CIT (A) cannot delve on any issue not arising from assessment order

United Provinces Sugar Company Ltd Vs ITO (ITAT Kolkata)

A perusal of the propositions of law laid down in all these case-law, takes us to the conclusion that the ld. CIT(A) cannot touch or delve on any issue which does not arise from the order of assessment and which was outside the scope of or an issue which is not a subject matter the order of the assessment. In the case on hand, the issue of computation of book profits u/s 115JB of the Act was not an issue that was a subject matter during the course of assessment proceedings. This issue of computation of book profits u/s 115JB of the Act, does not arise from the order of the assessment. Section 115JB of the Act, is a “self contained code” as per the CBDT Circular No. 13/2001, dt. 09/11/2001 and was outside the scope of the order of assessment passed by the Assessing Officer u/s 143(3) of the Act on 21/12/2015. The ld. CIT(A), in our view, is not empowered to enhance the assessment by computing book profits u/s 115JB of the Act, as it is a separate code. Thus, we uphold this contention of the assessee and adjudicate this issue on powers of enhancement of the CIT(A), on the facts and circumstances of the case, in favour of the assessee. Thus, we quash the enhancement made by the ld. CIT(A).

FULL TEXT OF THE ITAT JUDGEMENT

This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) – 4, (hereinafter the “ld. CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 19/07/2018, for the Assessment Year 2013-14.

2. The assessee is a company and is engaged in the business of manufacturing ofsugar and it by-products, generation of power and other business. It filed its return of income for the impugned Assessment Year on 27/09/2013 disclosing total income as ‘Nil’. The Assessing Officer selected the case for scrutiny and completed the assessment u/s 143(3) of the Act on 21/12/2015, determining the total loss at Rs. 19,60,55,913/-. He determined income from both short term capital gains and from long term capital gains at 33,83,89,890/- and assessed the total income of the assessee under the normal provisions of the Act at Rs.14,23,83,070/-. The Assessing Officer did not compute the book profits u/s 115JB of the Act. He did not consider the issue as to whether book profit is to be computed u/s 115JB of the Act.

2.1 Aggrieved with the disallowance made by the Assessing Officer, while assessing the total income under the normal provisions of the Act, the assessee carried the matter in The assessee also agitated the non-grant of set off of, brought forward unabsorbed depreciation under the long term capital gains during the year. The ld. First Appellate Authority decided all the grounds of appeal raised by the assessee, in favour of the assessee, by deleting 10% adhoc disallowance made towards travelling expenses and 10% adhoc disallowance made towards miscellaneous expenses and also granted set off of brought forward depreciation of earlier years. On the issue of grant of, set off of unabsorbed brought forward depreciation against long term capital gains, the ld. CIT(A) held the issue in favour of the assessee. He directed the Assessing Officer to grant set off of unabsorbed depreciation on long term capital gains and pass a speaking order and determine the balance amount of unabsorbed depreciation to be carried forward. This, resulted in the capital gains being reduced to Nil. Thus, the computation of income filed by the assessee disclosing the total income as Nil under normal provisions of the Act was upheld by the ld. CIT(A).

Thereafter, the ld. CIT(A) observed that the Assessing Officer has not computed income of the assessee u/s 115JB of the Act, i.e., under MAT provisions. On a query, the assessee submitted that in the absence of any taxable income under the normal provisions and tax being computed thereon, the computation provision for calculating tax u/s 115JB of the Act fails and hence this Section 115JB is not applicable to the assessee company. For this proposition, that MAT provision does not apply to the assessee company, when the taxable income in –Nil- under the normal provisions of the Act, the assessee relied on the judgment of the Hon’ble Jurisdictional High Court in the case of CIT vs. M/s. Vishnu Sugar Mills Ltd. in ITA No. 359 of 2006, G.A. No. 3015 of 2006, for Assessment Year 2002-03, judgment dt. 20/11/2006 and the order of the Kolkata ‘A’ Bench of the Tribunal in the case of Neeraj Vanijya P. Ltd. vs. ITO in ITA No. 1504/Kol/2008, order dt. 31/03/2008. The assessee also referred to the certificate issue by the chartered accountant in Form No. 29B, certifying that MAT provisions u/s 115JB of the Act are not applicable to the assessee company in view of the judgment of the Hon’ble Jurisdictional High Court on this issue. This Form No. 29B, was filed along with the return of income. The ld. CIT(A) invoked his power u/s 251(1)(a) r.w.s. 251(2) of the Act and issued a showcause notice to the assessee, as to why he should not exercise his powers of enhancement under the Act and assess the income of the assessee u/s 115JB of the Act. For the proposition that he had powers of enhancement on this issue, he relied on the decision of the Hon’ble Supreme Court in the case of CIT vs. Kanpur Coal Syndicate [53 ITR 229 (SC)]. He held that the certificate issue by the chartered accountant that in absence of positive Gross Total Income and Total Income, MAT provisions are not applicable, is contrary to law. On the contention of the assessee that the Assessing Officer has not computed income u/s 115JB of the Act and consequently, the ld. CIT(A) does not have power to compute the same, as this issue was not dealt by the Assessing Officer at all, was rejected by the ld. CIT(A). Thereafter, he referred to Section 115JB of the Act and held that the wordings of this Section are different from the wordings of Section 115JA and consequently, the judgment of the Jurisdictional High Court in the case of M/s. Vishnu Sugar Mills Ltd. (supra) and the order of the ITAT in the case of Neeraj Vanijya P. Ltd. (supra) are not applicable to the facts of the case. At para 8.9., of his order, he held that the decision of ITAT in the case of Vishnu Sugars (supra), for the Assessment Year 2002-03, where the provisions of Section 115JB of the Act applies, are sub-silentio and unfit to be considered as a factual precedent. Referring to the judgment of the Kolkata Bench of the ITAT in the case of M/s. Bahtkawa Tea Industries vs. ACIT (2010) ITA No. 813/Kol/2010, Assessment Year 2005-06, he held that the ITAT, did not follow its earlier order and had admitted an inadvertent error. Thereafter, he relied on the decision of the Lucknow Bench of the Tribunal in the case of ACIT vs. M/s. L.H. Sugar Factory Ltd. in ITA No. 417 & 418/LKW/2013, which is extracted at pages 16 to 20 of the order of the ld. CIT(A) and relied on the same and held that computation of book profits u/s 115JB of the Act, has to be done in the case of the assessee and book profits determined. For the purpose of calculating book profits u/s 115JB, he gave certain directions to the Assessing Officer. He dismissed the additional grounds taken by the assessee that the entire receipt of Rs.42,96,37,937/-, is a capital receipt and hence, it should be excluded from the computation of income both under the normal provisions of the Act as well as while computing book profits u/s 115JB of the Act. The basic contention of the assessee is that the amount in question is in the nature of capital receipt and not in the nature of profit or gains, taxable u/s 45 of the Act and realisation of capital due to improvement of capital asset by way of external development over a long period of time.

