combined endurance to market the products in the same vicinity results in close commercial ties between the assessee company and its sister company. As a result both the companies were maintaining current accounts in order to achieve their respective business targets. Therefore it cannot be said that, the interdependence for meeting several business commitments of the assessee and its sister concerns does not result in commercial nexus between the assessee company and its sister concerns. As pointed out by the Ld.AR some expenses were met by both the companies which were reimbursed by either company. These facts are not disputed. Moreover at the close of the financial year the current account maintained by the assessee with its sister concern showed nil balance. In this situation, we are of the view that the decision of the Jurisdictional High Court in the case CIT vs. C.Subba Reddy would be most appropriate, wherein it was held that “when no benefit has accrued to assessee and credit was a result of business transaction and was neither in nature of loan or deposit hence, provisions of Sections 2(22)(e) of the Act do not stand attracted.” Further in the case of the assessee the circular No.19/2017 supra is also very relevant. Considering these aspects of the case, we are of the considered view that provisions of Section 2(22)(e) of the Act will not be applicable in the case of the assessee. Therefore we hereby direct the Ld.AO to delete the addition made by invoking the provisions of Section 2(22)(e) of the Act.” Ld.A.R also placed reliance in the decision of the jurisdictional High Court in the case of CIT Vs. C.Subba Reddy, reported in (2017) 77 Taxmann.com 320(Madras), which has been referred to in the decision ITS Nos.1614 to 1622/Chny/2018 :- 6 -: Dr.S.Mahalakshmi &Dr.L.Saravanan of the Co-ordinate Bench of the Tribunal in the case of M/s.CAI Industries P Ltd., referred to supra.

The purpose of taking of the money was also for the purpose of business of the company, which is also not disputed. A perusal of the decision of the jurisdictional High Court in the case of CIT Vs.C.Subba Reddy referred to supra which is in the year 2017 clearly shows that ITS Nos.1614 to 1622/Chny/2018 :- 7 -: Dr.S.Mahalakshmi &Dr.L.Saravanan where the amount has been given by the company as part of the contractual obligation, no deemed divided can be assessed. The Co-ordinate Bench of this Tribunal in the case of M/s.CAI Industries P Ltd referred to supra followed decision of has the jurisdictional High Court in the case of CIT Vs. C.Subba Reddy (supra), as also CBDT Circular No.19/2017 held that on account of commercial expediency transactions in the current account should not be treated as giving rise to deemed dividend. In the circumstances, respectfully following the decision of the jurisdictional High Court in the case of CIT Vs. C.Subba Reddy referred to supra, as also the principle laid down by the Co- ordinate Bench of this Tribunal in the case of M/s.CAI Industries P Ltd referred to supra, we are of the view that the addition as made by the ld. Assessing Officer and confirmed by the Ld.CIT(A) is unsustainable and therefore, stands deleted.

8. In respect of the appeals of Dr.L.Saravanan in to 1622/2018 in respect of Grounds Nos.6 & 8 representing the cash deposits in the company’s account, the source for which has been treated as unexplained by the Ld.CIT(A) in the enhancement proceedings, it was submitted by the ld.A.R that at the outset the enhancement as done by the Ld.CIT(A) was erroneous.

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9.1 It was a submission that in respect of merits, the ld.A.R had no objection, if the issues of the sources for the cash deposits was restored to the file of the AO for re-adjudication.

9.2 In respect of the appeals of Dr.S.Mahalakshmi in to 1616/2018 in respect of Ground Nos. 6 & 8, It was a submission that the issue was in respect of cash payments in excess of `20,000/- for purchase of medicine by invoking the provisions of the section 40A(3) of the Act. It was a submission that out of five transactions, one transaction was by cash. It was a submission that it was not, as if all the purchases has been only as cash transactions.

