1936 (3) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Material sufficiency for the Commissioner's determination regarding the assessee's jewellery accounts and the Income-tax Officer's profit estimates.
2. Timeliness of the Commissioner's determination in respect of the 1932-1933 assessment under Section 34.
3. Authority of the Commissioner to enhance the assessment under Section 33 after disposing of the assessee's appeal under Section 32.

Issue-wise Detailed Analysis:

1. Material Sufficiency for the Commissioner's Determination:
The first question addressed whether there was any material upon which the Commissioner could determine as fact that the assessee's Agra jewellery accounts were not true and complete, and that the Income-tax Officer's estimate of the profits of the Delhi jewellery business was below the actual profits. The court noted that the only material referred to by the Commissioner consisted of the history of the assessee's relations with Banji Lal and the history of his assessments for several years in the past. The court found no evidence to show that the assessee was falsifying the accounts for the year under assessment. The Commissioner's observation about the surprising relation of the expenditure to the disclosed extent of trade was deemed insufficient to conclude that the sales were understated. Consequently, the court answered the first question in the negative, indicating that there was no material basis for the Commissioner's determination.

2. Timeliness of the Commissioner's Determination:
The second question dealt with whether the Commissioner's determination in respect of the 1932-1933 assessment was barred by time under Section 34 at the date of the order, 8th October 1934. The court discussed the concept of "escaped assessment" and referenced the Full Bench ruling in Madan Mohan Lal v. Commissioner of Income Tax, Delhi, which clarified that income not assessed due to being omitted from the return or books could be considered as having "escaped assessment." The court held that the sum of Rs. 23,447, being the difference between Rs. 50,000 and Rs. 26,553, must be regarded as income that had "escaped assessment." Since no notice was issued to the assessee within one year of the end of the assessment year (i.e., by 31st March 1933), the Commissioner was not entitled to enhance the income from Rs. 26,553 to Rs. 50,000. Therefore, the court answered the second question in the affirmative, indicating that the determination was indeed barred by time.

3. Authority of the Commissioner to Enhance the Assessment:
The third question concerned whether the Commissioner could take action under Section 33 and proceed to enhance the assessment after disposing of the assessee's appeal under Section 32. The court opined that the Commissioner could indeed take action under Section 33 to enhance the assessment, but this power was subject to the limitation provided in Section 34. The court referenced Jesaram v. Commissioner of Income tax, Punjab, to support this view. The court clarified that the provisions of Section 32(3) allow the Commissioner to pass orders on the subject matter of the appeal but do not include the power to enhance an assessment suo motu, which is a power granted under Section 33. Therefore, the court answered the third question in the affirmative, affirming the Commissioner's authority to enhance the assessment under Section 33, subject to Section 34's limitations.

Conclusion:
In conclusion, the court found no material basis for the Commissioner's determination regarding the jewellery accounts and profit estimates, ruled that the Commissioner's determination was barred by time, and affirmed the Commissioner's authority to enhance the assessment under Section 33, subject to the limitations of Section 34. The Commissioner was directed to pay the costs of the assessee, fixed at Rs. 100. The reference was answered accordingly.