Anup Sharma v. Cit

T.R Sood, A.M:— This is an appeal filed by the assessee against the order dated 01/12/2011 of CIT (Appeals), Chandigarh.

2. In this appeal assessee has raised the following grounds:—

1) That on the facts & circumstances of the case, Learned Commissioner of Income Tax (Appeals)-Chandigarh [‘Ld. CIT(A)’] has grossly erred in law in confirming that the assessment framed under section 143(3) of the Income Tax Act, 1961 (‘the Act’) by the Additional Commissioner of Income Tax, Range III, Chandigarh (‘Ld. AO’) is with proper jurisdiction.

a) That on the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the addition of Rs. 1,80,000/- made by the Ld. AO invoking provision of section 64(1)(iii) and section 40A(2)(b)/section 37(1) of the Income Tax Act, 1961 (‘the Act’). being salary paid to Mrs. Rashmi Sharma.

2)(b) That the Ld. CIT(A) has grossly erred in law in not considering the contention of the Appellant that the Ld. Assessing officer has not complied with the conditions required for invoking provisions of section 40A(2)(b) of the Act.

2)(c) That the Ld. CIT has grossly erred in law in rejecting the contention of the Appellant that Principle of Consistency is require to be followed before disallowing the salary paid to Mrs. Rashmi Sharma by the Appellant.

3) That on the facts and circumstances of the case, Ld. CIT(A) has grossly erred in confirming addition of Rs. 2,77,632/- on account of alleged difference in the accounts of following parties.

Party Amount(Rs.) Glass Palace 1,53,746 Healthy way 1,23,886 Total 2,77,632

The aforesaid addition cannot be made sinceamount due from these parties is more in the Appellant's books of accounts as compared to the balance in the books of accounts of the aforesaid parties.

4) That on the fact and circumstances of the case, Ld. CIT(A) has grossly erred in confirming addition of Rs. 23,500/- made by the Ld. Assessing officer by invoking provisions of section 40A(3) of the Act.

5) That the Ld. CIT(A) has grossly erred in law in treating the addition made under section 68 by the Ld. AO as unexplained investment under section 69A by applying provisions of section 292B of the Act. even after accepting the Appellant's contention that bank pass books are not books of accounts of appellant attracting section 68 of the Act.

6) That the Ld. CIT(A) has grossly erred in law in confirming addition of Rs. 1856644/- being alleged deposits in Chandigarh State Cooperative Bank, Sector — 22 B, Chandigarh, Addition confirmed is illegal and bad in law.

3. Ground No. 1: The Ld. Counsel for the assessee referred to the Circular of the Board, copy of which is available at page 54 of the paper book. He pointed out that as per this circular if a case was selected only on the basis of AIR information then scrutiny was required to be limited only to that issue and the scope of scrutiny could not be expanded without permission of the concerned Commissioner. He contended that it is settled position that circular are binding on the Revenue authorities, therefore, scope of assessment could not have been expended without the permission of the Commissioner.

4. On the other hand, Ld. DR. strongly supported the order of CIT(A).

5. After considering the rival submissions, we find that CBDT has issued instructions, copy of which is placed at page No. 54 which is reproduced below:—

“F. No. 225/-26/2006-ITA.II (P)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, dated the 8th September, 2010

All Chief Commissioners of Income Tax

All Directors General of Income Tax

Sir/Madam

Subject:— Selection of cases for scrutiny on the basis of data in AIR returns and subsequent assessment proceedings — regarding

Reference is invited to Board's letter of even number dated 23rd May 2007 regarding scope of enquiry in the scrutiny cases

selected only on the basis of information received through the AIR returns.

2. The above mentioned guidelines have been reconsidered by the Board and it has been decided that the scrutiny of such cases would be limited only to the aspects of information received through AIR. However, a case may be taken up for wider scrutiny with the approval of the administrative Commissioner, where it is felt that apart from the AIR information there is a potential escapement of income more than Rs. 10 Lacs.

3. It has also been decided that in all the cases which are picked up for scrutiny only on the basis of AIR information, the notice u/s 143(2) of Income Tax Act should clearly be stamped with “AIR Case”.

This should be immediately brought to the notice of all the officers working in your region.

