# M/S S.D. Traders v. Commissioner of Income Tax,Kanpur &Anr

- **Citation:** (2019) 1 ILRA 467
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-09-03
- **Case number:** INCOME TAX APPEAL No.159 of 2016
- **Bench:** Bharati Sapru, Rohit Ranjan Agarwal
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-s-d-traders-v-commissioner-of-income-tax-kanpur-anr-44493
- **Pages:** 12

## Headnote

A. Income Tax Act, 1961: Sections 44AB,
142(1), 143(1), 149(1)(b), 251, 260-A
Power of Commissioner (Appeals) -
coterminous with that of ITO - can also
direct AO to do what he had failed to do.

Income Tax Appellate Tribunal, affirmed the
addition of sundry creditors to the extent of
468 INDIAN LAW REPORTS ALLAHABAD SERIES
Rs. 15 lakhs and upheld the disallowance of
25% labour charges claimed by the assessee,
as made by the CIT (Appeals). Dismissing the
present appeal, the High Court

Held:-Under S.251 of the Income Tax Act, the
Commissioner
(Appeals)
has
powers
to
confirm, reduce, enhance or annul the
assessment, by considering and deciding any
matter arising out of the proceedings before
him irrespective of whether that matter was
raised in appeal. The powers are coterminous
with that of the assessing authority. (Para
20, 24, 29)

Precedent followed: -

## Text

_Characters 0–39,944 of 40,246. This is a partial read: ask again with offset=39944 for what follows._

1 All. M/S S.D. Traders Vs. Commissioner of Income Tax, Kanpur & Anr.
467
with provision of Section 263 and relied
upon the decision of Malabar Industrial
Co. Ltd. (supra).

25. As, Clause (c) of Explanation 1
to Section 263 of the Act provides that
when an appeal is pending before the
Commissioner, the exercise of jurisdiction
under Section 263 of the Act by CIT is
barred. Thus, in the present case, the CIT
wrongly exercised jurisdiction under
Section 263 of the Act by remanding back
the matter to assessing authority on
25.3.2013, while the appeal was decided
by CIT (A) on 5.6.2013. Thus, the order
passed by the ITAT does not suffer from
any irregularity and needs no interference.

26. As far as the word "record"
appearing in Clause (b) of Explanation1 to Section 263 is concerned, it means
the record available at the time of
examination by the Commissioner of
Income Tax and not any material or
record available subsequent to his
examination or exercise of power under
Section 263. Thus, any order passed by
the AO in the assessment proceedings
after the remand by the CIT cannot be
looked upon and the argument made by
the counsel for the revenue for relying
upon the fresh assessment order made
on 7.3.2004 under Section 263/143(3) of
the Act cannot be accepted in view of
the above provision of law.

27. In the present case, the Tribunal
had recorded specific finding of fact that the
assessing authority had examined each and
every aspect of the case on which the remand
order hinges, as such the remand order was
not sustainable in the eyes of law.

28. Considering the facts and
circumstances of the case, we are of the
considered opinion, that the revenue has
failed to make any case for interference in
the order of the ITAT, as the CIT had
proceeded to remand the matter back to
the assessing authority while the appeal of
the assessee was pending under Section
250 and the power of exercise under
Section 263 was barred by Clause (c) to
Explanation 1 of Section 263 of the Act.
Further, the remand order by the CIT was
based
merely
on
suspicion
and
presumption.

29. The appeal is devoid of merit
and is hereby dismissed. The question of
law is, therefore, answered against the
revenue and in favour of the assessee.
---------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 03.09.2019

BEFORE
THE HON'BLE BHARATI SAPRU, J.
THE HON'BLE ROHIT RANJAN AGARWAL, J.

INCOME TAX APPEAL No.159 of 2016

M/S S.D. Traders ...Appellant
Versus
Commissioner of Income Tax,Kanpur
&Anr....Respondents

Counsel for the Appellant:
Sri Suyash Agarwal.

Counsel for the Respondents:
C.S.C., I.T., Sri Krishna Agarwal, Sri
Pravin Kumar.

A. Income Tax Act, 1961: Sections 44AB,
142(1), 143(1), 149(1)(b), 251, 260-A
Power of Commissioner (Appeals) -
coterminous with that of ITO - can also
direct AO to do what he had failed to do.

