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TMI Blog1962 (10) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, preferred an appeal therefrom to the Appellate Assistant Commissioner. The principal grounds urged by the assessee related to the income alleged to have been received in British India by reason of the payments made as aforesaid. The Appellate Assistant Commissioner passed an order on 31st March, 1959, whereunder he has sought to rope in income which could be deemed to have accrued to the assessee in British India by reason of certain purchases of goods made by the assessee in British India having regard to the provisions contained in section 4(1)(c) and section 42 of the Income-tax Act. In the course of his decision he has observed as follows : Another point that arises for this assessment is that the appellant made certain purchases in the taxable territories and whereas for the assessment years 1946-47 onwards the Income-tax Officer assessed a certain percentage of the ultimate profits earned by the assessee as relating to such purchases, no such income has been assessed in this year. He held that he has competent to make an enhancement of tax on this account as the Income-tax Officer had taken into account this particular source of income of the assessee, viz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allocate a part of the profits as assessable under section 42(1) of the Income-tax Act, although this aspect of the allocation had not been considered by the Income-tax Officer? In our view, the question as framed by the Tribunal sufficiently brings out the point in controversy between the parties and it is not necessary to amend the question as framed by the Tribunal. The question raised before us involves the consideration of the powers of the Appellate Assistant Commissioner when an appeal is preferred before him. Section 30 of the Indian Income-tax Act, 1922, deals with appeals that may be made against assessment under the Act. That section, inter alia, provides that any assessee objecting to the amount of income assessed under section 23 may appeal to the Appellate Assistant Commissioner against the assessment. The right of appeal to the Appellate Assistant Commissioner against the assessment has not been conferred on the Income-tax Officer. It could not possibly be conferred upon the Income-tax Officer because he could not be expected to appeal against his own order. The powers to be exercised by the Appellate Assistant Commissioner have been set out in section 31. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We shall briefly state the facts of that case as the decision in that case has been followed in several later cases. In that case, one Babu Jagarnath Therani carried on business at Kishanganj in the district of Purnea. He had branches at Calcutta and Jalpaiguri. He used to make returns of his income in all the three places. The income-tax authorities in Calcutta and Jalpaiguri reported their findings to the Income-tax Officer at Purnea who then combined the figures and made an assessment to income-tax. In the year under consideration, that is, 1922-23, the Income-tax Officer at Purnea made the assessment without waiting for the reports from Calcutta and Jalpaiguri. There was an appeal filed before the Assistant Commissioner of Income-tax who enhanced the assessment after taking into account the income derived from the branch businesses at Calcutta and Jalpaiguri. It appears from the order of the Assistant Commissioner of Income-tax that after making his assessment the Income-tax Officer had noted that assessment would be made on receipt of the reports from the income-tax authorities at Calcutta and Jalpaiguri as was done during the earlier years. It was urged on behalf of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importance which we will consider is the case of Narrondas Manordass v. Commissioner of Income-tax [1957] 31 ITR 909 , as some of the observations in this case have been quoted with approval by the Supreme Court in a later case to which we shall subsequently advert. The Division Bench of the Bombay High Court, consisting of Chagla C.J. and Tendolkar J., in that case has laid down that the powers conferred upon the Appellate Assistant Commissioner by the Income-tax Act are much wider than the powers of an ordinary court of appeal, that under the Income-tax Act once an assessment came before the Appellate Assistant Commissioner, his competence was not restricted to examining those aspects of the assessment which were complained of by the assessee, but ranges over the whole assessment and that it is open to him to correct the Income-tax Officer not only with regard to a matter raised by the assessee in the appeal but also with regard to a matter which has been considered by the Income-tax Officer and determined in the course of the assessment. The assessee in that case was carrying on business at Bombay and at Rajkot. With regard to the profits of Rajkot, the Income-tax Officer assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged that if the Income-tax Officer had dealt with a particular income of the assessee and come to the conclusion that that income was not liable to tax, the Appellate Assistant Commissioner could not reverse the decision of the Income-tax Officer. Dealing with this argument, it was observed that such an interpretation of section 31(3) would not only completely clip the powers of the Appellate Assistant Commissioner but would fail to give effect to the object that the Legislature had in conferring this rather extraordinary power upon the Appellate Assistant Commissioner. It is further stated that it was clear that the Appellate Assistant Commissioner had been constituted a revising authority against the decisions of the Income-tax Officer, a revising authority not in the narrow sense of revising what is the subject-matter of the appeal, not in the sense of revising those matters about which the assessee makes a grievance, but a revising authority in the sense that once the appeal was before him, he could revise not only the ultimate computation arrived at by the Income-tax Officer but he could vary the process which led to the ultimate computation or assessment. In other words, what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evise the various decisions given by the Income-tax Officer in the course of the assessment and also the various incomes or deductions which came in for consideration of the Income-tax Officer. We shall next deal with the case of Shapoorji Pallonji Mistry's case (supra) . In that case, the assessee was a leading building contractor. His firm took a contract for building the Ritz Hotel for one S. Zito on a plot of land belonging to Mehta. The assessee had agreed to finance Zito and the agreement provided for the return of capital with interest and the assessee also secured for himself the right to become a 6 annas partner in the business of this hotel for a period of seven years. After the completion of the building disputes arose between the assessee and Zito. A suit was instituted by the assessee for the realisation of the outstanding dues and for enforcing his claim in connection with the share of the partnership. As a result of a settlement arrived at between the parties, a sum of ₹ 40,000 was received and a receipt was passed for the amount in which it was stated that the sum had been paid in full settlement of the suit being the share of 6 annas in the goodwill an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to disclose and which had never been subjected to the process of assessment and that surely was not the power which section 31 gave to the Appellate Assistant Commissioner when it referred to the power of enhancing an assessment. This case was carried by the Commissioner of Income-tax, Bombay, to the Supreme Court and this judgment of the Supreme Court is Shapoorji Pallonji Mistry's case (supra). After referring to various authorities, to some of which we have already adverted, and after referring to some of the observations made by Chief Justice Chagla in Narrondas Manordass's case (supra), it is stated that the Supreme Court had given its approval to the opinion of Chief Justice Chagla that section 31 of the Income-tax Act conferred not only appellate powers upon the Appellate Assistant Commissioner in so far as he was moved by an assessee but also a revisional jurisdiction to revise the assessment with a power to enhance the assessment. Thereafter, it has been stated as under: The only question is whether in enhancing the assessment for any year he can travel outside the record, that is to say, the return made by the assessee and the assessment order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the income that could be deemed to have accrued in British India should not be taken into account for the year in question but should be taken into account for the subsequent years. He sought to support the same by the material which was in the possession of the Income-tax Officer. The Tribunal in the course of its judgment has in express words stated as under: Admittedly, in the instant case, the Income-tax Officer never considered this matter. In view of this statement by the Tribunal, it is not open to us to go behind the same and permit the Commissioner of Income-tax to agitate the matter. In view of the finding of the Tribunal that the Income-tax Officer never considered this matter, the position, on the authorities, is clear. As the Income-tax Officer has not considered this matter at all, it was not open to the Appellate Assistant Commissioner to take the same into account and give the directions which he has thought fit to give. In the result, our answer to the question is in the negative. We order the Commissioner to pay to the respondents the costs of the reference. There will be no order on the Civil Application No. 6 of 1962 filed by the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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