· The assessee filed its return of income declaring total income as Nil. The case of the assessee was selected for scrutiny and the AO made various additions to the income of assessee, by invoking the provisions of section 14A read with Rule 8D, by disallowing certain expenses and by adding the reconciliation difference in the balance of one of the parties.
· Thereafter, the CIT(A) upheld the addition made u/s 14A read with Rule 8D, and further made an addition u/s 2(22)(e) of the Act.
· It was submitted by the assessee that the addition u/s 2(22)(e) was made by the CIT(A) by searching a new source of income.
· The Tribunal observed that the issue of deemed dividend was not touched upon by the AO in his order. It was further held by the Tribunal that the CIT(A) is not competent to enhance the assessment by discovering a new source of income which has not been mentioned in the return, nor has been considered by the AO in the assessment.
· Therefore, the addition made by the CIT(A) u/s 2(22)(e) of the Act was set aside and held as void-ab-initio, because the CIT(A) had exceeded its jurisdiction in making the addition in absence of reference of such income either in the return of income or in the assessment proceedings.
For further reading, refer the attachment.
Further Reading