Income Tax Appellate Tribunal, affirmed the
addition of sundry creditors to the extent of
468 INDIAN LAW REPORTS ALLAHABAD SERIES
Rs. 15 lakhs and upheld the disallowance of
25% labour charges claimed by the assessee,
as made by the CIT (Appeals). Dismissing the
present appeal, the High Court

Held:-Under S.251 of the Income Tax Act, the
Commissioner
(Appeals)
has
powers
to
confirm, reduce, enhance or annul the
assessment, by considering and deciding any
matter arising out of the proceedings before
him irrespective of whether that matter was
raised in appeal. The powers are coterminous
with that of the assessing authority. (Para
20, 24, 29)

Precedent followed: -

1.
Commissioner
of
Income
Tax
Vs.
NirbheramDeluram, (Para 13, 14, 24)

2. CIT Vs. Kanpur Coal Syndicate, (Para 13)
Jute Corporation of India Vs. CIT, (Para 13, 14,
24, 29)

3. Commissioner of Income Tax Vs. Kashi Nath
Candiwala, (Para 14)

4. CIT Vs. K.S. Dattatreya, (Para 15)

5. CIT Vs. McMillan & Co., (Para 15)
Precedent distinguished: -

1. CIT Vs. Shapoorji Pallonji Mistry, (Para 8,
16, 23, 25)

2. ITO Vs. Rai Bahadur Hardutroy Motilal
Chamaria, (Para 9, 16, 23)

3. Additional Commissioner of Income Tax Vs.
M/s Gurjargravures, (Para 9, 13)

4. CIT Vs. Sardari Lal and Co. (Para 9, 23, 25)

5. Commissioner of Income Tax, Thrissur Vs.
B.P. Sherafudin, (Para 10)
Against the order dt. 24.2.2016 of ITAT,
Lko Bench for AY 2006-07 (E-7)

(Delivered by Hon'ble Rohit Ranjan Agarwal J.)

1. This is an assessee's appeal under
Section 260-A of the Income Tax Act,
1961 (hereinafter called as 'Act') assailing
the order of the Income Tax Appellate
Tribunal, Lucknow Bench, 'A' Lucknow
(hereinafter called as 'Tribunal') dated
24.02.2016, affirming the order of the CIT
(A) as far as regarding addition out of sundry
creditors to the extent of Rs.15 lacs and
disallowance of 25% of the labour charges.
The appeal was admitted on 05.07.2016 on
the following question of law:-

"(i)
Whether
the
Appellate
Tribunal was legally justified in holding
that CIT(A) in exercise of power of
enhancement u/s 251 has power to
consider new source of income which was
not dealt by A.O. in assessment order
ignoring the Full Bench decision of CIT
vs. Sardari Lal & Co. 251 ITR 864 (Del)
(FB)?

(v)
Whether
the
Appellate
Tribunal was justified in not considering that
after set-aside proceedings by Hon'ble high
Court, the CIT(A) has not issued fresh notice
of enhancement (although time barred) and
followed the its earlier order without
application of mind?"

2. However, vide order dated
02.05.2019, this Court allowed the
application filed by the appellant for
additional question of law proposed by
him which are as under:-

"(iii) whether the ITAT was
correct to disallow Rs.5.95 lacs, being
25% of labour charges ignoring the
increasing trend in the G.P rate of
17.79% in this year as compared to
13.79% in A.y 2005-06, specially when all
the expenses were vouched and verifiable
being the books of accounts are duly
1 All. M/S S.D. Traders Vs. Commissioner of Income Tax, Kanpur & Anr.
469
audited u/s 44AB of the Act, in the
absence of its rejection and the books
have not been rejected.

(iv) whether the ITAT has
rightly sustained the addition of Rs.15
lacs out of Sundry Creditors for onus of
discharge of verification after 7 years, on
appellant while legal observation to
preserve the books of Accounts and other
documents, for 6 years from the relevant
assessment years and third party is under
no obligation to provide confirmation or
verification beyond 6 years from the
relevant assessment years."

3. On 03.05.2019, the above
mentioned
question
of
laws
were
incorporated by the appellant in the paperbook as question nos. III and IV.
Assessee/ appellant is in business of civil
contract, and for assessment year 2006-07
disclosed his job work receipts amounting
to Rs.90,35,009/- and declared gross
profit of Rs.16,07,474/- whereas net profit
was shown as Rs.3,62,113/-. Return of
income was filed on 31.10.2006 and the
same was processed under Section 143(1)
of the Act on 14.09.2007. Case of the
assessee was selected for scrutiny and
notice under Section 143(2) was issued on
19.10.2007, as well as notice under
Section 142(1) along with questionnaire
was issued on 08.08.2008. According to
assessee, he replied the queries raised by
Assessing
Officer.
AO
completed
assessment and made three additions.

