ANJU MANISH GANGAR,NAVI MUMBAI vs. ITO WD 22(3)(1), NAVI MUMBAI

The assessee has raised the following Grounds of appeal:

The order passed by the learned C.I.T. (A) is bad in law.”

Before us, the grievance articulated by the learned representative is that the CIT(A) ought to have confined himself to decide the validity of the addition in the instant assessment year and could not have directed the Assessing Officer to include such income for taxation in A.Y. 2008-09, which was not before him. For the said proposition reliance has been placed on various decisions, inter alia, Mathurdas B Mohta vs. CIT (1965) 56 ITR 269 (Bom); Ivan Singh vs. ACIT, order dated 17.05.2013 in for AY 2008-09; AICT vs. Ivan Singh in Tax Appeal 28 of 2013 (Bom); ITO vs. Murlidhar Bhagwandas (1964) 52 ITR 335 (SC).

On the other hand, on this aspect, learned DR appearing for the Revenue has defended the decision of the CIT(A) by placing reliance thereon and contended that assessee had herself admitted that the investment belonged to an earlier year and since it was unexplained, no mistake was made by the CIT(A) in directing the assessment of such income in the relevant year.

We have carefully considered the rival submissions. The dispute before us lies in narrow compass in as much as whether the CIT(A) was competent to direct that a particular income was assessable in an assessment year which was not before him. Pertinently, in the instant case, the assessment which had come up for challenge before the CIT(A) was for A.Y. 2009-10 in which the Assessing Officer has sought to tax a sum of ` 36,40,000/- as unexplained investment in a transaction of immovable property reported as per AIR information. Apart from other defences, one of the points raised by the assessee before the CIT(A) was that even if the investment was to be treated as unexplained, the year of taxability was not correct and, therefore, no addition was maintainable in this year. The assessee supported this proposition by pointing out that the investment, as being reported in the AIR, was indeed in the earlier assessment year corresponding to the date of a purported date of acquisition i.e. 31.01.2008. Ostensibly, the issue before the CIT(A) was as to whether the said unexplained investment could be taxed in the instant assessment year, which covers the previous year from 01.04.2008 to 31.03.2009. The CIT(A) took cognizance of the aforesaid fact situation and found it fit to set aside the action of the Assessing Officer in assessing the same in the instant year. However, he sought to modify the assessment by directing that said income be included for assessment in A.Y. 2008-09, a year which was not before him. The controversy is directly settled by the Hon’ble Supreme Court in the case of ITO vs. Murlidhar Bhagwandas (52 ITR 335), which lays down a principle that the jurisdiction of the CIT(A) is confined to the assessment order for the particular year that was under appeal before him. The CIT(A) is competent to issue directions which are necessary to dispose of the appeal in respect of the year of assessment which is before him and it could not extend to any other assessment year. The learned representative for the assessee pointed out that similar position has been upheld by the Hon’ble Bombay High Court also in the case of Mathurdas B Mohta (supra). In the case before the Hon’ble Bombay High Court, the issue was relating to capital gains arising on sale of a textile mill on 25.10.1946. The Assessing Officer included the capital gains in the total income of the assessee for A.Y. 1947-48 and the Appellate Commissioner while dealing with assessee’s appeal for A.Y. 1947-48 held that the capital gain was not assessable in the A.Y. 1947-48. After recording so, the Appellate Commissioner gave a direction that the said capital gain was taxable in A.Y. 1948-49. The direction so issued by the Commissioner was held to be untenable as according to the Hon’ble Bombay High Court, the jurisdiction of the Appellate Commissioner was strictly confined to the assessment of the particular year of appeal before him. The facts in the instant case stand on similar footing in as much as it was competent for the CIT(A) to decide whether the impugned amount of investment was assessable in the instant year or not; but, it was not within his jurisdiction to direct in the instant appeal the appropriate year in which the income is liable to be taxed. Therefore, considering the ratio of Hon’ble Supreme Court in the case of Murlidhar Bhagwandas (supra), which has been further enumerated by Hon’ble Bombay High Court in the case of Mathurdas B Mohta (supra), we hold that the direction of the Commissioner saying that the amount of ` 36,40,000/- is assessable in A.Y. 2008-09 is misconceived and beyond his jurisdiction. We hold so. Thus, on this aspect the assessee succeeds.

The only other issue raised by the assessee is against the action of the Assessing Officer in making an adhoc disallowance of 25% out of various expenses, which resulted in disallowance of ` 3,33,295/-. On this aspect the only plea of the learned representative is that the disallowance made @25% is excessive and that restricting the disallowance to 10% would be sufficient. We find that the disallowance made by the Assessing Officer is on a purely adhoc basis, ostensibly, noticing the absence of the assessee during the assessment proceedings. Be that as it may and in the absence of any adverse history on this aspect, we direct the Assessing Officer to restrict the disallowance to 10% of the expenses and allow necessary relief accordingly. Thus, on this aspect assessee partly succeeds.

In the result, assessee’s appeal is partly allowed, as above.