1967 (2) TMI 28 - HC - Income Tax

Whether the Tribunal can refuse to consider the question of law urged before it if the same could have been decided on the material before it - Held, no

Summary

Issues:
Assessment of undisclosed income for a Hindu undivided family trading in cotton and other goods based on loans received from a purported creditor. Jurisdiction of tribunals and authorities to subject the undisclosed income to tax for the relevant assessment year.

Analysis:
The judgment pertains to the assessment of undisclosed income for a Hindu undivided family involved in trading activities. The income in question, amounting to Rs. 32,000, was categorized by the authorities as income from undisclosed sources. The Income-tax Officer, Appellate Assistant Commissioner, and the Appellate Tribunal all agreed on this categorization. However, a crucial point was raised regarding the assessment year for taxing this undisclosed income. The Tribunal did not address the argument that the receipts making up the Rs. 32,000 should fall within the financial year immediately preceding the assessment year. This issue was not raised previously, leading to a petition to the High Court under the Income-tax Act.

The High Court highlighted the limitation on the assessee's ability to choose an accounting year for undisclosed sources, emphasizing the standard definition of the previous year. The Court noted that the power of the Appellate Assistant Commissioner is restricted to the assessment year under appeal. Therefore, the Appellate Assistant Commissioner could not direct the assessment of the undisclosed income in the preceding year. The High Court emphasized that the point raised by the assessee was fundamental, impacting not only tax liability but also the jurisdiction of the tribunals and authorities to tax the amount in question for the relevant assessment year.

The Court found that the Appellate Tribunal erred in refusing to consider the point raised by the assessee, as it was crucial to the case. The Court asserted that the Tribunal had the discretion to permit the legal point to be raised during the appeal. Given that the issue was fundamental and affected the jurisdiction of the authorities, the Tribunal's refusal to entertain the point was deemed an improper exercise of discretion. The Court cited relevant case law to support its opinion on the matter.

In conclusion, the High Court declined to answer the first question posed and provided a definitive answer to the second question, stating that the Tribunal was incorrect in refusing to address the assessability of the Rs. 32,000 undisclosed income for the assessment year 1948-49. The Court's decision was based on the fundamental nature of the legal point raised and the jurisdictional implications for taxing the undisclosed income.