It was only on commercial expediency, the assessee had paid the cash for the purchase of medicines for the hospital. It was a submission that the proviso after Section 40A(3A), which also applied to Sec.40A(3) provided for no disallowance to be made if the payment was made for consideration of business expediency and other relevant factors. It was a submission that the fact that the cash payments had to be made is an undisputed fact and that the payment was made for the purchase of medicine was also undisputed fact and this was also shown and proved before the Ld.CIT(A) as it is evident from the page 21 of the ITS Nos.1614 to 1622/Chny/2018 :- 9 -: Dr.S.Mahalakshmi &Dr.L.Saravanan order of the CIT(Appeals). The payments had been made to M/s.Abhijay Hospital Pvt. Ltd., which was a partnership firm between assessee and her spouse. The said firm was incurring losses and subsequently had also closed down. It was a submission that as the said firm was incurring losses so as to avoid any locked down of the assessee’s funds by the banks of the partnership firm, the payments had been made by cash for the purchase of the medicines and the genuineness of the transaction was never disputed. It was a submission that in the circumstances, the enhancement made by the Ld.CIT(A) by invoking the provisions of the section 40A(3) of the Act in respect of cash payments made to M/s.Abhijay Hospital Pvt. Ltd., on account of commercial expediency for purchasing the medicines was liable to be deleted.

10.1 In respect of issue of the addition representing enhancement in the case of Dr.L.Sarvanan by invoking the provisions of the section 40A(3) of the Act, the same was liable to be upheld.

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11.1 In regard to the enhancement done by the Ld.CIT(A) in the case of Dr.S.Mahalakshmi by inv0king the provisions of the section 40A(3) in respect of the cash payments to the partnership firm, M/s.Abhijay Pharma Medical Technologies, wherein the assessee is also a partner, as it is noted that the cash payments have been made on account of commercial expediency, in view of the proviso after Sec.40A(3A) which is also applicable to Sec.40A(3), the disallowance as made by the Ld.CIT(A) is deleted.

12. In respect of common issue being Ground No.7 in all the appeals against the action of enhancement done by the Ld.CIT(A), it was submitted by ld.A.R that the Ld.CIT(A) has taken recourse to enhancement by taking up a new source which was not permissible.

Ld.A.R placed reliance on the decision of the Hon’ble Supreme Court in the case CIT Vs. Shapoorji Pallonji Mistry reported in 44 ITR 891(SC) wherein it has been held that it would not be open to the AAC to ITS Nos.1614 to 1622/Chny/2018 :- 11 -: Dr.S.Mahalakshmi &Dr.L.Saravanan introduce into assessment new sources as his power of enhancement is restricted only to incomes which were subject matter of consideration for the purpose of assessment by the Income Tax officer.

‘1. It is hereby submitted that, in the factual matrix of this case the CIT(A) has powers to enhance the assessment, based on the following decisions: 2. Reliance is placed on the decision rendered in the case of Ansadldo_Enegergia Spa v. ADIT (International; Taxation), (115 TTJ 942 dated Dated May 11, 2007), by the Hon’ble ITAT Chennai, wherein it was held as follows:

“... The powers of the CIT A) are co-terminous with those of the AO. He has plenary powers in disposing of an appeal. He can do what the AO could do and can also direct the latter to do what the latter failed to do... The relevant extract of this order is reproduced as below:

ITS Nos.1614 to 1622/Chny/2018 :- 12 -: Dr.S.Mahalakshmi &Dr.L.Saravanan “... 7.. Learned Departmental Representative submitted that the powers of CIT(A) are co-terminous with that of AO. As such he can exercise all the powers of AO. Reference was made to various precedents. In the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) it was held that CIT(A) can do what the ITO can do. He can also direct him to do what he failed to do. Learned Departmental Representative submitted that on this factual backdrop the decisions rendered in the cases of CIT v. Shapoorji Pallonji Mistiy (supra), CIT v. Rai Bahadur Hard utroy Motilal Chamaria (supra) and CIT v. Nirbheram Daluram (supra) are to be considered. The first two decisions were rendered under the 1922 Act whereas the case of Nirbheram Daluram (supra) was rendered under the 1961 Act in which an Explanation was appended to s.

8. It was further submitted that CIT(A) did not add any income from totally new source. The dictionary meaning of the term “source” is “place of origin or place of issue”. In this case the source of income was contract with Neyveli Lignite Corporation (in short ‘NLC9. Assessee did offer income from Contract II and part of Contract I. Details regarding Contract III and Contract IV were also available before the AO. CIT(A) has only added income from Contract III and Contract IV as well as part of income from Contract I.