4. The order of assessment was
challenged
by
assessee
before
Commissioner of Income Tax (Appeals),
who
on
13.09.2013
issued
notice
requiring appellant to produce labour
register including bills, vouchers and
ledger accounts as well as details of
sundry creditOrs. On 14.11.2013, CIT (A)
passed an order enhancing income of
appellant by Rs.26.50 lacs which includes
disallowances to the extent of 50% of
wage expenses claimed by appellant in
profit and loss account and 50% of sundry
creditors appearing in balance sheet of the
assessee.

5. Order of CIT(A) was challenged
before the Tribunal by assessee, and on
14.04.2014, Tribunal dismissed the appeal of
assessee. Aggrieved by this order assessee
preferred an Income Tax Appeal Defective
No. 145 of 2014 before this Court. On
10.12.2014, this Court set aside the order of
CIT (A) and of the Tribunal, and restored the
proceedings for reconsideration before CIT
(A), with a direction that appellant shall file
all required information and documentary
material before CIT (A) by 31st December,
2014 and shall appear before CIT (A) for
receiving directions as to hearing on 5th
January, 2015. It was further held that in case
assessee fails to file required information and
documentary material, CIT (A) would be at
liberty to pass orders on basis of available
records after furnishing an opportunity of
being heard to the assessee.

6. In compliance of the order of this
Court, it appears that assessee filed an
application along with copy of order
before CIT (A) along with certain documents
which have been enclosed along with this
appeal and are part of record as Annexure-6.
Further, notice under Section 250 was issued
by the CIT (A) for hearing on 05.01.2015.
Thereafter, appellant was given several
opportunities on 31.12.2014, 18.02.2015,
27.02.2015, 09.03.2015, 17.03.2015 and
25.03.2015. From the order of the CIT (A), it
appears that the authorised representative of
the appellant appeared from time to time and
furnished
replies/
documents.
On
470 INDIAN LAW REPORTS ALLAHABAD SERIES
31.03.2015, CIT (A) partly allowed appeal of
the assessee and disallowance of Rs.36,019/-
and
Rs.20,000/-
were
deleted,
while
additions of Rs.11.50 lacs and Rs.15.00 lacs
were confirmed. Against this order an appeal
was filed by the assessee/ appellant before
the Tribunal which was also partly allowed
on 24.02.2016 confirming the addition of
amount of sundry creditors to extent of
Rs.15.00 lacs, while disallowance on labour
charges of Rs.5.95 lacs being made. It is
against this order that the present appeal has
been filed by the assessee.

7. Learned senior counsel appearing
for the assessee submitted that Assessing
Officer had made three additions which
were deleted by the CIT (A) but had
wrongly made addition of Rs.11.50 lacs
and
Rs.15.00
lacs
towards
labour
expenditure and sundry creditors, as he
did not had the jurisdiction to introduce a
new source of income and assessment was
to be confined to those items of income
which was subject matter of original
assessment, that is the three additions
made by AO of Rs.76,019/-, Rs.20,000/-
and Rs.54,375/- only.

8. It was submitted that Section
251(1)(a) of the Act only envisages for
the appellate authority that is CIT
(Appeal) to confine its assessment to the
original assessment order and not to
include the power to discover a new
source of income. Reliance has been
placed upon the decision in case of CIT v.
Shapoorji Pallonji Mistry [1962] 44 ITR
891 (SC). Relevant portion relied upon is
extracted hereasunder:-

"In our opinion, this Court must
be held not to have expressed its final
opinion on the point arising here, in view
of what was stated at pages 709 and 710
of the report. This Court, however, gave
approval to the opinion of the learned
Chief Justice of the Bombay High Court
that section 31 of the Income-tax Act
confers not only appellate powers upon
the Appellate Assistant Commissioner in
so far as he is moved by an assessee but
also a revisional jurisdiction to revise the
assessment with a power to enhance the
assessment. So much, of course, follows
from the language of the section itself.
The only question is whether in enhancing
the assessment for any year he can travel
outside the record that is to say, the
return made by the assessee and the
assessment order passed by the Incometax Officer with a view to finding out new
sources of income not disclosed in either.
It is contended by the Commissioner of
Income-tax that the word "'assessment"
here means the ultimate amount which an
assessee must pay, regard being had to
the charging section and his total income.
In this view, it is said that the words
"enhance the assessments" are not
confined to the assessment reached
through a particular process but the
amount which ought to have been
computed if the true total income had
been found. There is no doubt that this
view is also possible. On the other hand,
it must not be overlooked that there are
other provisions like sections 34 and 33B,
which enable escaped income from new
sources to be brought to tax after
following a special procedure. The
assessee contends that the powers of the
Appellate Assistant Commissioner extend
to matters considered by the Income-tax
Officer, 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 a finding by
two tribunals and one right of appeal."
1 All. M/S S.D. Traders Vs. Commissioner of Income Tax, Kanpur & Anr.
471