3. Aggrieved the assessee is in appeal before us on various grounds.

4. The Id. Senior Counsel, Shri S.M. Surana, based his arguments on two main issues. These are (a) That the ld. CIT(A) was in error while invoking provision u/s 251(1)(a) r.w.s. 251(2) of the Act and enhancing the income of the assessee. (b) That the ld. CIT(A) was wrong on the issue as to whether Section 115JB of the Act, applies to the assessee company or not, when admittedly, the gross taxable income and the total income as well as the tax payable are Nil, by refusing to follow the binding decision of the Hon’ble Jurisdictional High Court as well as the order of the ITAT Kolkata Bench of the Tribunal, on this issue.

On the first issue, as to whether, the ld. CIT(A) has the right to enhance the total income of the assessee, the ld. Counsel for the assessee submitted that the Assessing Officer in his order u/s 143(3) of the Act or in the notice given u/s 142(1) of the Act, has not even whispered about the computation of income u/s 115JB of the Act. He submitted that up to the Assessment Year 2005-06, the Department in the case of the assessee have not computed any income, whatsoever, u/s 115JB of the Act, by following the decision of the jurisdictional Tribunal.

4. On merits he submitted that only in the Assessment Year 2005-06, the AssessingOfficer completed assessment, making computation u/s 115JB of the Act and this was quashed by the ld. CIT(A) and the Tribunal as well as the Hon’ble High Court has upheld this order of the ld. CIT(A) and subsequently based on this decision, no income was computed u/s 115JB of the Act, wherever the GTI and TI, was Nil and there was no tax He read out Section 251(2) of the Act and submitted that the ld. CIT(A) is empowered to decide only such matters which arise out of the proceedings in which the order was appealed and in a case where the Assessing Officer has not dealt with an issue during the course of the assessment proceedings or in the assessment order, the ld. CIT(A) has no power to deal with the same and enhance the income of the assessee. For this proposition, he relied on a number of case-law including:-

> Gurinder MohanSingh Nidrajog CIT reported in 348 ITR 170

> CIT Kanpur Coal Syndicate (1964) 53 ITR 225 (SC)

> CIT Rai Bahadur Hardutroy Motilal Chamaria ( 1967) 66 ITR 443( SC)

> CIT vs.Union Tyres reported in 240 ITR 556 [Delhi]

> CIT Sardarilal & Co. [2001] 251 ITR 864 (Delhi)

> CIT National Co. Ltd. (1993) 199 ITR 445 (Cal)

4.1. He referred to the judgment of the Hon’ble Supreme Court in the case of Kanpur Coal Syndicate (supra), and submitted that the issue before the Court was whether the ITAT has the power of enhancement. Thus, the issue considered by the Hon’ble Supreme Court was different from the issue on hand. Thereafter, in numerous judgments, the Hon’ble Supreme Court and the Hon’ble High Courts have laid down the principles of law applicable to the powers of enhancement vested to the CIT(A), after considering the judgment of the Hon’ble Supreme Court in the case of Kanpur Coal Syndicate (supra) and other cases. We would be dealing with the propositions of law laid down in each of these cases during the course of our findings. Thus, he submits that the ld. CIT(A) was wrong in exercising his powers of enhancement u/s 251(1)(a) of the Act. On a query raised by the Bench, as to whether the computation of income u/s 115JB of the Act, tantamount to taxing of the assessee from a different source of income (new source of income), the ld. Counsel for the assessee relied on a number of decisions as well as the CBDT Circular No. 13/2001 dt. 09/11/2001, reported in 252 ITR St. 50 and submitted that computation of income u/s 115JB of the Act, is a self contained code. He submitted that when the Assessing Officer has not dealt with or considered the computation of profits u/s 115JB of the Act, the ld. CIT(A), does not have the power to enhance the assessment by bringing in a totally different self contained code for computation of book profits, not dealt with by the Assessing Officer. He further submitted that the Kolkata D Bench of Tribunal in the case of ACIT vs M/s.Vishnu Sugar Mills Ltd. in ITA No. 1761/Kol/2005 & C.O. No. 189/Kol/2015; Assessment Year 2002 03, upheld this order of the ld. CIT(A) and the Hon’ble Calcutta High Court in the case of CIT M/s.Vishnu Sugar Mills Ltd. in ITA No. 359 of 2006, G.A. No. 3015 of 2006, for Assessment Year 2002-03, judgment dt. 20/11/2006, upheld the order of the Tribunal on the issue. Thus, he submits that the issue is covered in his favour and the ld. CIT(A) was wrong in holding that this judgment is not binding on him as it was not a speaking order or on the ground that it does not hold the correct law. He relied on the judgment of the Hon’ble Kerala High Court in the case Denny Fernandez vs State Of Kerala 2003 (1) KLT 280, for the proposition that, when a Court decides a principle issue, it is presumed that all aspects of law and facts have been taken into account and the judgment cannot be disputed on the ground that certain aspects of the case was not considered by the Hon’ble Supreme Court or certain provisions of law were not brought to the notice of the Hon’ble Supreme Court. He vehemently contended that the judgment of the Hon’ble Jurisdictional High Court is binding on the authorities below and that the ld. CIT(A) has committed a grave error in following the decision of the Lucknow Bench of the Tribunal in the case of M/s. L.H. Sugar Factory Ltd. (supra), in preference to the judgment of the Hon’ble Jurisdictional High Court . He pointed out that the Lucknow Bench of the Tribunal in its order in the case of M/s. L.H. Sugar Factory Ltd. (supra) refused to follow the judgment of the Hon’ble Jurisdictional High Court for the reason that, it is not the Jurisdictional High Court and submitted that, the ld. CIT(A) has no such liberty. He once again emphasised that the Hon’ble Jurisdictional High Court has held that Section 115JB of the Act cannot be applied when both the GTI & TI are Nil and not taxes are payable. He prayed for relied.