Yours faithfully

(Ajay Goayal)

Director (ITA.II)

Telefax: 23092151”

6. The contents of the above letter show that these are internal instructions and could not be construed as circular. The Ld. CIT(A) has dealt this issue vide para 2.3, which is as under:—

“2.3 I have considered the submission of the Ld. Counsels for the appellant and have gone through the assessment records of the case. The first notice u/s 143(2) in this case was issued on 02.09.2009 and in this notice, it was clearly stated that this case has been selected through CASS. The instruction dated 08.09.2010 quoted by the Ld. Counsels could not have been followed by the Assessing Officer, since notice u/s 143(2) had been issued on 02.09.2009 Moreover, the appellant never objected before the Assessing Officer when he was conveyed about the AIR information vide questionnaire dated 06.09.2010 In any case, this was an administrative matter and if the appellant had any grievance, he should have approached the Commissioner of Income Tax for remedy. Ground of appeal No. 1 is dismissed.”

7. In our opinion the Ld. CIT(A) has correctly adjudicated the issue because in this case the case was selected on the basis of CASS which is also known as Computer Assisted Scrutiny System. Moreover, the case was selected for security on 2.9.2009 when a notice u/s 143(2) was issued whereas the instructions have been issued on 8.9.2010 and, therefore, they cannot apply to the earlier period. Once the case is selected for scrutiny under the CASS and notice is issued u/s 143(2) then whole of assessment is open for scrutiny. In any case the Ld. CIT(A) has correctly observed that this is an administrative matter and could have been objected to before the Commissioner in administrative capacity and cannot be challenged in the appeal, therefore, in our opinion no interference is required in the order of Ld. CIT(A).

8. Ground No. 2(a) to 2(c):— After hearing both the parties, we find that during assessment proceedings the Assessing Officer noticed that assessee has paid a salary of Rs. 1,80,000/- to his wife. The Assessing Officer raised a query that why this salary should not be disallowed us/40A(2)(b) as no services have been rendered by Mrs. Rashmi Sharma that is wife of the assessee. He also confronted the assessee that why salary should not be disallowed as per section 64(1). In response, it was stated vide letter dated 19.11.2010 as under:—

“Ms. Rashmi Sharma is MSC Botany — 1st Class, and was engaged in the English copy writing and preparing Add-brochures, the copy of the Master of Philosophy education certificate had been submitted therefore we understand the provisions of section 64(1) are not applicable in this case.”

9. The Assessing Officer after considering the above submission observed that assessee was engaged in the advertising business and there was no evidence or any material on record to show that Mrs. Rashmi Sharma was engaged in the English Copy writing and preparing the advertisement brochures. Then he referred to various provisions of the Act and ultimately disallowed the salary in view of the clubbing provisions of section 64(1) of the Act.

10. On appeal before CIT(A), it was mainly submitted that Mrs. Rashmi Sharma is M. Sc. in Botany and the expression “technical or professional qualification” do not necessary connote a qualification by recognized university and it must be given a vide meaning. Further, the salary has been allowed in the earlier years.

11. After examining the submissions, Ld. CIT(A) did not find force in the same. He observed that there is no force in the contention that no such disallowance was made in the earlier years because assessments in those cases might have been completed without scrutiny. In any case there is no res judicata in the income tax proceedings. He further observed that in view of the provisions of section 64(1)(ii) of the Act, the requirement of specific professional qualification is there and in the absence of the same, the expenditure was not allowable and confirmed the action of the Assessing Officer.

12. Before us Ld. counsel for the assessee submitted that Mrs. Rashmi Sharma is MSC Botany and was doing the work of copy writing in English. The expression “technical or professional qualification” do not necessary connote a qualification by a degree of a recognized university and the expression should be given a wider meaning. In this regard, he referred to the following decisions:—

a) Ashaben Rohitbhai v. CIT 237 ITR 561 (Guj.)

b) Commissioner Of Income-Tax v. Smt. R. Bharathi 240 ITR 697 (Madras)

c) Commissioner Of Income-Tax v. R. Jayalakshmi 240 ITR 773 (Madras)

He also contended that provisions of section 64(1) could not be invoked if the expenses were not allowable u/s 37 or 40A(2)(a). Further the similar expenditure was allowed in earlier years and in few of those earlier years the assessment was framed u/s 143(3) and in this regard he referred to pages 117 to 121 which is copy of the assessment order.