9. Counsel for the assessee also
relied upon a decision of the Apex Court
in case of ITO v. Rai Bahadur Hardutroy
Motilal Chamaria [1967] 66 ITR 443
(SC) which had followed the earlier
decision of the Apex Court cited above.
Reliance has also been placed on the
decision of the Supreme Court in case of
Additional Commissioner ofIncome Tax
v. M/s. Gurjargravures (P.) Ltd. [1978]
111 ITR 1 (SC), following the earlier two
decisions of the Apex Court. Counsel for
the assessee vehemently argued that the
power of the first appellate authority does
not go beyond what has been considered
by the Assessing Officer in appeal and
reliance upon the decision of a Full Bench
in case of CIT v. Sardari Lal and Co.
[2001] 251 ITR 864 (Delhi) has been
placed wherein it has been held as under:-

"7. The learned counsel for the
revenue also submitted that this conclusion
of the Division Bench needs a fresh look.
We have considered this submission in the
background of what had been stated by the
Apex Court in Jute Corporation of India
Ltd. v. CIT [1991] 187 ITR 688 and CIT v.
Nirbheram Daluram [1997] 224 ITR 610.
In Jute Corporation of India Ltd.'s case
(supra), the Apex Court while considering
the question whether AAC has jurisdiction
to allow the assessee to raise an additional
ground in assailing the order of assessment
before it, referred to Shapoorji Pallonji
Mistry's case (supra), and draw a distinction
between the power to enhance tax on
discovery of a new source of income and
granting a deduction on the admitted facts
supported by the decision of the Apex
Court. Relying on certain observations
made by the Apex Court in CIT v. Kanpur
Coal Syndicate [1964] 53 ITR 225, the
Apex Court held that powers of the first
appellate authority are coterminous with
those of the Assessing Officer and the first
appellate authority is vested with all the wide
powers, which the subordinate authority may
have in the matter. In Nirbheram Daluram's
case (supra), the decisions of Kanpur Coal
Syndicate's
case
(supra)
and
Jute
Corporation of India Ltd.'s case (supra)
were also considered and it was observed by
the Apex Court that the appellate powers
conferred on the first appellate authority
under section 251 were not confined to the
matter, which had been considered by the
ITO, as the first appellate authority is vested
with all the wide powers of the Assessing
Officer may have while making the
assessment, but the issue whether these wide
powers also include the power to discover a
new source of income was not commented
upon. Consequently, the view expressed in
Shapoorji Pallonji Mistry's case (supra) and
Rai
Bahadur
Hardutroy
Motilal
Chamaria's case (supra) still holds feet. It
may be noted that the issue was considered
in CIT v. Mc. Millan and Co. [1958] 33 ITR
183 (SC). Referring to a decision of the
Bombay
High
Court
in
Narrondas
Manordass v. CIT [1957] 31 ITR 909, it
was held that the language used in section 31
is wide enough to enable the first appellate
authority to correct the ITO not only with
regard to a matter which has been raised by
the assessee but also with regard to a matter
which has been considered by the Assessing
Officer and determined in the course of
assessment. It is also relevant to note that in
the Jute Corporation'of India Ltd.'s case
(supra), the Apex Court inter alia observed as
follows:-

".....The AAC, on an appeal
preferred by the assessee, had jurisdiction to
invoke, for the first time, the provisions of
rule 33 of the Indian Income-tax Rules, 1922,
for the purpose of computing the income of a
non-resident even if the ITO had not done so
472 INDIAN LAW REPORTS ALLAHABAD SERIES
in the assessment proceedings. But, in
Shapoorji Pallonji Mistri [1962] 44 ITR
891, this Court, while considering the extent
of the power of the AAC, referred to a
number of cases decided by various High
Courts including the Bombay High Court
judgment in Narrondas Manordass [1957]
31 ITR 909 and also the decision of this
Court in McMillan and Co. [1958] 33 ITR
182 and held that, in an appeal filed by the
assessee, the AAC has no power to enhance
the assessment by discovering new sources
of income not considered by the ITO in the
order appealed against. It was urged on
behalf of the revenue that the words 'enhance
the assessment' occurring, in section 31 were
not confined to the assessment reached
through a particular process but the amount
which ought to have been computed if the
true total income had been found. The Court
observed that there was no doubt that this
view was also possible, but having regard to
the provisions of sections 34 and 33-B,
which made provision for assessment of
escaped income from new sources, the
interpretation suggested on behalf of the
revenue would be against the view which
had held the field for nearly 37 years......"
(p. 692) [Emphasis supplied]

8. 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 sections 147/148
of the Act and section 263, 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. That being
the position, decision in CIT v. Union
Tyres [1999] 240 ITR 556 of this Court
expresses the correct view and does not
need re-consideration. This reference is
accordingly disposed of."