5. The Id. D/R, on the other hand, opposed the contentions of the assessee and submitted that Section 251(1) (a) of the Act, gives vast powers to the ld. CIT(A) to enhance the assessment. He relied on the judgment of the Hon’ble Supreme Court in the case of Kanpur Coal Syndicate (supra), and submitted the powers of the ld. CIT(A) is co- terminus with the powers of the Income Tax Officer (ITO) and there is no reason as to why the appellate authority cannot modify the assessment order on an additional issue/s which was not raised or considered by the ITO. He submitted that no restrictions whatsoever, can be placed on the powers of the ld. CIT(A) while hearing the appeal and that he ld. CIT(A) has all the powers that the original authority may have in determining the assessable income in the case of any assessee. He relied on the order of the ld. CIT(A) and submitted that a certificate given by the chartered accountant in Form 29A of the Act, with MAT provisions u/s 115JB of the Act, is not applicable to the assessee is wrong, as the provisions of Section 115JA and the provisions of Section 115JB are different and the decisions or judgments cited u/s 115JA of the Act cannot be applied in this case. He further relied on the order of the ld. CIT(A) and submitted that the judgment of the Hon’ble Calcutta High Court, cannot be held as a binding precedent for the reason that, it was not a speaking order and only held that there is no substantial question of law involved on the decision of the Tribunal, in the case of the assessee, for the Assessment Year 2002-03. He submitted that the Lucknow Bench of the Tribunal has held that this order is per incarium. He extensively relied on the decision of the Lucknow Bench of the ITAT in the case of M/s. L.H. Sugar Factory Ltd. (supra) and submitted that as per the order, Section 115JB is applicable to the facts of the case.

6. We have heard rival On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:-

7. We first take up the issue as to whether the CIT(A) has powers of enhancement under the facts and circumstances of the case. The admitted fact is that the Assessing Officer has not dealt with the issue as to whether the book profits have to be computed u/s 115JB of the Act, in the facts of the case. The possible reason might me that in the earlier Assessment Years, no such computation of book profits u/s 115JB of the Act, was made and when the same was made in the Assessment Year 2005-06, the CIT(A)as well as the ITAT had held in favour of the assessee and the Hon’ble Jurisdictional High Court had upheld this decision of the ITAT. After the ld. CIT(A) has granted relief to the assessee of set off of brought forward of unabsorbed depreciation and had deleted the adhoc disallowance made by the Assessing Officer, the gross total income of the assessee as well as the total income was Nil and there was no tax payable.

7.1 The powers of enhancement of the CIT(A) are discussed as follows:-

“251. (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 43annul 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 aseither 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, theCommissioner (Appeals) may consider and decide 50 any matter arising out of the proceedings in which the order appealed against was passed, not with standing that such matter was not raised before the Commissioner (Appeals) by the appellant.

8. The Hon’ble Supreme Court in the case of CIT Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC), has held as under:-

“Section 251 of the Income-tax Act, 1961 [Corresponding to section 31(3) of the Indian Income tax Act, 1922] – Commissioner (Appeals) – Power of – Assessment year 1952-53 – Whether power of enhancement of AAC under section 31(3) of 1922 Act is restricted to subject matter of assessment or source of income which have been considered expressly or by clear implication by ITO from point of view of taxability of assessee – Held, yes – Whether, therefore, AAC had no jurisdiction under section 31(3) of 1922 Act, to assess a source of income which had not been processed by ITO and which was not disclosed either in return filed by assessee or in assessment order – Held, yes”

The Hon’ble Calcutta High Court in the case of CIT vs. National Co. Ltd. (1993) 199 ITR 445 (Cal), has held as follows:-

“In CIT v. Shapoorji Pallonji Mistry[1962] 44 ITR 891, the Supreme Court held that in enhancing the assessment for any year, the AAC cannot travel outside the record, that is to say, the return made by the assessee and the assessment order passed by the ITO with a view to finding out new sources of income not disclosed in either. The Supreme Court also observed that there are other provisions which enable escaped income from new sources to be brought to tax after following the special procedure. The powers of the AAC extends to matters considered by the ITO and if a new source is to be considered then the power of remand should be exercised. By the exercise of the power to assess fresh sources of income, the assessee is deprived of the finding by two Tribunals and one right of appeal.

In the instant case, the assessment in question was made by the ITO long before the appellate order for the assessment year 1962-63, was passed. Therefore, in view of the principles laid down by the Supreme Court in the aforesaid case, the AAC had no jurisdiction to assess the said sum and enhance the assessment for the assessment year 1963-64 taking an income which was not considered by the ITO at all.”

The Hon’ble Delhi High Court in the case of CIT vs. Union Tyres reported in 240 ITR 556 [Delhi], held as follows:-

“The first appellate authority is invested with very wide powers under section 251(1 (a) 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 Commissioner to introduce in the assessment a new source of income and the assessment has to be confined to those items of income which were the subject-matter of original assessment.