9. After considering the various details and submissions we find that Contracts I, II, Ill and IV were treated as part of a single composite contract, there was no new source of income which was considered by the CIT(A). Hon’ble Supreme Court in the case of CIT v. Sun Engineering Works (P) Ltd. [1992] 107 CTR (SC) 209 [1992] 198 ITR 297 (SC) has held that once an assessment is reopened, the entire proceedings are open before the AO and he can bring to tax any income which escaped assessment. Therefore AO as well as CIT(A) need not restrict themselves to the issue on which the assessment was reopened.

10. The powers of the CIT(A) are co-terminous with those of the AO. He has plenary powers in disposing of an appeal. He can do what the AO could do and can also direct the latter to do what the latter failed to do. Appeal is merely the continuation of the original proceedings and unless some fetters are placed upon the powers of the CIT(A), he can exercise the same powers as that of AO. There appears to be no reason as to why CIT(A) cannot modify the assessment order when such powers are expressly provided to him by the statute.

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11. It is the duty of the CIT(A) to consider a matter placed before him in all its aspects. This is all the more so when the AC had failed to consider the matter in detail or in a proper manner. In the present case the issue was with regard to the taxability of income arising out of the contract with NLC. Assessee did offer income from Contract II and part of Contract I. Details in regard to Contracts III and IV were also available before the AC. CIT(A) has only added the income from Contract III and Contract IV and part of income from Contract I.

12. Hon’ble apex Court in the case of CIT v. Nirbheram Daluram (supra) made it clear that the powers of first appellate authority under s. 251 of the Act cannot be construed to be confined to the matters considered by the AO only. First appellate authority is entitled to direct additions in respect of items of income not considered by the AC. In the cases of Rai Bahadur Hardutroy Motilal Chamaria (supra) and Shapoorji Pallonji (supra), decisions were rendered under the 1922 Act. In the case of Kanpur Coal Syndicate (supra), apex Court made it very clear that CIT(A) can do what the ITO can do. We therefore respectfully following the decisions of the Hon’ble Supreme Court in Nirbheram Daluram (supra) and Kanpur Coal Syndicate (Supra), decide this issue in favour of the Revenue and against the Assessee. 3. This decision of the Hon’ble ITAT Chennai was not contested by the Assessee before the Hon’ble Madras High. This can be seen from the relevant Decision of the Hon’ble Madras High court in the same case, reported in 178 TrnZJ2OO9) . Thus it is submitted that, this ion of the Hon’ble Chennal ITAT, regarding the powers of the CIT(A), u/s 251 has become final, and therefore the same may be followed in this present appeal also. 4. Further reliance is placed on the decision rendered in the case of Megatrends Inc v. CIT, Chennai, (74 Taxmann 197, Dated August 22, 2016), by the Hon’ble Madras High Court, where it was held as follows:

“... courts have consistently held that the power of the first appellate authority are coterminous with that of the Assessing Officer and that the appellate authority can do what the Assessing Officer ought to have done and also direct the latter to do what he has failed...” The relevant extract of this order is reproduced as below:

4.1. Thus it is submitted that, this latest decision of the jurisdictional Madras High Court , upholding the powers of the CIT(A), u/s 251 to enhance the assessment , may be followed in this present appeal also.

5. In the aforesaid decision the Honble Madras high Court in turn has relied on the Full bench decision of the Hon’ble Madras High rendered in the case of Sate of Tamilnadu V. Arulmurugan & Co {(1982) 51 STC 381}. 5.1. In this decision based on pan materia provision in the Tmailnadu General Sales tax Act 1959 dealing with the powers of the appellate authority to issue notice for enhancement, the Hon’ble Full Bench of the Madras High court has held that “.. the power of the appellate authority concerning an assessment under appeal is no different, and not less wide, than the power of the assessing authority to make the assessment in the first instance. It follows, therefore, that whatever discretion is conferred on the assessing authority for purposes of assessment must so be regarded, as a matter of statutory construction, to have been conferred on the appellate authority even without the concerned statutory provision expressly naming the appellate authority in that behalf.” The relevant extract of this order is reproduced as below:

“...