10. Counsel for the assessee also relied
on a decision of the Kerala High Court in
case of Commissioner of Income Tax,
Thrissur v. B.P. Sherafudin [2017] 399 ITR
524 (Kerala). Lastly, he submitted that the
CIT (A) had issued the notice for
enhancement on 13.09.2013, while the time
limit expired on 31.03.2013 for assessment
year 2006-07 and the said proceedings are
barred by limitation in view of Section
149(1)(b) of the Act.

11. Refuting the arguments made by
counsel
for
assessee,
Sri
Krishna
Agarwal, learned counsel appearing for
the Revenue submitted that question nos.
(i) and (ii) are substantial question of law
while question nos. (iii) and (iv) framed
as additional questions are questions of
fact.
He
submitted
that
power
of
enhancement provided under Section 251
of the Act, is in fact, the power of
Appellate
Assistant
Commissioner
coterminous with that of Income Tax
Officer and he can do what the Income
Tax Officer do and also direct him to do
what he has failed to do. It was further
contended that CIT (A) had been
empowered under Section 251 to enhance
the assessment and he may consider and
decide
any
matter
arising
out
of
proceedings in which the order appealed
against was passed. Power of CIT(A)
cannot be limited to any disallowances or
additions made by Assessing Officer but
it extends to whole of proceedings.

12. He further submitted that assessee
filed its return of income along with balancesheet, profit and loss account and audited
books
of
account
in
the
assessment
proceedings, in which he claimed deduction
1 All. M/S S.D. Traders Vs. Commissioner of Income Tax, Kanpur & Anr.
473
on account of labour expenses and sundry
creditOrs. CIT (A) has power to look into
such deductions claimed by assessee in his
return as well as any credits in its books of
account which assessee does not claim to be
its income.

13. Reliance has been placed upon
the decision of the Apex Court in case of
Commissioner
of
Income
Tax
vs.
Nirbheram Deluram [1997] 91 Taxman
181 (SC), CIT vs. Kanpur Coal Syndicate
[1964] 53 ITR 225 (SC) as well as Jute
Corporation of India vs. CIT [1991] 187
ITR 688 (SC), in which the Apex Court in
depth considered the power of the
Appellate Assistant Commissioner while
exercising power under Section 251 of the
Income Tax Act. Further, the Apex Court
in Jute Corporation of India (supra)
distinguished the judgment passed in case
of Gurjargravures (P.) Ltd. (supra) and
held as under:-

"4. Section 31 of the Income-tax
Act, 1922 ('the Act') also conferred power
on the AAC to hear appeal against the
assessment order made by the ITO.
Chagla, C. J. of the Bombay High Court
considered the question in detail in
Narrondas Manordass v. CIT, [1957] 31
ITR 909 and held that the AAC was
empowered to correct the ITO not only
with regard to a matter which had been
raised by the assessee but also with regard
to a matter which may have been
considered by the ITO and determined in
the course of the assessment. The High
Court observed that since the AAC had
been the revising authority against the
decisions of the ITO; a revising authority
not in the narrow sense of revising those
matters, which the assessee makes a
grievance but the subject-matter of the
appeal not only he had the same powers
which could be exercised by the ITO.
These observations were approved by this
Court in CIT v. McMillan and Co.,
[1958] 33 ITR 182 the AAC on an appeal
preferred by the assessee had jurisdiction
to invoke, for the first time provisions of
rule 33 of the Income-tax Rules, 1922, for
the purpose of computing the income of a
nonresident even if the ITO had not done
so in the assessment proceedings. But in
CIT v. Shapporji Pallonji Mistry, [1962]
44 ITR 891this Court while considering
the extent of the power of the AAC
referred to a number of cases decided by
various High Courts including Bombay
High Court judgment in Narrondas
Manordass's case (supra) and also the
decision of this Court in McMillan and
Co.'s case (supra) and held that in an
appeal filed by the assessee, the AAC has
no power to enhance the assessment by
discovering new sources of income, not
considered by the ITO in the order
appealed against. It was urged on behalf
of the revenue that the words 'enhance the
assessment' occurring in section 31 were
not confined to the assessment reached
through particular process but the amount
which ought to have been computed if the
true total income had been found. The
Court observed that there was no doubt
that this view was also possible, but
having regard to the provisions of sections
34 and 33B of the 1922 Act, which made
provisions for assessment of escaped
income
from
new
sources,
the
interpretation suggested on behalf of the
revenue would be against the view which
had held the field for nearly 37 years. In
this view the Court held that the AAC had
no power to enhance the assessment by
discovering new sources of income. This
decision does not directly deal with the
question which we are concerned. Power
to enhance tax on discovery of new
474 INDIAN LAW REPORTS ALLAHABAD SERIES
source of income is quite different than
granting deduction on the admitted facts
fully supported by the decision of this
Court. If the tax liability of the assessee is
admitted and if the ITO is afforded
opportunity of hearing by the appellate
authority in allowing the assessee's claim
for deduction on the settled view of law,
there appears to be no good reason to
curtail the powers of the appellate
authority' under section 251(1)(a) of the
Act.