The Hon’ble Supreme Court in the case of CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), held as follows:-

“It was, therefore, held that section 3 of 1922 Act impliedly gives an option to an appropriate authority to assess the total income of either the association of persons or the members of such association individually. The next question is whether the said option was given only to the ITO and is denied to the AAC and the Tribunal. Under the Act the ITO, after following the procedure prescribed, makes the assessment under section 23 of 1922 Act. Doubtless in making the assessment at the first instance he has to exercise the option whether he should assess the association of persons or the members thereof individually. It is not because that any section of the Act confers an exclusive power on him to do so, but because it is part of the process of assessment; that is to say, he has to ascertain who is the person liable to be assessed for the tax. If he seeks to assess an association of persons as an assessable entity, the said entity can object to the assessment, inter alia, on the ground that in the circumstances of the case the assessment should be made on the members of the association individually. The ITO may reject its contention and may assess the total income of the association as such and impose the tax on it. Under section 30 of 1922 Act an assessee objecting to the amount of income assessed under section 23 of 1922 Act or the amount of tax determined under the said section or denying his liability to be assessed under the Act can prefer an appeal against the order of the ITO to the AAC. It is said that an order made by the ITO rejecting the plea of an association of persons that the members thereof shall be assessed individually does not fall under one or other of the three heads mentioned above. What is the substance of the objection of the assessee ? The assessee denied his liability to be assessed under the Act in the circumstances of the case and pleaded that the members of the association would be assessed only individually. The expression ‘denial of liability’ is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances. In either case the denial is a denial of liability to be assessed under the provisions of the Act. In one case the assessee says that he is not liable to be assessed to tax under the Act, and in the other case the assessee denies his liability to tax under the provisions of the Act if the option given to the appropriate officer under the provisions of the Act is judicially exercised. It was, therefore, held that such an assessee has a right of appeal under section 30 of 1922 Act against the order of the ITO assessing the association of members instead of the members thereof individually. If an appeal lies, section 31 of 1922 Act describes the powers of the AAC in such an appeal. The AAC has, therefore, plenary powers in disposing of an appeal. The scope of his power is conterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do. If the ITO has the option to assess one or other of the entities in the alternative, the AAC can direct him to do what he should have done in the circumstances of a case. Under section 33(1), an assessee objecting to an order passed by an AAC under section 28 or section 31 may appeal to the Tribunal within 60 days of the date on which such order is communicated to him. Under section 33 of 1922 Act the Tribunal has ample power to set aside the assessment made on the association of persons and direct the ITO to assess the individuals or to direct the amendment of the assessment already made on the members. The comprehensive phraseology used both in section 31 and section 33 of the 1922 Act does not countenance the attempt of the revenue to restrict the powers of the AAC or of the Appellate Tribunal: both of them have power to direct the appropriate authority to assess the members individually instead of the association of persons as a unit.

It was, therefore, held agreeing with the High Court, that the Tribunal has jurisdiction to give directions to the appropriate authority to cancel the assessment made on the association of persons and to give appropriate directions to the authority concerned to make a fresh assessment on the members of that association individually. In the result, the instant appeal was to be dismissed.”

This judgment was considered in subsequent judgments by various Courts and the later judgments hold the field on this issue. The Hon’ble Supreme Court in the case of CIT vs. Nirbheram Deluram reported in [1997] 224 ITR 610 (SC), held as follows:-

“For the assessment year 1956-57, during reassessment proceedings the ITO made addition to the assessee’s income to the extent of Rs. 2,45,000 on account of ostensible transactions in hundi loans shown by the assessee. On appeal, the AAC, while sustaining the aforesaid addition also took notice of 10 other items of ostensible hundi loans amounting to Rs. 2,30,000 and directed that the total income be enhanced by the sum of Rs. 2,30,000. The Tribunal, however, deleted the said addition holding that the AAO had exceeded his jurisdiction. The High Court placing reliance on the decision of the Supreme Court in Addl. CIT v. Gurjargravures (P.) Ltd. [1978] 111 ITR 1 held that the AAC had no jurisdiction to consider the new entries which were not considered at all by the ITO and to add the amount of Rs. 2,30,000 to the total income of the assessee. According to the High Court, the items representing the said amount constituted new sources of income which were not the subject- matter of assessment before the Assessing Officer and, therefore, it was not open to the AAC in appeal to consider the new sources and to assess them.

The Hon’ble Delhi High Court in the case of CIT vs. Sardari Lal Co. reported in [2001] 251 ITR 864 (Delhi) held as follows:-

“Section 251 of the Income-tax Act, 1961 – Commissioner (Appeals) – Powers of – Whether whenever question of taxability of income from a new source of income is concerned which had not been considered by Assessing Officer, jurisdiction to deal with same in appropriate cases may be dealt with under section 147/148 and section 263 if requisite conditions are fulfilled and it is inconceivable that in presence of such specific provisions a similar power is available to first appellate authority – Held, yes”

The Hon’ble Delhi High Court in the case of Gurinder Mohan Singh Nidrajog vs. CIT reported in 348 ITR 170, considered at length the various remedies under the Income Tax Act for bringing to tax, the addition income and held as under:-

“14. We have considered the submissions of both the parties. There is no doubt about the fact that while framing the assessment even under Section 143(3) of the Act, the Assessing Officer may omit to make certain additions of income or omit to disallow certain claims which are not admissible under the provisions of the Act thereby leading to escapement of income. The Income-Tax Act provides for remedial measures which can be taken under these circumstances. While framing an assessment under Section 143(3) of the Act, any of the following situation may occur:-

(a) The Assessing Officer may accept the return of income without making any addition or disallowance; or

(b) The assessment is framed and the Assessing Officer makes certain addition or disallowance and in making such additions or disallowances, he deals with such item or items of income in the body of order of assessment but he under-assessed such sums; or

(c) He makes no addition in respect of some of the items, though in the course of hearingbefore him holds a discussion of such items of income

(d) Yet, there can be another situation where the Assessing Officer inadvertently omits totax an amount which ought to have been taxed and in respect of which he does not make any enquiry.

