1970 (11) TMI 33 - HC - Income Tax

Whether Appellate Assistant Commissioner was right in sustaining the addition, even though he came to the conclusion that there had been no inflation in the purchase price, indulged in by the assessee power of AAC u/s 31 are not confined to the subject-matter of the appeal but extends to the subject-matter of the assessment therefore, addition made by ITO on certain grounds, can be sustained by AAC on a different ground

Summary

Issues:
1. Jurisdiction of the Appellate Assistant Commissioner to make an addition of income from undisclosed sources.
2. Whether the Appellate Assistant Commissioner can sustain an addition on a ground different from the one made by the Income-tax Officer.

Detailed Analysis:
1. The judgment involved a question referred under section 66(1) of the Indian Income-tax Act, 1922, regarding the addition of Rs. 13,189 to the income of the assessee under the head "Undisclosed sources." The Income-tax Officer had added this amount due to unexplained cash credits in the account of one of the partners. The Appellate Assistant Commissioner, after examining the matter, sustained the addition under "Undisclosed sources" as the source of the credits was not satisfactorily explained. The issue raised was whether the Appellate Assistant Commissioner had jurisdiction to add this sum as income from undisclosed sources, considering it a new source of income.

2. The judgment clarified that the Appellate Assistant Commissioner, under section 31(3)(a) of the Act, has plenary powers to confirm, reduce, enhance, or annul an assessment. The Appellate Assistant Commissioner's powers are conterminous with those of the Income-tax Officer, allowing him to revise every process that led to the assessment. It was established that the Appellate Assistant Commissioner can sustain an addition made by the Income-tax Officer on a ground different from the one originally made. The Appellate Assistant Commissioner's jurisdiction extends to all items subject to assessment, not limited to the specific grounds raised in the appeal. Therefore, in this case, the Appellate Assistant Commissioner was deemed to have the authority to sustain the addition of Rs. 13,189 as income from undisclosed sources, even though the Income-tax Officer had initially added it as suppressed income from business due to inflated purchase prices.

In conclusion, the judgment answered the question in the affirmative, holding that the Appellate Assistant Commissioner had the jurisdiction to add the amount as income from an "undisclosed source." The decision emphasized that the Appellate Assistant Commissioner's powers extend to all aspects of the assessment, allowing for considerations beyond the specific grounds raised in the appeal. The judgment highlighted the distinction between undisclosed income from a known source and income from an undisclosed source, affirming the Appellate Assistant Commissioner's authority to make additions based on different grounds than those initially considered by the Income-tax Officer.