ITAT explains principals for addition of new source of income by CIT(A)

ITO Vs Angel Cement Pvt. Ltd (ITAT Delhi)

Now coming to the issue of fresh addition made by the ld. CIT (A) by making enhancement on account of alleged commission income in three cases. Though as discussed above, the ld. CIT (A) has deleted the addition made u/s.68 on the ground that no unaccounted funds have come in the bank account of the assessee companies, nevertheless, has held that assessee company might not have not availed any accommodation entry but has merely provided facility to route the fund of Bhushan Steel Ltd. in view of some of alleged commission @ 2%. This finding is purely based on guesswork and surmises. In nutshell, ld. CIT (A) has treated the accommodation entry, i.e., jamakharchi providing facility to route transaction in view of some commission income. The relevant findings of the ld. CIT (A) in all the three cases have already been incorporated above. First of all, it is neither the case of the Assessing Officer nor has been discussed in any of the assessment orders. What ld. CIT (A) is trying to do is, introducing a new source of income and that to be based on some hypothetical presumption. No show cause notice has been issued to the assessee. Ld. CIT (A) before fastening such presumptive addition in the hands of the assessee company. This is in gross violation of the provisions of the Act but also the principles of natural justice. The Act provides that before enhancing any income Ld. CIT (A) is required to give opportunity to the assessee. These additions have neither been disclosed in the return of income nor have been considered by the Assessing Officer in the assessment order and therefore, making such addition of new source of income is beyond the scope of enhancement by the ld. CIT (A).

From the various judgments relied upon by the ld. counsel on this point, the proposition which can be culled out are as under:

(i) That the C.I.T.(A) has no jurisdiction to travel beyond the subject matter of the assessment or beyond the record, i.e. the return of income and the assessment order; and his power of enhancement relates only to that income which has been subjected to the process of assessment.

(ii) That the process of assessment includes not only taxing an income but also holding that a particular income is not taxable.

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