(e) Further another situation may arise, where an item or items of income or 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, or

(f) Where an item of income which ought to 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

To ensure for each of such situations, an income which ought to have been taxed and remained untaxed, the legislature has provided different remedial measures as are contained in sections 251(1)(a), 263, 154 and 147 of the Act.

In the category stated in (a), obviously if an income escapes an assessment, the provisions of Section 147 of the Act can be invoked, subject to the condition stated in the proviso of the said section. In the category of cases falling in category (b), section 251(1)(a) provides the CIT(A) could enhance such an assessment qua the under-assessed sum i.e. where the AO had dealt the issue in the assessment and was the subject matter of appeal. In category falling in (c) & (e), the CIT has been empowered to take an appropriate action under section 263 of the Act In category of cases falling under clause (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 CIT(A) against the said addition and disallowance, the said disallowance and addition being the subject matter of appeal before the CIT(A) in such cases, the CIT(A) has been empowered u/s 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 CIT(A) 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.

15. This is succinctly stated in CIT v. Edward Keventer (Successors) (P.) Ltd. [1980]123 ITR 200 (Delhi) :-

16. The only question is as to whether the CIT(A), in exercise of power under Section 251(1)(a) of the Act has the power to enhance the assessment in the manner done in the instant case. As noted above, the submission of learned counsel for the appellant was that the Assessing Officer had not dealt with the issue in question (on which additions are made) in the assessment order at all and therefore, the CIT(A) had no power to make any additions under Section 251(1)(a) of the Act. According to the assessee, even if the Assessing Officer might have discussed such an issue during the course of hearing before him, i.e. incidental or collateral examination, that itself would not have given power to the CIT(A) unless the issue was specifically dealt with by the AO in the body of the order of the assessment. It is this aspect which needs consideration in the present case.

17. Before adverting to this, we may note that, as a fact, the Assessing Officer had issued aquestionnaire specifically on the aforesaid two items in respect of which CIT(A) has made the additions by enhancing the income of the assessee. The assessee had even replied to the said It is also to be kept in mind that it is a case of search and during the search certain documents were seized. The assessment of that period has been made on the basis of that search. The Assessing Officer undertaken the exercise as to whether the income is to be brought to tax or not on the basis of various documents seized. Based on seized documents queries were raised and the assessee had even furnished the specific reply thereto before the Assessing Officer. However, it is also a matter of record that in the final assessment order passed, there is no mention about the aforesaid two items. According to the assessee the CIT(A) had discovered a new source of income not considered by the AO in his order and, therefore, the CIT(A) had no such power under Section 251(a) (a) of the Act. The case of the Revenue, on the other hand is that the AO had already considered the seized document and had asked for the explanation of the assessee and found the explanation to be acceptable because of which the AO did not mention anything in the assessment ord r regarding the two items. On the other hand, the CIT(A) found some factual error in the explanation of the assessee and in these circumstances, he made the enhancement of income. It was, therefore, not a case of the discovery of new source of income which was not considered by the Assessing Officer. To appreciate the rival contentions, we reproduce the provisions of Section 251(1)(a) of the Act:-

“251. Powers of the Commissioner (Appeals)

(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 annual the “

18. In Rai Bahadur Hardutroy Motilal Chamaria (supra) where the Supreme Court interpreted the corresponding provision under the old Income-Tax Act, 1922, the legal position was stated as under:-

“The principle that emerges as a result of the authorities of this Court is that the Appellate Assistant Commissioner has no jurisdiction under s. 31(3) of the Act, to assess a source of income which has not been processed by the Income-tax Officer and which is not disclosed either in the returns filed by the assessee or in the assessment order, and therefore the Appellate Assistant Commissioner cannot travel beyond the subject-matter of the assessment. In other words, the power of enhancement under s. 31(3) of the Act is restricted to the subject-matter of assessment or the sources of income which have been considered expressly or by clear implication by the Income-tax Officer from the point of view of the taxability of the assessee. It was argued by Mr. Vishwanath Iyer on behalf of the appellant that by applying the principle to the present case, the Appellate Assistant Commissioner had jurisdiction to enhance the quantum of income of the assessee. It was pointed out that the fact of alleged transfer of Rs. 5,85,000 to Forbesganj branch was noted by the Income-tax Officer and also the fact that it did not reach Forbesganj on the same day. So it was argued that in the appeal the Appellate Assistant Commissioner had jurisdiction to deal with the question of the taxability of the amount of Rs. 5,85,000 and to hold that it was taxable as undisclosed profits in the hands of the assessee. We are unable to accept the argument put forward on behalf of the appellant as correct. It is true that the Income-tax Officer has referred to the remittance of Rs. 5,85,000 from the Calcutta branch, but the Income-tax Officer considered the dispatch of this amount only with a view to test the genuineness of the entries relating to Rs. 4,3 ,000 in the books of the For besganj 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 not 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 s. 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 proves 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 s. 31 of the Act, to enhance the assessment”.

19. To the same effect is the judgment of another Division Bench of this Court in CIT v. Union Tyres [1999] 240 ITR 556/107 Taxman 447 reiterating that first appellate authority cannot consider new scope of income under Section 251(1) of the Act. Following question from the same judgment can aptly be:

“Section 251 of the Act prescribes the power of the Appellate Assistant Commissioner, now Commissioner (Appeals). Section 251(1)(a) of the Act empowers the Appellate Assistant Commissioner in disposing of an appeal by the assessed 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. “Explanation” to Section 251 provides that the Appellate 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 Commissioner by the appellant. 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, Bombay 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 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 (Central) Calcutta v. Rai Bahadur Hardutory 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 ITO form the point of view of taxability and that the Appellate Commissioner had no power to assess a source of income which had been processed by the Assessing Officer.”

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:

“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 assessed makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only with regard to a matter raised by the assessed 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 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.”