13. On the other hand, Ld. DR. strongly supported the order of CIT(A).

14. After considering the rival submissions we find that Mrs. Rashmi Sharma is holding a Post Graduate degree i.e M. Sc in Botany which has nothing to do with the copy writing or advertising business, therefore, it cannot be said that she was having any professional or technical qualification for doing this job. As far as the decision of Hon'ble High Court of Gujarat in the case of Ashaben Rohitbhai v. CIT (Guj.) in 237 ITR 561 is concerned, in that case the wife was working as Managing Director of a company but it has to be noted that she had worked as Managing Director in other companies in the past which according to Court was a sufficient qualification and experience within the meaning of proviso to Clause (2) to Section 64(1). The observation of the Court has been extracted in the head note as under:—

“Clause (ii) of sub-section (1) of section 64 contemplates that in computing the total income of any individual, there shall be included all such income as arises directly or indirectly to the spouse of such individual. Clause (ii) refers to payment made by way of salary, commission, fees or any other form of remuneration to the spouse of such individual in which such individual has substantial interest. But the proviso engrafts an exception and provides that clause (ii) will not apply in relation to any income arising to the spouse where the spouse possesses technical or professional qualifications and the income is solely attributable to the application of his or her technical or professional knowledge and experience. The proviso contemplates two conditions : (i) the spouse must possess technical or professional qualifications; and (ii) income derived by him or her must be attributable to the application of such technical or professional knowledge and experience. The requirement of technical or professional qualification is not general in terms. It must relate to the post which he or she occupied and, secondly, the salary or fees must be attributable to the application of his or her technical or professional knowledge. If these two conditions are fulfilled, the income must be considered to be of that person and should be assessed accordingly. If the job is of a technical nature requiring a degree or diploma, the holding of such degree or diploma would be essential. The nature of professional qualifications, however, varies from profession to profession. Likewise, the nature of technical qualifications also differs depending on the nature of the job. It is not each and every qualification, academic or otherwise, which can bring the spouse within the scope of the proviso so as to enable him or her to take the income out of the clubbing provision. If the spouse possesses technical or professional qualifications necessary to undertake the particular technical job or carry on the profession to which the income is attributed, that will meet the requirement of the first part of the proviso. But even if the first part of the proviso is complied with, it must further be shown that the payment made to the spouse is attributable to the application of such technical or professional knowledge and experience falling under the latter part thereof.”

15. The highlighted portion clearly shows that if a job is of a technical nature then such technical qualification would be essential. The job of a copy writer is definitively a technical job and cannot be described as a general administrative job. By no stretch of imagination, M. Sc. (Botany) will have anything to do with the job of copy writing.

16. Similarly, in the case of Commissioner Of Income-Tax v. Smt. R. Bharathi 240 ITR 697 (Madras), the salary was paid to the husband of the assessee. The lady was doing business of jewellery and her husband was having experience of valuation of jewellery. The valuation of jewellery is an integral part of the jewellery business and that is why salary was held to be allowable, therefore, clearly this a distinguishable case.

17. Further in the case of Commissioner Of Income-Tax v. R. Jayalakshmi 240 ITR 773 (Madras), again the salary was paid by the concern where wife was a partner in the printing press. The salary was paid by the firm to the husband of the lady who was partner. The husband was employed as manager of the printing press. It was noticed by the Court that husband had worked previously in another printing press as Manager and that is why salary was held to be allowable. But in the case before us, nowhere it has been shown that wife has worked as a copy writer in some other concern.

18. It was also contended that proviso of section 64(1)(ii) cannot be invoked if expenditure are now allowable u/s 37(1) and 40A(2)(a). We find no force in these submissions. Though Assessing Officer has referred to the provision of section 40A(2)(b) initially but finally disallowance has been made u/s 64(1)(ii). This has been done because the assessee is running a business in his individual capacity and any remuneration paid to the wife is required to be clubbed with his income. Whether the income is clubbed or the expenditure is disallowed would amount to the same thing because net effect would be to the increase in the income of assessee. Further the Ld. CIT(A) has finally confirmed the disallowance by way of clubbing u/s 64(1)(ii) and we are concerned with the impugned order where reference has been made to section 64(i)(ii) of the Act and no cognizance can be taken for the reference made by Assessing Officer to section 40A(2)(b).

