Sections 68, 69A and 254(1) – Appeal to Appellate Tribunal – Jurisdiction and power – Cannot go beyond question in dispute – Subject matter of appeal in regard to addition made u/s. 68 – Tribunal holding addition u/s. 68 unjustifiable – Tribunal cannot travel beyond issue raised in appeal and make addition u/s. 69A – Order vitiated

21. Smt. Sarika Jain vs. CIT; 407 ITR
254 (All); Date of order: 18^th July,
2017 A. Y. 2001-02

Sections 68, 69A and 254(1) – Appeal to
Appellate Tribunal – Jurisdiction and power – Cannot go beyond question in
dispute – Subject matter of appeal in regard to addition made u/s. 68 –
Tribunal holding addition u/s. 68 unjustifiable – Tribunal cannot travel beyond
issue raised in appeal and make addition u/s. 69A – Order vitiated

In the A. Y. 2001-02, the
assessee had inducted capital in the firm in which she was a partner. During
reassessment proceedings u/s. 147 of the Income-tax Act, 1961, (hereinafter for
the sake of brevity referred to as the “Act”), the assessee explained
the source of the amounts received as gifts through banking channels and also
produced the gift deeds. The statements of the two donors were also recorded
u/s. 131. However, the Assessing Officer held that the gifts were not genuine
and added the amounts u/s. 68 of the Act as undisclosed income.

The Commissioner (Appeals)
affirmed the order and recorded findings that the documentation in respect of
the gifts was complete and that the assessee had established the identity of
the donors and their creditworthiness to make the gifts, but did not
acknowledge the gifts as genuine. The Tribunal held that the additions made by
the Assessing Officer u/s. 68 and sustained by the Commissioner (Appeals) could
not be sustained. Thereafter the Tribunal added the said amount as the income
of the assessee u/s. 69A.

On appeal by the assessee,
the Allahabad High Court reversed the decision of the Tribunal and held as
under:

“i)    The use of the word “thereon” in section 254(1) of the Income-tax
Act, 1961 is important and it reflects that the Tribunal has to confine itself
to the questions which arise or are subject matter in the appeal and it cannot
travel beyond that. The power to pass such order as the Tribunal thinks fit can
be exercised only in relation to the matter that arises in the appeal and it is
not open to the Tribunal to adjudicate any other question or issue, which is
not in dispute and which is not the subject matter of the dispute in appeal.

ii)    The Tribunal travelled beyond the scope of the appeal in making
the addition of the amounts of the gifts as income u/s. 69A. The subject matter
of the dispute all through before the Tribunal in the appeal was only with
respect to the addition, made u/s. 68, of the amounts received by the assessee
and not whether such addition could have been made u/s. 69A.

iii)    The Tribunal had recorded a categorical finding that it was clear
that under the provisions of section 68, the addition made by the Assessing
Officer and sustained by the Commissioner (Appeals) could not be sustained
meaning thereby that the Tribunal was of the opinion that the Assessing Officer
and the Commissioner (Appeals) had committed an error in adding the amounts
u/s. 68 to the income of the assessee.

iv)   When the amounts could not have been added u/s. 68, the Tribunal was
not competent to make the addition u/s. 69A. Therefore, the order of the
Tribunal was vitiated in law. Matter remanded to the Tribunal.”