The aforesaid view taken by the Division Bench was confirmed by the Full Bench of this Court in Sardari Lal & Co. (supra) observing as under:-

“Looking from the aforesaid angles, 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 Assessing Officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147/148 of the Act and section 263 of the Act, if requisite conditions are fulfillled. It is inconceivable that in the presence of such specific provisions, a similar power is available to the first appellate authority. That being the position, the decision in Union Tyres’ case (supra) of this court expresses the correct view and does not need reconsideration. This reference is accordingly disposed of.”

20. Mr. Sabharwal, learned counsel appearing for the Revenue could not and did not disputethe aforesaid position in law. His submission was that the Assessing Officer had considered the issue which was clear from the questionnaire and, therefore the CIT(A) was vested with power to look into the same. As pointed out above, the Assessing Officer had issued a questionnaire on the basis of documents seized during the search. He had specifically undertaken the exercise as to whether the income has to be brought to tax or not on the basis of various seized documents. The reply of the assessee was elicited on this very aspect as well i.e. seized documents (page 21) which related to the transactions in question. It was pointed out that the document contains various notings of cash payments, advances etc. made through Mr. Tameez. The assessee was asked to furnish complete explanation thereof with sources for the same and was asked to explain with documentary evidences where it was accounted for. It was also mentioned that the document pertains to the property at Bangalore and the assessee was required to furnish full and complete details thereof. Page no. 21 reads as under:-

“i. R.T. Nagar

That GMS Construction Co. Pvt. Wanted to start the development of some properties at R.T. Nagar, Bangalore along with Mr. Jeetu on joint venture basis. As per their verbal understanding 60% of built up area would go to Mr. Jeetu and the balance 40% to GMS Construction Co. Pvt. Ltd. In consideration of this under standing Mr. Jeetu was to pay Rs. 50 lacs as non-adjustable deposit. That initially a deposit of Rs. 25 lacs was received from Mr. Jeetu and the same was deposited with Canara Bank, Bangalore on 110- 1995. The copy of Bank statement is enclosed herewith. The balance amount of Rs. 25 lacs was not received as the joint development could not be carried on due to depression in the real estate business and fall in the market prices of the properties. This amount has been adjusted against the amount due to Mr./Mrs. G.M. Singh from Soloman David holding private limited. It may however be stated that the assessee is not connected with this transaction in his individual capacity and the same are not related to his books of account.

ii. Shanti Nagar

This again was a joint venture proposal by GMS Construction Co. Pvt. Ltd. with Mr. Jeetu for the development of properties at Shanti Nagar. That both Mr. Jeetu and GMS Construction Co. Pvt. Ltd, were to invest and share the profit in equal proportion as stated on the paper under reference. All the initial payments for the purchase of land were made by GMS Construction Co. Pvt. Ltd. and no contribution was received from Mr. Jeetu. This joint venture could not be finalized due to the same reason as state above i.e. recession in the real estate business and fall in the market price of the properties. The advances made for Shanti Nagar properties are not related to the assessee and hence to his block assessment.”

The assessee furnished its comments to the said page which reflected the transactions relating to property purchase at R.T. Nagar, Shanti Nagar and Chellagatta etc. It is thus clear that this very property in respect of which additions are made by the CIT(A) was the subject matter of consideration before the Assessing Officer. It is a different matter that after the reply submitted by the assessee, the Assessing Officer chose not to make any addition on this count and nothing is mentioned in the assessment order. That, however, would not mean that the Assessing Officer had not considered this matter. It was in our opinion duly considered.

21. Mr. C.S. Aggarwal, learned Senior Counsel had submitted that as per the judgments of this court in Union Tyres (supra) and Sardari Lal & Co. (supra), the jurisdiction of the first appellate authority could exercise his powers only “with regard to any other matter which has been considered by the Assessing Officer and determined in the course of the assessment. His submission was that there was no such determination.

22. We do not agree with this submission. Obviously, when this matter/item is considered but addition on that account is not made in the assessment order, it would clearly follow that the Assessing Officer had “determined” the same in the course of assessment by deciding not to make any addition.

23. In the case of Shapoorji Pallonji Mistry v. CIT [1958]34 ITR 342 (Bom.) (which has been a ffirmed by the Supreme Court), the Bombay High Court clarified that “source” of income would not mean source in the sense of head of income as used in the Income-Tax Act but would mean a specific source from which a particular income spank or arose. It was clarified that:-

“…….If a particular source or item of income had been considered by the Income tax Officer and had been subjected to the process of assessment, then even though the assessee may not have appealed against that particular source or item, one once the appeal was before the Appellate Assistant Commissioner his power extended not merely to the subject-matter of the appeal, but to the whole subject-matter of assessment. What gave the power to the Appellate Assistant Commissioner was the fact that a particular item or source had been subjected to the process of assessment. Now, the process of assessment would include, not only the subjecting of an item or source to tax, but equally holding that the particular source or item was not subjected to tax.”

We are of the opinion that the aforesaid item or source had been subjected to the process of assessment. Merely because the ultimate order passed by the Assessing Officer is silent about this item and there is no discussion thereupon would not mean that the Assessing officer had not considered the same. It is trite law that the Assessing Officer is not supposed to frame the assessment order like a judgment of the Court and would discuss each and every item and aspects specifically. It is clear from the record that import and impact of every document seized including page No. 21 was considered by the Assessing Officer; he went into the matter by issuing a questionnaire; calling upon the assessee to give reply and reply/ clarification was received from the assessee. It is thereafter only that addition on the basis of page No. 21 was not made in respect of the properties in question.

24. We thus answer question No. 2 in favour of the Revenue and against the assessee holdingthat on the facts of this case, the CIT(A) rightly exercised his powers under Section 251(1) of the

25. In view of our aforesaid answer to question 2, we revert back to the additions mentioned at (iv) and (v) under Question No. 1, which are now to be dealt with on merits.