19. One more contention was raised by ld. counsel of the assessee that the similar expenditure has been allowed in the earlier years even under the scrutiny assessment completed for assessment year 2007-08. We are unable to agree with this contention because Hon'ble Supreme Court in the case of CIT v. British Paints India Ltd. in 188 ITR 44 (SC) has clearly observed at page 53 as under:—

“It is not only the right but the duty of the Assessing Officer to consider whether or not the books disclose the true state of accounts and the correct income can be deduced therefrom. It is incorrect to say, as contended on behalf of the assessee, that the officer is bound to accept the system of accounting regularly employed by the assessee the correctness of which had not been questioned in the past. There is no estoppel in these matters and the officer is not bound by the method followed in the earlier years.”

20. The above clearly shows that there cannot be any estoppel if earlier a wrong proposition was accepted by the Assessing Officer against the clear provision of law. This is so because an error cannot be allowed to be perpetuate forever.

21. In view of the above observation, we find nothing wrong with the order of Ld. CIT(A) and we confirm the same.

22. Ground No. 3 : After hearing both the parties we find that during assessment proceedings Assessing Officer conducted enquiries by calling information us/133(6) form certain parties. Certain discrepancies were noted in the account of M/s. Glass Palace and assessee was asked to reconcile the discrepancies. According to Assessing Officer M/s. Glass Palace had made an entry of Rs. 1,53,746/- on 31.3.2008 with a narration ‘rebate on bills of M/s. Pecific Ads credited in this voucher for billing for financial year 2007-08 as per verbal settlement of account’. No such entry was found in the books of the assessee. He also noted that M/s. Glass Place had made the following entries:—

30.03.2008 Adjustment purchases furniture against 15000 31.03.2008 Cash 1950 31.03.2008 Glass Palace 55000 31.03.2008 Against purchase furniture 10000

23. The Assessing Officer observed that the above entries show that assessee had purchased some furniture items and the same has been adjusted in the rebate account. In this background, the sum of Rs. 1,53,746/- was added back to the income of the assessee.

24. Similarly, it was seen that as per the accounts furnished by M/s. Healthway, the closing credit balance was of Rs. 5,37,963/- whereas the debit balance in the books of the assessee is in the name of M/s. Healthway was Rs. 6,61,849/-. According to Assessing Officer the assessee had given general explanation and could not reconcile these amounts, therefore, this difference of Rs. 1,23,886/- was also added to the income of the assessee.

25. On appeal before CIT(A), it was mainly submitted that in case of M/s. Glass Palace the total amount of sales by the assessee matches with the amount of purchases shown by M/s. Glass Palace. It was pointed out that difference arose because the assessee has shown various rebates by way of individual entries whereas M/s. Glass Palace has made one entry for such rebate at the end of the year. Further, the amount of rebate amounting to Rs. 1,53,746/- include a sum of Rs. 25,000/- towards adjustment of furniture and debit on account of furniture has been duly recorded in the books of the assessee. In respect of M/s. Healthway, it was pointed out that amount due from that party as per assessee's books was Rs. 6,61,849/- whereas that party was showing less credit, therefore, no adverse inference can be taken particularly when no entry for cash is there in the books. In any case the difference is on account of rebate because M/s. Healthway has debited rebate amounting to Rs. 18,37,300/- whereas assessee party has allowed rebate of Rs. 16,45,653/-. The Ld. CIT(A) did not find force in these submissions and decided the issue against the assessee vide para 5.2 of his order, which is as under:—

“5.2 I have considered the submission of the Ld. Counsels for the appellant. When the appellant was asked to reconcile the discrepancies appearing in the accounts of M/s. Glass Palace and M/s. Healthyway, he could not make the reconciliation. It is seen that the appellant had purchased furniture from M/s. Glass Palace and these entries have been shown as rebate by M/s. Glass Palace in its books of accounts. Regarding closing balance difference in the account of M/s. Healthyway, the appellant explains that it was on account of rebates allowed, but the fact remains that there is a difference in closing balance as on the last date of the financial year. In view of this discussion, it is held that the Assessing Officer has rightly made the addition on account of difference in closing balances of these two parties and the same is upheld. Ground of appeal No. 5 is dismissed.”