21. Having regard to the considerations which we have set out in the foregoing paragraphs, we must uphold the decision of the Tribunal in both the cases. We hold that the Tribunal has the power to receive C forms at the time of the appeal, for sufficient cause. The Tribunal can then proceed to the next step of applying the concessional rate of tax to the turnover covered by the C forms. Or, the Tribunal may remand the case to the Appellate Assistant Commissioner. The remand may be for the specific purpose of going into the question of sufficient cause. The remand may also be loaded with a finding by the Tribunal that there has been sufficient cause, leaving the scrutiny of the C forms alone to be undertaken on remand. The Tribunal may, if satisfied about the sufficient cause set aside even the assessment order, and direct the assessing authority to re-do the assessment, in which event there would be no occasion for the assessing authority to go into any question of “delay” in filing the C forms, for with the setting aside of the assessment the whole thing is once again at large. It is needless to add that whatever has been stated by us as respects the Tribunal’s power and the modes of its exercise apply, mutatis mutandis, to the Appellate Assistant Commissioner in like situations occurring in the appeals before him... -----An appeal is a continuation of the process of assessment, and an assessment is but another name for adjustment of the tax liability to accord with the taxable event in the particular tax- payer’s case. There can be no analogy or parallel between a tax appeal and an appeal, say, in civil cases. A civil appeal, like a law suit in the court of first instance out of which it arises, is really and truly an adversary proceeding, that is to say, a controversy or tussle over mutual rights and obligations between contesting litigants ranged against each other as opponents. A tax appeal is quite different. Even as the assessing authority is not the tax-payer’s “opponent”, in the strictly procedural sense of the term, so too the appellate authority sitting in appeal over the assessing authority’s order of assessment is not strictly an arbitral tribunal deciding a contested issue between two litigants ranged on opposite sides. In a tax appeal, the appellate authority is very much committed to the assessment process. The appellate authority can itself enter the arena of assessment, either by pursuing further investigation, or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the tax-payer’s appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special ITS Nos.1614 to 1622/Chny/2018 :- 17 -: Dr.S.Mahalakshmi &Dr.L.Saravanan and exceptional attributes of the jurisdiction of a tax appellate authority is no different, functionally and substantially, from the assessing authority itself. This position has been well brought out in more than one decision of the Supreme Court (Para 15)...”

5.2. From the above , it is here by submitted that these reasoning laid down by the Full Bench decisions of the Jurisdictional Madras High Court , (as relied in the Income tax decision by the jurisdictional Madras high Court in the case of Mega Trends Inc (Supra)), may be followed in the the Hon’ble Chennal ITAT.

6. It is further submitted that the above reasoning rendered by the full bench of the Madras High Court has been upheld in by the Hon’ble Suprerñe Court in the case State of Andhra Pradesh v. Hyderabad Asbestos Cement Production Ltd, Dated April 28, 1994, {(1994) 1994 Taxmann.com 361 (SC) (para 16)}.

7. It is hereby submitted that, similar view has been held by the three-Judge bench of the Hon’ble Supreme Court in the case of CIT v. Kanpur Coal syndicate [1964] 53 ITR 225. In this case the scope of section 31(3)(a) of the Indian Income-tax Act, 1922 [which was almost identical to section 251(1)(a) of the 1961 Act] was considered and it was held that powers of The CIT (A) is coterminous with that of the AO.

7.1. The relevant extract of this decision is reproduced as below: “... If an appeal lies, section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under section 31(3)(a), in disposing of such an appeal, the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income-tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is coterminous with that of the Income- tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do’.

“….The above observations are squarely applicable in the interpretation of section 251(1)(a)of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is co-terminous with that of the Income-tax Officer, and if that is so, ITS Nos.1614 to 1622/Chny/2018 :- 18 -: Dr.S.Mahalakshmi &Dr.L.Saravanan there appears to be no reason as to 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 to this view as the Act does not place any restriction or limitation on the exercise of 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. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. . .

