1974 (5) TMI 22 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Appellate Assistant Commissioner under section 31 of the 1922 Act and section 251 of the 1961 Act.
2. Authority of the Appellate Assistant Commissioner to add income from undisclosed sources.
3. Interpretation of "assessment" and "source of income" in the context of the appellate powers.

Detailed Analysis:

Jurisdiction of the Appellate Assistant Commissioner:
The primary issue was whether the Appellate Assistant Commissioner had the jurisdiction to add income from a source not disclosed by the assessee nor dealt with by the Income-tax Officer. The court examined sections 31(3) of the 1922 Act and 251(1) of the 1961 Act, which allow the Appellate Assistant Commissioner to confirm, reduce, enhance, annul, or set aside the assessment. However, the court concluded that these powers do not extend to discovering new sources of income not considered by the Income-tax Officer.

Authority to Add Income from Undisclosed Sources:
The court referred to the Supreme Court's decision in Commissioner of Income-tax v. Shapoorji Pallonji Mistry, which held that the Appellate Assistant Commissioner cannot enhance the assessment by discovering a new source of income not mentioned in the assessee's return or considered by the Income-tax Officer. This principle was reiterated in P. Vasudeva Setty v. Commissioner of Income-tax, where the court held that the Appellate Assistant Commissioner cannot alter the findings of the Income-tax Officer regarding the source of income.

Interpretation of "Assessment" and "Source of Income":
The court emphasized that the subject matter of the appeal is the assessment, and the scope of the appeal is limited to the subject matter. The Appellate Assistant Commissioner cannot travel beyond the assessment's subject matter to assess new sources of income. The Supreme Court in Commissioner of Income-tax v. Rai Bahadur Hardutroy Motilal Chamaria reinforced this view, stating that the Appellate Assistant Commissioner's power of enhancement is restricted to the sources of income considered by the Income-tax Officer.

Conclusion:
The court held that the Appellate Assistant Commissioner had no jurisdiction to add income from undisclosed sources. The sums of Rs. 83,600 for the assessment year 1960-61 and Rs. 1,82,887 for the assessment year 1961-62, traced to undisclosed sources by the Appellate Assistant Commissioner, were not permissible. Consequently, the court directed the Commissioner of Income-tax to modify the orders by deleting these amounts from the respective assessment years.

Final Order:
The petitions were allowed, and the Commissioner of Income-tax was directed to modify the assessment orders accordingly. No costs were awarded.