6. In Gurjargravures (P.) Ltd.'s
case (supra) this Court has taken a
different view, holding that in the absence
of any claim made by the assessee before
the ITO regarding relief, he is not entitled
to raise the question of exemption under
Section 84 of the Act before the AAC
hearing appeal against the order of the
ITO. In that case the assessee had made
no claim before the ITO for exemption
under Section 84, no such claim was
made in the return nor any material was
placed on record supporting such a claim
before the ITO at the time of assessment.
The assessee for the first time made claim
for exemption under Section 84 before the
AAC who rejected the claim but on
further appeal the Tribunal held that since
the entire assessment was open before the
AAC there was no reason for his not
entertaining the claim, or directing the
ITO to allow appropriate relief. On a
reference the High Court upheld that view
taken by the Tribunal. On appeal this
Court set aside the order of the High
Court as it was of the view that the AAC
had no power to interfere with the order
of assessment made by the ITO on a new
ground not raised before the ITO, and,
therefore, the Tribunal committed error in
directing the AAC to allow the claim of
the assessee under Section 84. Apparently
this view taken by two Judge Bench of
this Court appears to be in conflict with
the view taken by the three Judge Bench
of the Court inKanpur Coal Syndicate's
case (supra). It appears from the report or
of the decision in Gujrat High Court case
the three Judge Bench decision in Kanpur
Coal Syndicate's case (supra) was not
brought to the notice of the Bench in
Gurjargravures (P.) Ltd.'s case (supra).
In the circumstances the view of the
larger Bench in the Kanpur Coal
Syndicate's case (supra) hold the field.
However, we do not consider it necessary
to
over-rule
the
view
taken
in
Gurjargravures (P.) Ltd.'s case (supra)
as in our opinion that decision is founded
on the special facts of the case, as would
appear from the following observations
made by the Court:-

"......As we have pointed out
earlier, the statement of case drawn up by
the Tribunal does not mention that there
was any material on record to sustain the
claim for exemption which was made for
the first time before the AAC. We are not
here called upon to consider a case where
the assessee failed to make a claim though
there was no evidence on record to
support it, or a case where a claim was
made but no evidence or insufficient
evidence was adduced in support. In the
present case, neither any claim was made
before the Income-tax Officer, nor was
there any material on record supporting
such a claim..."(p.5)

The above observations do not
rule out a case for raising an additional
ground before the AAC if the ground so
raised could not have been raised at that
particular stage when the return was filed or
when the assessment order was made or that
the ground became available on account of
1 All. M/S S.D. Traders Vs. Commissioner of Income Tax, Kanpur & Anr.
475
change of circumstances or law. There may
be several factors justifying raising of such
new plea in appeal, and each case has to be
considered on its own facts. If the AAC is
satisfied he would be acting within his
jurisdiction in considering the question so
raised in all its aspects. Of course, while
permitting the assessee to raise an additional
ground, the AAC should exercise his
discretion in accordance with law and reason.
He must be satisfied that the ground raised
was bona fide and that the same could not
have been raised for good reasons. The
satisfaction of the AAC depends upon the
facts and circumstances of each case and no
rigid principles or any hard and fast rule can
be laid down for this purpose."

14. A division Bench of this Court in
case of Commissioner of Income Tax v.
Kashi Nath Candiwala [2005] 144 Taxman
840 (All.) relying upon the judgment of
Nirbheram Deluram (supra) and Jute
Corporation of India (supra) held that in
view of Explanation to Section 251 of the
Act the appellate authority is empowered to
consider and decide any matter arising out of
proceedings in which the order appealed
against was passed.