8.1. Thus submitted that , two larger bench of the Supreme Court has held that the powers of CIT(A) is coterminous with that of the AO.

9. These decision rendered by the Supreme Court has been considered again by the supreme court in the case of CIT v. Nirbheram Deluram [(1991) 224 ITR 610 (SC)], and the Apex court has held again that , CIT(A) has powers to decide and enhance on the matters, which has not been considered by the ITO.

The relevant extract of this order is reproduced as below:

At the instance of the revenue, the Tribunal was directed by the Madhya Pradesh High Court to refer the following questions of law for opinion: “1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting a sum of Rs.2,30,000 freshly added by the Appellate Assistant Commissioner? 2. Whether the sum of Rs.2,30,000 was added by the Appellate Assistant Commissioner on new sources of income of items not considered by the Income-tax Officer from the point of view of assessability? 3. Whether the Appellate Assistant Commissioner had no jurisdiction or power to add the sum of Rs. 2,30,000 in the facts and circumstances in which he has added the same ?“ (Para) 4. Having regard to the decision in Jute Corpn. of India Ltd. ‘s case (supra),it must be held that the High Court was in error in holding that the appellate power conferred on the AAC under section 251 was confined to the matter which had been considered by the ITO and the AAC exceeded his jurisdiction in making an addition of Rs. 2,30,000 on the basis of the other 10 items of ITS Nos.1614 to 1622/Chny/2018 :- 19 -: Dr.S.Mahalakshmi &Dr.L.Saravanan hundis which had not been explained by the assessee. This means that even if question No. 2 is answered in the affirmative, question Nos. I and 3 must be answered in the negative. The appeal is, therefore, allowed, the impugned judgment of the High Court insofar as it relates to question Nos. 1 and 3, is set aside and the said questions are answered in the negative, i.e., in favour of the revenue and against the assessee. No order as to costs.”

9.1. Thus it is submitted that this latest decision of the supreme court , which has held that the powers of the CIT (A) is co-terminous with that of the AC, may be followed in the present appeal before the Hon’ble ITAT, Chennai.

10. The Hon’ble ITAT, Hyderabad in it’s very recent order in the case of Fincity Investments (P.) ltd. V. ACIT, Hyde, [2018] 96 Taxmann. Corn 616, followed these afore referred supreme court decisions, and has held that CIT(A) has powers to enhance on issues not considered by the AO.

The relevant extract of this order is reproduced as below: “... (Para) 11.1 Respectfully following the same, we are of the opinion that Ld. CIT(A) has jurisdiction to consider the loss claimed of the assessee, which AC has not examined, as he has powers to enhance also given to him u/s.

251. The provisions of Section 251(1)(a) empowers the CIT in an appeal against an order of assessment to confirm, reduce, enhance or annul the assessment. Thus, since the CIT(A) has not un- earthed a new source of income, but only has gone by the annual report! statements enclosed to the return in which assessee has claimed trading loss to set-off to other incomes, we are of the opinion that CIT(A) has power to enhance and accordingly the contentions of assessee on this issue are rejected...”

11. Submission regarding the assessee reliance on the assessee, rendered by the Hon’ble Keral High Court: 11.1. In this case under appeal, the AC had assessed the deemed dividend u/s 2 (22) (e). The appeallent assesee has produced the relevent account reflecting the finacial transaction between him and the company, before the CIT(A) and sought that if at all the Deemed divident to assessed, it should be on the net balance outstanding as on the end of the year, as the assessee had repaid to loan taken, back to the company. 11.2. In this regard the CIT(A) had sought to verify the correctness of this submission of the assessee, the CIT(A) had sought the details of the source for the said repayments. The assessee could not produce the same , hence it lead to the said enhancement Thus it is found that the enhancemnet has been made, based on the same details filed by the assessee, and not form outside his return of income. 11.3. On the other hand in the case law relied by the assessee, rendered by the Hon’ble Keral High Court in the case of CIT v. B. P. Sherafudin [(2017)