26. Before us, Ld. counsel for the assessee mainly reiterated the submissions made before the first appellate authority and also referred to the copies of various accounts and pointed out that if rebate was properly considered then there was no difference.

27. On the other hand, Ld. DR. strongly supported the order of CIT(A).

28. After considering the rival submissions we find force in the submissions of Ld. Counsel for the assessee. Perusal of the copy of account of the assessee in the books of M/s. Glass Palace and copy of the account of Glass Palace in the books of the assessee which are placed at pages 55 to 66 and 67 to 71 of the paper books clearly show that there is no difference in the sales. Further, assessee has credited the account of Glass Palace with individual entries for rebates allowed e.g against the bill of Rs. 22,244/- as rebate of Rs. 1,747/- is credited but no entry for rebate has been made by M/s. Glass Palace. Thus, it becomes clear that M/s. Glass Palace has made only one entry at the end of year towards rebates allowed to them through the year which also include adjustments on account of furniture. Similarly, in the of M/s. Healthway, perusal of account at pages 71 to 117 would show that they have taken credit of total rebate amounting to Rs. 18,37,300/- whereas the assessee has allowed rebates only up to Rs. 16,45,654/-. If other party debits account with more debit without the consent of the assessee then assessee could not be blamed. Therefore, reading of the various entries clearly show that account was duly reconciled and whatever difference is there stand duly explained, therefore, there is no justification in this addition. Accordingly, we set aside the order of Ld. CIT(A) and delete the addition amounting to Rs. 2,77,000/- on account of difference with M/s. Glass Palace and Healthway.

29. Ground No. 4 : After hearing both the parties we find that during assessment proceedings it was noticed that assessee had made cash payment of Rs. 23,500/-. On an enquiry, it was submitted that payments were made in various installments for purchase of festival gifts but Assessing Officer did not find force in these submissions and added the sum of Rs. 23,500/- to the income of the assessee.

30. On appeal, the submissions made before the Assessing Officer was reiterated. The Ld. CIT(A) did not find force in the same and observed that even if the payment was made in installments, the same was covered by the provisions of section 40A(3).

31. Before us, Ld. counsel for the assessee submitted that the sum of Rs. 23,500/- was paid in installments of Rs. 3,500/- and Rs. 20,000/-, therefore, the same is not in violation provisions of section 40A(3) of the Act particularly in views of the decision of Hon'ble Orrisa High Court in the case of CIT v. Aloo Supply Co. 121 ITR 680 (Orissa) and CIT(A) v. Triveniprasad Pannalal 228 ITR 680 M.P). He further submitted that parliament has amended the law by Finance Act 2008 and w.e.f 1.4.2009, the aggregate payment have to be considered for the purpose of disallowance u/s 40A(3) and the amendment is not applicable in the relevant year.

32. On the other hand, Ld. DR. strongly supported the order of CIT(A).

33. After considering the rival submissions we find that before 31.3.2008, the disallowance of interest u/s 40A(3) could be made for any payment in cash in excess of Rs. 20,000/-. However, the provision did not contain the expression “aggregate of payment” and Hon'ble Orissa High Court has held that in the case of CIT v. Aloo Supply Co. (supra) that if payments were made at various points of time in a particular day but less than Rs. 2,500/- (as applicable in the relevant year which was later changed to Rs. 20,000/-) then provisions of section 40A(3) was not attracted. The relevant observations of the Orissa High Court are as under:—

“The word “sum” has no statutory definition and must have the common parlance meaning. While legislating, Parliament tries to convey its intention through express words. It is one of the well settled rules of interpretation that where a word used in a statute carries more than one meaning, that meaning which makes the provision workable and is nearest to the legislative intention, has to be adopted. The word “sum” in s. 40A(3), second proviso, of the I.T Act, 1961, is used only to indicate an amount of money and does not refer to the totality of the expenditure.

Therefore, if an assessee makes payments at different times during the day and he has no idea that he has to pay to the same person on more than one occasion, he cannot be subjected to the statutory provision contained in s. 40 A(3) of the Act, unless any one payment is above Rs. 2,500. The statutory limit of Rs. 2,500 under s. 40A(3) of the Act applies to payment made to a party at a time and not to the aggregate of the payments made to a party in the course of the day as recorded in the cash book.