26. In sofar as addition of this amount is concerned, it is pointed out by the learned CIT(A) that at page 21 of the seized documents itself it was mentioned that receipt of Rs. 25 lacs from Jitu Virmani was in respect of property at RT Nagar, Bangalore. In his statement dated 5.2.2000, Mr. G.M. Singh explained that Mr. Jitu Virmani was to give Rs. 50 lacs for joint venture in respect of that property. He had given Rs. 25 lacs and balance was to be received. The CIT(A) further observed that in his reply given by the assessee before the Assessing Officer on 8th February, 2002 he mentioned that balance amount of Rs. 25 lacs was not received and that amount has been adjustable against the amount due to Mr. G.M. Singh from Solomon Davi Holding Pvt. Ltd. Before the CIT(A), the response of the assessee was that the assumption of Mr. Jitu Virmani was not correct and thus, according to the CIT(A), this was not only a change of stand but not acceptable either because of the following reasons:-

“1. On page 21 it has been clearly mentioned that the amount receivable was Rs. 50 lacs.

2. On 8.2.02 it was again clearly explained that “this amount (the balance amount of Rs. 25lakhs)had been adjusted against the amount due to Mr/Mrs. G.M. Singh from Soloman David Holding P. Ltd.” In view of this the stand of the appellant no that the additional amount of Rs. 25 lacs was neither received nor adjusted cannot be accepted. Therefore the only conclusion possible from these facts is that Rs. 25 lacs was received separately and has not been reflected in the regular books of account. Accordingly, Rs. 25 lacs is treated as unaccounted income of the appellant.”

27. The learned Tribunal revisited the issue again discussing the contents of the seized documents at page 21 of the AnnexureA-1, statement of Mr. G.M. Singh and also the explanation of the assessee. Before the ITAT, the assessee had reiterated his contention that Mr. Jitu Virmani paid the remaining balance amount of Rs. 25 lacs in cash and was not correct and dealt with the said contention concluding its discussion as under:-

“42. Heard both the parties and perused the record. It is an admitted fact that the seized document has been found as the time of search from the premises of the assessee and was also owned by him. In the light of his fact the assessee should have come with clear hands and take a definite stand while explaining the noting on the seized documents. But we find that the assessee is changing his stand while explaining the Noting on the seized documents. Before the AO his explanation was that Rs. 25,00,000 was adjusted against the amount due to Mr. & Mrs. Singh from M/s Solomon David Holdings Pvt. Ltd. and before the Ld. CIT(A) the explanation of the assessee was that this amount of Rs. 25,00,000/- was neither received nor adjusted, in such a factual position we are not inclined to interfere with the order of the Ld. CIT(A) on this issue assessee is also dismissed.” This ground of the

28. We are of the opinion that Sabharwal, learned counsel appearing for the Revenue is correct in his submission authorities below. that issue pertains to the appreciation of evidence by the two

29. In Aradhna Oil Mills v. CIT [2001]119 Taxman 629 the Madhya Pradesh High Court categorically held that it was not for the High Courts to exercise its power under Section 260A of the Act relying the evidence. That case also related to search and seizure and on the basis of documents seized addition was made by the ITO which was upheld by the Tribunal as The explanation of the assessee was not accepted by the quasi-judicial authorities and dismissing the appeal of the assessee, the Court observed:-

“In effect, the question whether a particular entry in the account book is genuine or not, or whether the assessee is able to show its source is a question of fact. In other words, it only involves appreciation of evidence tendered by the assessee pursuant to a query made by the Revenue. It is for the Assessing Officer to accept the explanation offered or not. No doubt, the first appellate court as also the second appellate court are also empowered to examine the factual background of the issue with a view to examine whether the explanation offered is reliable, adequate or/and proper. But that exercise, the High Court in its third appellate jurisdiction cannot do by virtue of the specific language employed in Section 260A of the Act.”

30. In a recent judgment pronounced by the Supreme Court in the case of CIT P. Mohanakala [2007] 291 ITR 278/161 Taxman 169 this well established principle is reiterated and affirmed by making following pertinent observations:-

“The findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence.

No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed error in disturbing the concurrent findings of facts.”

31. It can not be said that the findings are in any way perverse or based upon no evidence This addition is, therefore,

32. In sofar as addition of Rs. 1.05 crores is concerned, it pertains to Chellagatta property. It was again a joint venture between the assessee and Jitu From the seized documents it was found that the amount of Rs. 1,35,80,000 was invested in the said properties. This amount was paid on behalf of ‘Soleman David Private Ltd’. The explanation of the assessee was that these amounts were subsequently received and statement of account was produced. As per the CIT(A), the dates on which the amounts were advanced and the amounts were received back could not be related to seized documents at all for the following reasons:-

“i. The documents record “Recd. 1.05 crores + 35 chq. On 4.9.95”. This noting cannot be broken up in two parts – one for Rs. 35 lacs and other for Rs. 1.05 crores, particularly when the nothings have been made in the past tense, i.e. Sh. G.M. Singh has recorded that on 4.9.95 itself both amount of Rs. 1.05 crores and Rs. 35 lacs were received. It cannot be said that Rs. 1.05 crores were received after 4.9.95 but Sh. G.M. Singh recorded the same on the date of receipt of Rs. 35 lacs. The appellant is trying to defend himself only by saying that on 4.9.95 Rs. 1.05 crores was not received even though this is recorded as such.

ii. In his first statement given on 5.2.2000 Sh. G.M. Singh had also state that Rs. 1.35 crores were already invested. Therefore, it was not open for him to change his stand that this amount was advanced in the year 1996 as per the statement of accounts given during the course of assessment proceedings.”

The CIT(A) further found as under:-

“(f) the notings mentioned two amounts of Rs. 1.05 crores and Rs. 35 lacs whereas the explanation given during the course of assessment proceedings mentioned two different amounts i.e. Rs. 67.81 lacs for Sh. G.M. Singh and Rs. 67.86 lacs for Mrs. Praveen Nindrajog. There is no correlation between these two sets of figures and the explanation given cannot explain the notings on page 21.