ITS Nos.1614 to 1622/Chny/2018 :- 20 -: Dr.S.Mahalakshmi &Dr.L.Saravanan ((87 Taxmann.com 330)], the enhancement had been made by the CIT(A), by assessing the salary income of the assessee, earned by him from abroad sources, which was not originally offered to tax , in his return orginally filed, and based on which the appeal procedings have originated. 11.4. In this case the assessee is not found to have got an another salary income from an another hopital or business in come from running medical institute or professional income from an another clinic , which were hitherto not offered to tax. Had such income was brought to tax , by the CIT(A) , then it can be said that income an another new source , has been enhanced by the CIT(A). But as submitted earlier that is not the case, in this enhancement made by the CIT(A). 11.5. Thus it is submitted that the decisions relied by the assessee are not applicable to this case under appeal.

12. Based on these submissions, the Hon’ble ITAT, may kindly consider to hold that the CIT(A) has the powers to enhance the assessment in this case.’

“Powers of the Commissioner (Appeals)

3251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.”

Section 251(1)(a) is a provision for enhancement. Section 251(2) is a provision under which it is made compulsory for Ld.CIT(A) to provide ITS Nos.1614 to 1622/Chny/2018 :- 24 -: Dr.S.Mahalakshmi &Dr.L.Saravanan reasonable opportunity of showing cause in respect of enhancement or reduction of refunds. The Explanation to Sec.251 is the procedure laid down for adjudicating the issues by the Ld.CIT(A) when such issues have not been raised before the ld.CIT(A) by the assessee. Thus, the explanation also acts as a curtailment on the issues which could be gone into by the ld.CIT(A).

The methods being, re-opening u/s.148 of the Act, such powers being available to the ld. Assessing Officer; the provisions of the section 263 providing for revision of an order, which is erroneous or prejudicial to the interests of the Revenue, this power being with the Commissioner of Income Tax. Here, what needs to be clearly kept in mind is that the provisions of the section 148 of the Act is controlled by a particular limitations provided u/s.153 of the Act, the limitations u/s.263 of the Act is provided in the provisions of the section 263 itself.

The Hon’ble Supreme Court went further to say “He can do what the Income Tax officer can do and also direct him to do what he has not done”. This shows that the Appellate Authority can look into only such things that the assessing authority has opened. It must be appreciated that for the purpose of making an inquiry before assessment, the notice u/s.142(1) is to be issued only by the Assessing Officer and none else. Similarly, Section 143(3) is very specific to say “after hearing such evidences as the assessee may produce and such other evidences as the Assessing Authority may require on specified points,”.

ITS Nos.1614 to 1622/Chny/2018 :- 28 -: Dr.S.Mahalakshmi &Dr.L.Saravanan These powers that are specific to the Assessing Authority cannot be usurped by any authority unless they take on themselves the status of the assessing authority, in which case, the limitation provided in section 153 would also become operational. This however, does not mean that the ld.CIT(A) is precluded from directing the assessing authority to verify or look into specific issues, subject to the limitations and permissibility under law. The Hon’ble Delhi High Court in Full Bench in the case of CIT Vs.Sardari Lal & CO., reported in [2001] 251 ITR 864(Delhi), after considering the implication of both decisions of the Hon’ble Supreme Court in the cases of Shappori Pallonji Mistry(supra) and Nirbheram Daluram(supra) had held as under:-

“8. ----------, the inevitable conclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the AO, the jurisdiction to deal with the same in appropriate cases may be dealt with under s. 147/148 of the Act and s. 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 first appellate authority.- ------“

In the above circumstances, respectfully following the principles laid down by the Hon’ble Bull Bench of Delhi High Court, it is held that the enhancement as has been done by the Ld.CIT(A) in the case of the appeals herein being in respect of new source of income, which has not been considered by the ld. Assessing Officer in course of ITS Nos.1614 to 1622/Chny/2018 :- 29 -: Dr.S.Mahalakshmi &Dr.L.Saravanan assessment proceedings, being the proceedings in which the order appealed against before the ld.CIT(A) was passed, the enhancement as done by the ld.CIT(A) stands quashed.

Order pronounced in the open court on 29th October, 2018, at Chennai.