34. Similar view has been taken by the Hon'ble Madhya Pradesh High Court in the case of CIT(A) v. Triveniprasad Pannalal (supra). The Government to wipe out the impact of above judgments amended the law and the expression “on agreement of payments made to a person in a day” was added by Finance Act 2008 w.e.f 1.4.2009, therefore, it is clear that amendment is operational from 1.4.2009 and cannot be applied in this year. Thus, in view of the decision of Hon'ble Orissa High Court, we are of the opinion that this disallowance is not justified and accordingly we set aside the order of Ld. CIT(A) and delete the addition.

35. Ground Nos. 5 & 6: After hearing both the parties we find that from AIR information it was noted that assessee has deposited cash in excess of Rs. 10 lakhs in the year under consideration. The cash was deposited in the bank account of the assessee with the Chandigarh State Cooperative Bank Limited, Sector 22-B, Chandigarh. Thereafter, information was called from the bank u/s 133(6). The bank vide letter No. 3725 dated 15.9.2010 supplied a copy of the account maintained by Shri Anoop Sharma i.e the assessee. Perusal of this saving bank account No. 1967 revealed that a large amount of cash was deposited. The assessee was asked to explain the sources of deposit in this account but no source was given. The Assessing Officer further verified the books of account of the proprietorship concern M/s. Pecific Ads and also of the partnership firm and M/s. Alfa Advertising and Marketing Services and partnership firm where assessee was partner and found that no such cash was withdrawn. He further noted that as per AIR information the deposit was shown at Rs. 15,01,1000/- but as per the bank account total deposit was of Rs. 19,50,644/- and detail of the deposits has been extracted by the Assessing Officer vide para 5.2 of this order. In view of these facts the Assessing Officer added Rs. 19,50,644/- u/s 68 of the Act of the income of the assessee.

36. On appeal, it was mainly submitted that bank pass book would not constitute the books of the assessee and, therefore, section 68 was not attracted. In this regard, reliance was placed on the following case laws:—

a) COMMISSIONER OF INCOME TAX v. BHAICHAND H. GANDHI HIGH COURT OF BOMBAY SOURCE : (1983) 141 ITR 67 (BOM)

b) JAWAHAR LAL OSWAL v. ASSISTANT COMMISSIONER OF INCOME TAX ITAT, CHANDIGARH BENCH 71 ITD 324 (Chd)

c) ANAND RAM RAITANI v. COMMISSIONER OF INCOME TAX HIGH COURT OF GAUHAT (1997) 139 CTR (Gau) 235 : 223 ITR 544 (Gau)

d) MS. MAYAWATI v. DEPUTY COMMISSIONER OF INCOME TAX, ITAT, DELHI ‘A’ BENCH (2008) 113 TTJ (Del) 178 : 19 SOT 460

37. The Ld. CIT(A) examined this issue and the submissions and found force to the extent that addition could not be made u/s 68 of the Act. However, he further observed that CIT(A) has co-terminus power and, therefore, exercising the same the addition was confirmed u/s 69A. However, he noted that during the year only sum of Rs. 18,46,644/- was deposited, therefore, addition was restricted only to Rs. 18,56,644/- and the Assessing Officer was directed to make balance addition of Rs. 94,000/- in assessment year 2009-10 because this amount pertain to financial year 2008-09.

38. Before us Ld. counsel for the assessee narrated the facts and submitted that CIT(A) is not correct after having observed that section 68 is not attracted to make the addition u/s 69A. He submitted that observation that such of addition is also protected by section 292B is not correct and in this regard he relied on the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. Norton Motors. 275 ITR 595 (P & H). In any case, even if CIT(A) has enhancement powers the same cannot be exercised to find out a new source of income and in this regard he relied on the decision of Hon'ble Delhi High Court in the case of CIT v. Sarodri Lal and Co. 251 ITR 864 (Del). He also relied on the decision of ACIT v. Laxmi Vishnu Silk Mills (1994) 49 TTJ (Ahd) 537 (copy of judgment filed).