(g) As Sh. G.M. Singh had confirmed that Rs. 1.35 crores were already invested, it is logical to believe the writings on page 21 that the same amount was received back on 4.9.95, after the deal was not finalized.

13.6 On the basis of above mentioned facts and analysis of the same the conclusion that can be arrived at is that the deal in this property was made in the year 1995 and approximately Rs. 1.35 crores were paid to different persons through Sh. Jeetu Virmani. The deal did not materialize subsequently and the amount given was received back on 4.9.95 Rs. 35 lacs were received in cheque and Rs. 105 crores were received back in cash which was not accounted for. All explanations offered subsequently are afterthought. Accordingly Rs. 1.05 crores will be treated as income of Sh. G.M. Singh.”

33. The ITAT thoroughly reconsidered this matter as well in the light of explanation of the The Tribunal has reproduced the discrepancy pointed out by the CIT(A) in the explanation furnished by the assessee before the Assessing Officer vide his show cause notice and the reply thereto by the assessee as well as the findings of the CIT(A). The Tribunal further pointed out that notings at page 21 were in the hand writing of the assessee. In his statement dated 5.2.2000 the assessee confirmed that these notings related to Chellagatta property. On the basis of admitted position and analysis done by the CIT(A) the Tribunal agreed with the findings of the CIT(A). Having regard to the discussion while considering item (iv) pertaining to addition of Rs. 25 lacs above, we are of the view that there is no perversity in the findings of the two authorities below which are factual in nature. The submissions of the learned Senior Counsel appearing for the appellant before us, again, was the same which was pressed before the authorities below. It was sought to be highlighted that major portion of the amount namely Rs. 70 lacs out of Rs. 1.35 crores was received before the date of search and there was no material to assume that the amount of Rs. 1.05 crores was received in cash. However, the two authorities below have found, as a fact, that the amount of Rs. 70 lacs allegedly received could not be related to the transaction in question.

34. We, therefore, do not find any justification for interfering with this finding as well. Withthis question 3 also stands answered against the assessee.

35. Asa result the appeal warrants to be dismissed which is

9. A perusal of the propositions of law laid down in all these case-law, takes us to the conclusion that the ld. CIT(A) cannot touch or delve on any issue which does not arise from the order of assessment and which was outside the scope of or an issue which is not a subject matter the order of the assessment. In the case on hand, the issue of computation of book profits u/s 115JB of the Act was not an issue that was a subject matter during the course of assessment proceedings. This issue of computation of book profits u/s 115JB of the Act, does not arise from the order of the assessment. Section 115JB of the Act, is a “self contained code” as per the CBDT Circular No. 13/2001, dt. 09/11/2001 and was outside the scope of the order of assessment passed by the Assessing Officer u/s 143(3) of the Act on 21/12/2015. The ld. CIT(A), in our view, is not empowered to enhance the assessment by computing book profits u/s 115JB of the Act, as it is a separate code. Thus, we uphold this contention of the assessee and adjudicate this issue on powers of enhancement of the CIT(A), on the facts and circumstances of the case, in favour of the assessee. Thus, we quash the enhancement made by the ld. CIT(A).

10. Coming to the issue on merits, we find that the CIT(A) while disposing off the matter for the Assessment Year 2004-05 in the order dt. 08/04/2005, has held as follows:-

“13. Ground No. 5, 6 & 7 are relating to MAT on book profit under section 115JB

14. As per the AR the AO was wrong in holding that section 115JB was applicable in the case of the assessee and was also wrong in computing book profit and tax u/s. 115JB when there was no computation of gross total income, deduction under Chapter VIA from gross total income could not be allowed and total income at a positive figure was not determine and no tax at all was payable which are preconditions for application of section 115JB. The Ld. AO erred by ignoring the order of the CIT(A) in the A.years 97-98 and 2001-02 in which by following the decision of the Supreme Court cited in 128 ITR 294 held that provisions of section 115J, 115jB are not applicable. According to the AR the AO was wrong in not considering in the separate profit and loss account prepared for determining book profit as required u/s. 115JB(2) and as per the order of Calcutta Tribunal in the case of Balrampur Chini Mills Limited in ITA No. 1061/K/2003 for A.Y. 2000-01 and in ITA No. 1422/C/19 for asstt. Year 1997-98.”

10.1 The ITAT ‘D’ Bench of the Tribunal in the in the assessee’s own case in ITA No.1761/Kol/2005, upheld this order of the ld. CIT(A) by holding that the issue is covered in favour of the assessee by the decision in the assessee’s own case as well as by a bunch of appeals filed by the revenue on this issue. The revenue carried the matter before the Hon’ble Calcutta High Court. The Hon’ble High Court held as follows:-

“We have perused the order passed by the Tribunal. It appears that the Tribunal has extensively dealt with the matter. We do not find that any substantial question of law is involved which is required to be decided by this Court. We therefore, do not find any reason to admit the application. Hence, this application is dismissed.”

10.1.1 From the above, it is clear that the issue is decided in favour of the assessee by the Hon’ble Jurisdictional High Court. The ld. CIT(A) was in error in hold that the decisions of the Tribunal was sub-silentio, when the Hon’ble High Court has upheld the same. The Income Tax Department itself, has not been bringing to tax book profits u/s 115JB of the Act except for the Assessment Year 2005-06 in the case of the assessee when the GTI and TI are –Nil- or negative. The ld. CIT(A) was in error in refusing to follow the ratio of the judgment laid down by the Hon’ble Jurisdictional High Court and in following the ratio laid down by the Lucknow Bench of the ITAT. The merits of the issue are a matter of interpretation, as to how we should interpret the same is of no relevance, when a binding decision of the Hon’ble Jurisdictional High Court is already before us and we are bound to follow the same. Thus, this issue whether book profits can be computed u/s 115JB of the Act, when the GTI and TI of the assessee are Nil and no taxes payable, is adjudicated in favour of the assessee, by respectfully following the decision of the Hon’ble Jurisdiction High Court on this issue. No other arguments are raised before

11. In the result, appeal of the assessee is allowed.