"7. We have heard Sri A.N.
Mahajan, learned standing counsel for the
revenue and nobody has appeared on behalf
of the respondent-assessee. The learned
counsel for the Revenue submitted that under
the Explanation to section 251 of the Act, the
Appellate Authority is empowered to
consider and decide any matter arising out of
proceedings in which the order appealed
against was passed notwithstanding the fact
that such matter was not raised before him by
the appellant and therefore, even though the
trading results were not subject-matter of the
appeal before the Commissioner of Income
Tax (Appeals), he was justified in going into
the trading results and substituting it by his
own findings. Shri Mahajan has relied upon
a decision of Apex Court in the case of CIT
v. Nirbheram Daluram [1997] 224 ITR 610
wherein the Apex Court has held that the
Appellate Assistant Commissioner is entitled
to direct additions in respect of items of
income not considered by the Income Tax
Officer. The Apex Court has followed its
earlier decision in the case of Jute Corpn. of
India Ltd. v. CIT [1991] 187 ITR 688 and
has held that the power of the Appellate
Assistant Commissioner is coterminous with
that of the Income Tax Officer and he can do
what the Income Tax Officer can do and also
direct him to do what he has failed to do."

15. Further two decisions relied upon
by the counsel for the Revenue are in case
of CIT v. K.S. Dattatreya [2011] 197
Taxman 151 (Kar.) and CIT v. McMillan
& Co. [1958] 33 ITR 182 (SC).

16. Sri Agarwal submitted that the
reliance placed on the decision of
Shapoorji Pallonji Mistry (supra) and Rai
Bahadur Hardutroy Motilal Chamaria
(supra) are completely distinguishable on
facts, as in both cases the Court held that
the AAC could not travel outside the
record that is to say the return made by
assessee with a view to finding out new
source of income not disclosed.

17. Lastly the counsel for the Revenue
submitted that there was no requirement of
issuance of fresh notice of enhancement once
this Court restored the matter back to the
CIT (A) to consider the material, giving an
opportunity to assessee and fixing 31st
December, 2014 as last date for submission
of
documents/
material
and
several
opportunities being provided by the first
appellate authority thus, question of fresh
issuance of notice does not arise.
476 INDIAN LAW REPORTS ALLAHABAD SERIES

18. We have heard Sri Rakesh
Ranjan Agarwal, learned Senior Advocate
assisted by Sri Suyash Agarwal, learned
counsel for the assessee and Sri Krishna
Agarwal, learned cousel for the Revenue.

19. Before proceeding, a glance of
provisions of Section 251 of the Act is
necessary, which is extracted hereasunder:-

"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 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."

20. A careful reading of Section 251
reveals that power vest in Commissioner
(Appeals), in an appeal against an assessment
order, where he can confirm, reduce enhance
or annul the assessment. Explanation to
Section 251 further clarifies the position and
empowers
Commissioner
(Appeals)
to
consider and decide any matter arising out of
proceedings in which the order appealed
against was passed, notwithstanding that said
matter was not raised before him by the
appellant, meaning thereby that power
exercisable by CIT (Appeal) under Section
251 cannot be restricted to only the issues
raised by the appellant in any appeal before
him, but Commissioner can exercise his
discretion in accordance with law.

21. The first argument raised by the
counsel for the assessee that the CIT (A)
while exercising power of enhancement
under Section 251 of the Act cannot
consider new source of income which was
not dealt by the Assessing Officer, in the
present case cannot be accepted as after the
remand by this Court, the CIT (A) as well
as the Tribunal in depth had recorded a
finding that there was no new source of
income on which the additions had been
made and it was all on the records produced
before the Assessing Officer that the CIT
(A) had made additions of labour charges as
well as addition of sundry creditors to the
extent of Rs.15.00 lacs.

22. It has been argued by the counsel
for the Revenue that CIT (A) has not
1 All. M/S S.D. Traders Vs. Commissioner of Income Tax, Kanpur & Anr.
477
travelled beyond the books of accounts and
during appeal it was found that only
confirmation was available of five parties
and the rest of the creditors were untraceable,
hence the addition of the amount was made
which were part of the books of account.
Likewise, the addition made as far as the
labour charges are concerned was also on the
basis of the books of account submitted by
the assessee as such, it cannot be accepted
that the CIT (A) had made additions on the
basis of new source of income.

23. The argument of the counsel for
the assessee relying upon the decision of
the Apex Court in case of Shapoorji
Pallonji Mistry (supra), Rai Bahadur
Hardutroy Motilal Chamaria (supra) and
Sardari Lal & Co. (supra) cannot be
accepted as the said judgments have their
very basis where the Appellate Assistant
Commissioner had made addition or
deletion on the basis of new source of
income, but present case is not of new
source of income, as CIT (A) has relied
upon the books of accounts submitted by
the assessee along with his return and had
claimed expenditure made by him in
profit and loss account and claim of
sundry creditors shown in balance-sheet.

