1967 (2) TMI 3 - HC - Income Tax

Whether the Appellate Tribunal was right in its view that the AAC had competence to alter the finding of the ITO to the effect that the portion of income in dispute is an undisclosed income from a known source to a finding that it is undisclosed income from undisclosed source - Held no

Issues Involved:
1. Competence of the Appellate Assistant Commissioner to alter the findings of the Income-tax Officer.
2. Scope of the appellate powers of the Appellate Assistant Commissioner.
3. Legality of shifting income between different assessment years.
4. Validity of discovering new sources of income not considered by the Income-tax Officer.

Detailed Analysis:

1. Competence of the Appellate Assistant Commissioner to Alter Findings:
The primary issue was whether the Appellate Assistant Commissioner had the competence to alter the finding of the Income-tax Officer that the disputed income was from a known source to a finding that it was from an undisclosed source. The court held that the Appellate Assistant Commissioner did not have the competence to make such alterations. The Tribunal's view that the Appellate Assistant Commissioner was justified in giving such directions was found to be erroneous in law.

2. Scope of the Appellate Powers of the Appellate Assistant Commissioner:
The court examined the extent of the powers of the Appellate Assistant Commissioner under section 31 of the Indian Income-tax Act, 1922. It was argued that the powers are limited to the assessment year under appeal and the record of the assessment made by the Income-tax Officer. The court referred to Supreme Court rulings, specifically in "Income-tax Officer v. Murlidhar Bhagwan Das" and "Commissioner of Income-tax v. Shapoorji Pallonji Mistry," which established that the Appellate Assistant Commissioner's jurisdiction is confined to the assessment year under appeal and cannot extend to discovering new sources of income not considered by the Income-tax Officer.

3. Legality of Shifting Income Between Different Assessment Years:
The Appellate Assistant Commissioner had shifted Rs. 11,000 from the assessment year 1951-52 to 1950-51 and Rs. 19,130 from 1950-51 to 1949-50. The court found this action to be beyond the Appellate Assistant Commissioner's powers. The original assessing authority had not considered these amounts in the respective years to which they were shifted. The court held that each assessment year is a separate unit, and the Appellate Assistant Commissioner cannot travel beyond the record of the year under appeal.

4. Validity of Discovering New Sources of Income Not Considered by the Income-tax Officer:
The court held that the Appellate Assistant Commissioner could not enhance the assessment by discovering new sources of income not considered by the Income-tax Officer. The Supreme Court's ruling in "Commissioner of Income-tax v. Shapoorji Pallonji Mistry" was cited, which stated that the power of enhancement could only be exercised in respect of sources actually considered by the original assessing authority. The Appellate Assistant Commissioner's action of treating the cash credits as income from undisclosed sources, different from the business income considered by the Income-tax Officer, was beyond his powers.

Conclusion:
The court concluded that the Tribunal was not right in its view that the Appellate Assistant Commissioner had the competence to alter the findings of the Income-tax Officer. The shifting of income between different assessment years and the discovery of new sources of income not considered by the Income-tax Officer were beyond the appellate powers of the Appellate Assistant Commissioner. The Tribunal's contrary view was found to be erroneous in law. The parties were directed to bear their own costs in this reference, and the question was answered in the negative.

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