39. On the other hand ld. DR. relied on the order of CIT(A).

40. We have considered the rival submissions carefully and do not agree with the same. In the case before us clearly the assessee had deposited cash in a bank account for which assessee has not been able to give any source and correctly the income has been added. Now the question is whether section 68 could be invoked. The Ld. CIT(A) agreed with the contention of the assessee that section 68 could not be invoked. The Ld. CIT(A) has decided this issue vide para 7.3 and 7.3.1 which are as under:—

“7.3 I have considered the submission of the Ld. Counsels for the appellant. Cash has been deposited on several dates in the savings bank account of the appellant with the Chandigarh State Co-op Bank., Sector 22-B, Chandigarh. Out of the total addition made of Rs. 19,50,644/-, only Rs. 18,56,644/- pertains to the financial year 2007-08. The appellant had not given any explanation before the Assessing Officer regarding source of the cash introduced and the cash entries do not reconcile with the accounts of any of the business concerns of the appellant. A perusal of the cash deposits, reproduced in para 5.2 of the assessment order reveals that in all, there are 53 entries of cash deposits in the financial year 2007-08 and most of the deposits are of Rs. 40,000/-. Maximum deposit entry is of Rs. 49,000/-. A summary of the 53 credit entries is as under:

Total Amount i) 38 entries Rs. 40,000/- 15,20,000/- ii) 1 entry Rs. 49,000/- 49,000/- iii) 2 entries Rs. 45,000/- 90,000/- iv) 2 entries Rs. 35,000/- 70,000/- v) 3 entries Rs. 30,000/- 90,000/- vi) small amounts (7 entries) 37,644/- 18,56,644/-

7.3.1 In the appellate proceedings, the Ld. Counsels for the appellant have merely submitted that section 68 is not attracted on credit entries in the savings banks account, since bank pass book is not books of accounts of the appellant. No explanation regarding the source of these deposits has been filed. The contention of the appellant is correct but the fact is that the source of these deposits remains unexplained and so the entire amount of deposit of rs. 18,56,644/- is to be treated as unexplained investment u/s 69 A of the Act. The Ld. Counsels have relied upon a number of judgments in support of their contention on the issue but these judgments are not applicable in the instant situation, because the powers of Commissioner of Income Tax (Appeals) are coterminous with those of the Assessing Officer and so the Commissioner of Income Tax (Appeals) can apply the correct provisions of law, if they have not been so applied by the Assessing Officer was not the correct section and provisions of section 292 B will be applicable. In view of this discussion out of the addition made of Rs. 19,50,644/- on the issue, addition of Rs. 18,56,644/-, pertaining to credit entries of financial year 2007-08 is upheld. Rest of the amount of Rs. 94,000/- pertains to financial year 208-09 and the Assessing Officer is directed to take remedial action to tax this amount in A.Y 2009-10. Ground of appeal No. 7 is partly allowed.”

41. The above clearly shows that after having accepted the contention addition could not be made u/s 68. The Ld. CIT(A) could have invoked the provisions of section 69A to confirm that issue. For this he has observed that he has the plenary power and also the addition is protected by provision to section 292B of the Act, which reads as under:—

“Return of income, etc., not to be invalid on certain grounds.--No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.

42. The above provision clearly shows that assessment even if made under the wrong provision is protected by this provision. The Ld. Counsel before us had relied on the decision of Hon'ble Punjab & Haryana High Court in the case of CIT(A) v. Norton Motors. (supra). In that case the assessee firm was constituted on April 2, 1973. There were changes in its constitution in 1976 and 1978. Registration was granted to the firm. The firm filed its return for the assessment year 1978-79. The Assessing Officer determined the income of the firm. Subsequently the Commissioner issued notice to the assessee requiring it to show cause as to why the registration may not be withdrawn on the ground that the newly inducted partners had been wrongly allowed shares in the profits for the whole of the year. After hearing the representative of the assessee, the Commissioner held that distribution of profits for the entire year made by the firm amongst five partners was not in accordance with the law. Accordingly, he directed the Income-tax Officer to reallocate the profits among the three partners. The Tribunal held that the Commissioner could not have directed the Income-tax Officer to change the share allocation among the partners without issuing notice under section 158 read with section 67. It set aside the order of the Commissioner.

