9911796707
TMI Blog1982 (4) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... his daughter-in-law, Smt. Uma Devi Agarwalla, and his mother Smt. Manna Devi Agarwalla. The aforesaid three ladies also supported the assessee's claim and asked for the return of their jewelleries. A part of the jewellery valuing Rs. 35,129 was claimed by the assessee as his personal property. 3. The WTO verified the claims lodged by the aforesaid persons with reference to their wealth-tax records and accepted the assessee's explanation to the extent of Rs. 2,74,826. The remaining value of the jewellery amounting to Rs. 1,51,247, rounded up to Rs. 1,51,250, was treated by him an unexplained income of the assessee. The aforesaid order under sub-section (5) of section 132 was passed by the ITO on 4-6-1976 with the prior approval of the IAC. Against the aforesaid order, the assessee filed an appeal with the competent authority in terms of sub-section (11) of section 132. The said competent authority happened to be the Commissioner himself. We understand that the said appeal is still pending for disposal with the Commissioner. 4. In course of time, the ITO took up the regular assessment of the assessee in respect of the assessment year 1976-77. The proceedings for the regular asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's first objection by pointing out that "whether the impugned sum of Rs. 1,51,250 was or was not an income of the assessee was never before the AAC and there was no question of the merger of the order of the ITO with that of the AAC on this point"' and, therefore, held that the Commissioner was competent to take up this matter and revise the order of the ITO so far as it related to the assessability of the impugned sum. Regarding the second objection raised by the assessee, the learned Commissioner pointed out that, as he was setting aside the assessment order of the ITO, he could raise his objection on the merits of the additions before the ITO, who would give necessary opportunity of hearing to the assessee. After rejecting the assessee's objection as above, he set aside the assessment order passed by the ITO "with the limited object of assessing the income from undisclosed source detected as a result of the search..." He further clarified that, "while making the fresh assessment, he should give the assessee an opportunity of being heard and he should not disturb the assessment of particular item of income agitated before the AAC and decided upon by him". 9. It is this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill merge in the appellate order, irrespective of the points urged by the parties or decided by the appellate authority." 10. He also drew our attention to the decision of the Full Bench of the Tribunal in the case of Dwarkadas Co. (P.) Ltd. v. ITO [1982] 1 ITD 303 (Bom.) After going through the decisions of the various High Courts on the point, the said Full Bench (Bombay Special Bench 'B') concluded that ".. the issues arising out of the assessment order which were decided by the ITO in the assessee's favour over which the AAC had power to examine and pass appropriate order but did not actually do so, the AAC should be deemed to have examined these issues and agreed with the ITO and even that portion of the assessment order is merged with that of the AAC..." In view of the aforesaid position in law, the learned Commissioner had, according to the learned counsel for the assessee, erred in holding against the assessee that the order of the ITO had not merged with that of the AAC, and that he could revise the impugned order under section 263. The assessment order of the ITO, as made by him, no more existed independently. The whole of it in the present case was subjected to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 and Rs. 30,000 from three parties. In considering the genuineness of these borrowings, the ITO noticed that the respondent had withdrawn at Calcutta, on 31-3-1952, a sum of Rs. 5,30,000 from a Calcutta Bank and had sent a sum of Rs. 5,85,000 to his Forbesganj branch on the same day to enable that branch to make payments including the repayment of the sum of Rs. 2,50,000. The ITO discussed the impossibility of the amount having reached Forbesganj in Bihar on the very same day. He, therefore, treated the entries in the books as not genuine and added to the assessable income the sums of Rs. 2,50,000, Rs. 1,50,000 and Rs. 30,000. When the assessee took up the matter in appeal, the AAC considered that the amount of Rs. 5,85,000 should also be included in the total income of the assessee after giving a deduction of Rs. 1,80,000. This action of the AAC was the subject-matter of scrutiny before their Lordships of the Supreme Court and the problem considered was as to whether the AAC could have enhanced the income of the assessee by considering the above amount of Rs. 5,85,000. Their Lordships pointed out that the AAC had no jurisdiction under sub-section (3) of section 31 of the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings, it is patent that the subject-matter of discovery of jewellery from the premises of the assessee and the bank locker was not at all the subject-matter of inquiry by him. In fact, it did not engage the attention of the ITO. On the face of it, therefore, it is to be held that the ITO did not apply his mind to this particular subject-matter or this particular source of income with a view to examine its taxability or non-taxability. The AAC could not, in the circumstances, have enhanced the income of the assessee in respect of this amount, even if he had applied his mind to it and he was so minded. The question of merger of the order of the ITO with that of the AAC in respect of the above subject-matter does not, therefore, arise. 16. The learned counsel for the assessee had, of course, contended that the same ITO, who had completed regular assessment, had earlier passed the order under sub-section (5) of section 132, and, therefore, according to him, it should be presumed that he was seized of the subject-matter and he did not make any addition with regard to it, as he was satisfied with the assessee's explanation. The finding given by the ITO though impliedly accepting the ..... 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