24. The Apex Court while dealing
with the power of the Appellate Assistant
Commissioner under Section 251 of the
Act had in case of Nirbheram Deluram
(supra) and Jute Corporation of India
(supra) had held that power of Appellate
Assistant Commissioner is coterminous
with that of Income Tax Officer and he
can do what the Income Tax Officer can
do and also direct him to do what he has
failed to do.

25. In the present case, the CIT (A)
had deleted addition made by the
Assessing Officer and had made two
additions of the labour charges and sundry
creditors on the basis of the profit and loss
account, and balance-sheet filed by the
assessee along with his return. Thus, there
was no new source of income as claimed
by the assessee. The case law relied upon
by the assessee in case of Sardari Lal &
Co. (supra) and Shapoorji Pallonji Mistry
(supra) are all distinguishable in the facts
of the present case, and the Hon'ble
Courts in those cases had only dealt with
the situation wherein AAC found new
source of income and made additions to
the income, while in the present case no
such addition was made from any new
source of income but from the return so
submitted by the assessee himself.

26. The second question as regards
the
issuance
of
fresh
notice
of
enhancement by the CIT (A) is concerned
has no relevance, once the order of the
Tribunal as well as CIT (A) was set aside
by this Court on 10.12.2014 restoring the
appeal
back
to
CIT
(A)
for
reconsideration
and
fixing
31th
December, 2014 as last date for the
appellant to file all required information
and documentary material and to appear
before CIT (A) on 05th January, 2015.
The question of law raised by the assessee
is of no consequence as he, thereafter, had
filed the documents before CIT (A) and
had appeared, thus, the question of
issuance of fresh notice for enhancement
does not arise and the CIT(A) rightly
decided the question so raised before it.

27. As far as question no. (III) and
(IV),
which
the
appellant
had
incorporated in his appeal with the
permission of the Court are not substantial
question of law and are questions of fact
which have been dealt with by, both CIT
478 INDIAN LAW REPORTS ALLAHABAD SERIES
(A) and the Tribunal in depth and have
categorically recorded finding of fact, for
which no interference is required in this
appeal.

28. Thus, argument of the counsel
for assessee cannot be accepted so as to
restrict the power of Commissioner
(Appeals) on the ground of new source of
income, as Section 251 clearly envisages
the power of the appellate authority for
considering and deciding any material
arising out of proceedings in which order
appealed against was passed. In the
present case, all the materials looked upon
by the appellate authority was before the
assessing
authority,
as
such
the
Commissioner
(Appeals)
rightly
proceeded to decide the same as it arose
out of the proceedings of assessment.

29. The Apex Court has also
affirmed that power of Commissioner
(Appeals) cannot be restricted and in the
case of Jute Corporation of India Ltd.
(supra) held that the power of the
Commissioner
(Appeals)
being
coterminous with that of the Income Tax
Officer, he can do what the Income Tax
Officer do and further the section also
empowers him to direct the Assessing
Officer to do what he had failed to do.
The power of the Commissioner is not
bridled in any way and the language of
the section is plain and simple.

30.

Having
considered
the
material on record and the law laid
down by the Apex Court in regard to
the power of Commissioner (Appeals)
exercisable under Section 251 of the
Act, we are of the considered opinion
that the order of the Tribunal needs no
interference and the appeal of the
assessee is dismissed.

31. The questions of law are,
therefore, answered in favour of the
Revenue and against the Assessee.
--------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 12.07.2019

BEFORE
THE HON'BLE BHARATI SAPRU, J.
THE HON'BLE VIVEK VARMA, J.

Income Tax Appeal No.50 of 2009

M/S Deepak Rugs,Bhadohi ...Appellant
Versus
Commissioner of Income Tax,Varanasi
 ...Respondent

Counsel for the Appellant:
Sri Shambhu Chopra, Sri Arun Pratap
Singh, Sri Rishi Raj Kapoor, Sri Nikhil
Agarwal, Sri Kushagra Srivastava.

Counsel for the Respondent:
C.S.C., I.T., Sri Ashish Agarwal.

A. Income Tax Act, 1961: Sections
143(2), 142(1), 144, 145(3), 251, 260-AIn exercise of powers u/s 260A, the
finding of fact of the Tribunal cannot be
disturbed.

The Assessing Officer noticed that the weaving
charges manufacturing expenses were not
verifiable and the gross profit rate had gone
down considerably as compared to the
preceding years. Assessing Officer applied the
provisions of S.145(3) and adopted a higher
GP rate (15%).