43. On the above fact it was held as under:—

“that the Commissioner had issued notice to the assessee proposing to cancel the registration of the firm on the ground of error in the allocation of shares among the partners but no notice was issued under section 158 read with sections 187 and 67 of the Act proposing to change the share allocation among the partners and the assessee did not get opportunity to make representation in this regard. Therefore, the Commissioner did not have the jurisdiction to direct modification of the order passed by the Income-tax Officer under section 158 of the Act and the order passed by him could not be sustained by relying on section 292B.”

44. Clearly, this decision is distinguishable because section 292B will not protect the basic jurisdictional defect which was absent in this case. Whereas in case before us clearly the Assessing Officer had information that assessee had deposited certain sums in a bank account and assessee was duly confronted with this information but assessee had no explanation and that is why the addition was made. Merely because the bank pass book cannot be treated as books of account on the basis of certain decisions does not mean that addition is not protected u/s 292B and has been rightly confirmed by the Ld. CIT(A) u/s 69A of the Act.

45. There is another aspect to the issue that a Ld. CIT(A) has also observed that he has plenary powers. In this connection we are reminded of the judgment of Hon'ble Supreme Court in the case of CIT v. Kanpur Coal Syndicate 53 ITR 225 (SC). In that case at page 22 in was observed as under:—

“The Appellate Assistant Commissioner has plenary powers in disposing of an appeal. The scope of his powers is conterminous with that of the Income-tax Officer. He can do what the Income-tax Officer can do and can also direct him to do what he has failed to do.

46. From the above, it become absolutely clear that CIT(A) has plenary powers and the scope of the powers has been held by the Hon'ble Supreme Court to be co-terminus with that of Income Tax officer. Therefore, he can do whatever can be done by the Assessing Officer. The Ld. CIT(A) under these powers has correctly upheld the addition under the correct provisions. The Ld. Counsel had relied on the decision of full Bench of the Hon'ble Delhi High Court in the case of CIT v. Sardari Lower and Co. 251 ITR 864 (Del). In that case it was observed as under:—

“In CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC) the matter relatd to provisions of the Indian Income-tax Act, 1922. It was held, inter alia, 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. A similar view was expressed in CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC). That also related to a case under section 31(3) of the old Act. It was held that the power of enhancement under section 31(3) of the old 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 Assessing Officer from the point of view of taxability and that the Appellate Assistant Commissioner had no power to assess a source of income, which had not been taken into consideration by the Assessing Officer. In CIT v. Nirbheram Daluram [1997] 224 ITR 610, it was observed by the apex court that the appellate powers conferred on th first appellate authority under section 251 of the Income-tax Act, 1961, were not confined to the matter, which had been considered by the Income-tax Officer, as the first appellate authority is vested with all the wide powers that the Assessing Officer may have include the power to discover a new source of income was not commented upon. Consequently, the view expressed in CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (Hon'ble Supreme Court) and CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC) still holds good. Whenever the question of taxability of income from a new soure which had not bee considered by the Assessing Officer is concerned, 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 fulfilled. In the presence of such specific provisions a similar power is not available to the first appellate authority. CIT v. SHAPOORJI PALLONJI MISTRY [1962] 44 ITR 891 (SC) AND CIT v. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA [1967] 66 ITR 443 (SC) explained and followed.”

47. From the above observation it is clear that above observation operate in altogether different field. The Hon'ble Court was concerned with the enhancement of income and it was observed that Commissioner (Appeals) has power to enhance but enhancement has to be restricted only to the source of income discovered by the assessing authority, therefore, the above judgment placed restriction on the enhancement power. This case is totally distinguishable because we are not concerned with the situation where Ld. CIT(A) has enhanced the income. In the case before us the Assessing Officer clearly found that assessee had deposited cash for which assessee had no explanation and that is why addition was made. The Ld. CIT(A) has not discovered anything new except that he agreed with the contention that addition could not made u/s 68 and made the addition u/s 69A of the Act. The other decision relied on in the case of ACIT v. Laxmi Vishnu Silk Mills (supra) is also distinguishable because in that case the Bench has not considered the decision of Hon'ble Supreme Court in the case of CIT v. Kanpur Coal Syndicate (supra).

48. In these circumstances we find nothing wrong with the order of Ld. CIT(A) and confirm the same.

49. In the result, appeal is partly allowed.