Libertatem Magazine

Income Tax Appellate Tribunal Set Aside Order by CIT(A) Who Exceeded His Jurisdiction in Enhancing Income of Assessee 

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Case: M/s Ginni Gold Limited v. Additional Commissioner of Income Tax


The assessee filed the appeal against the order of the learned CIT(A)-4, New Delhi, relating to Assessment Year- 2009-10. 


The assessee is a company engaged in trading in the business of billions and manufacture and trading of silver and gold ornaments. It filed the return of income on 29.09.2009 declaring a total income of Rs.65,59,963/-. 

The assessee produced books of account and the Assessing Officer checked the same. The Assessing Officer noted that the assessee company, against the nature of its business, has advanced an amount of Rs.2,20,00,000/- to its suppliers M/s Lakshya Overseas for two days. 

The Assessing Officer disallowed the claim of Rs.13,000/- on the name of donation to two trusts because of lack of evidence. The Assessing Officer also observed that the closing stocks of manufactured jewellery are undervalued by a sum of Rs. 13,27,855/-. 

The assessee approached the learned CIT(A) who in turn enhanced the assessment to the extent of Rs.3,57,53,276/-. The CIT found frequent transactions of purchase and sale of Gold Bar 995, Gold Bar 999, and finished Gold jewellery with its sister concerns with no valid books of account. 

Issue before the Court

Whether the learned CIT(A) is competent to enhance assessment by taking an income that was not considered or by necessary implication by the Assessing Officer during assessment proceedings? 

Arguments before the Court

The learned counsel for the assessee submits that CIT(A) does not have jurisdiction u/s 251(1)(a) of the Income Tax Act to enhance income in the form of a new source of income which the Assessing Officer has not considered. Since it is not the subject matter of appeal thus the CIT(A) being the First Appellate Authority is not competent to enhance in respect of a new source of income. This is a legal ground and does not need verification of new facts.

The counsel further submits that giving such powers to CIT(A) will make the powers u/s 263 of the CIT or the power of the Assessing Officer u/s 147 redundant. The learned DR relied on the order of the learned CIT(A) and submitted that it is fair and reasonable. 

Court’s Observation

The Hon’ble Court by relying on Hari Mohan Sharma vs ACIT reported in 179 ITD 310 observed that Commissioner (Appeals) has exceeded his jurisdiction in enhancing the income of the assessee as the new source of income was not considered by the Assessing Officer. 

The Court relied on the judgment in Gurinder Mohan Singh Nindrajog v. Commissioner of Income Tax [2012] 348 ITR 170 (Del). The Court in the said case observed that the CIT (Appeals) has a power of enhancement for such income which has been dealt within the body of the order of the assessment, and arose as per the grounds of appeal raised before him, being the subject-matter of the appeal. The powers under section 251 are wide but they do not go to the extent of displacing powers under Sections 147, 148, and 263 of the Act. 

Court’s Decision

The Court partly allowed the appeal filed by the assessee for statistical purposes. The Court directed the assessee to substantiate its case that there is no undervaluation of closing stock and decide the issue as per fact and law. 

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