TMI Blog1957 (2) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... f account for his business at Rajkot is the financial year although this is not so clear in the return filed by the assessee at Bombay for the assessment year 1950-51. The Income-tax Officer at Jamnagar assessed the assessee on the basis of the year of account being the financial year. According to the assessee, the profit at Rajkot from 2nd November, 1948, to 31st March, 1949, amounted to ₹ 2,41,486. From 1st April, 1949, to 21st October, 1949, again, according to the assessee there was a loss of ₹ 61,071. The sum of ₹ 2,41,586 was assessed by the Income-tax Officer, Jamnagar, under the Saurashtra Income-tax Ordinance. The assessee therefore claimed before the Income-tax Officer that for making the assessment at Bombay for the assessment year 1950-51, year of account being S. Y. 2005 (2nd November, 1948, to 21st October, 1949) he should be allowed the loss of ₹ 61,071. The Income-tax Officer rejected the claim stating as follows : Accounts of the branch at Rajkot were produced and seen. There is profit there. It is shown that the profits of this business for the year ending March, 1949, were already assessed by the Income-tax Officer, Jamn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Saurashtra, while making assessment on an income of ₹ 6,32,666 for the financial year ending 31st March, 1949. A copy of this order (which may be returned along with the report) is forwarded to the Income-tax Officer who will verify and report by 30th May, 1954, if the contention is correct. This point was left undecided in his report dated 25th February, 1953 8. Thereupon the Income-tax Officer ascertained that the said sum of ₹ 2,41,586 being profits for the period 2nd November, 1948, to 31st March, 1949, were included in the income of ₹ 6,32,666 assessed by the Income-tax Officer, Jamnagar, for the accounting year 1st April, 1948, to 31st March, 1949. A copy of the said Income-tax Officer's second remand report dated 21st July, 1954, is annexure ' E ' and forms part of the case. 9. The assessee received a notice dated the 21st May, 1954, from the Commissioner of Income-tax issued by him under section 33B of the Act calling upon the assessee to show cause why the said two remittances aggregating to ₹ 4 lakhs should not be included in the income of the assessee for the assessment year 1950-51. A copy of the said notice is annexure ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of the concessions allowed in Part B States Tax Concession Order. The present Income-tax Officer says this was wrong and the amount is includible in assessment. 3. In order that the appellant may have the opportunity of having his say in an important matter life the above, it is only desirable that the assessment be remanded to the Income-tax Officer for re-assessment. Incidentally, this will also furnish both the Income-tax Officer and the appellant the opportunity to reconsider the other points and effect corrections, if need be, in consultation with each other. 12. The assessee thereupon appealed to the Appellate Tribunal against the order of the Appellate Assistant Commissioner setting aside the assessment and directing a re-assessment by the Income-tax Officer. The grounds of appeal before the Appellate Tribunal were as follows : 1. The Appellate Assistant Commissioner of Income-tax, F Range, Bombay, erred in setting aside the assessment of the Income-tax Officer and directing him to make a re-assessment for the year 1950-51 instead of deciding the appeal on the points raised before him for which purpose he had remanded the case and received the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issues raised by the assessee. We, therefore, refer the following questions to the High Court : (1) Whether in the circumstances of the case, the Appellate Assistant Commissioner was competent to enhance the assessment by the sum of ₹ 4 lakhs said to have been remitted by the assessee from Rajkot to Bombay in the year of account even though the question of remittance did not form part of the grounds of appeal before him ? (2) Whether in the circumstances of the case the order of the Appellate Assistant Commissioner remanding the case to the Incometax Officer for re-assessment is valid in law ? ORDER OF THE APPELLATE TRIBUNAL A preliminary objection is taken by the Departmental Representative to the effect that the appeal is not maintainable. The Appellate Assistant Commissioner by his order under appeal set aside the assessment made by the Income-tax Officer for the year 1950-51 and has directed a fresh re-assessment according to law. The assessee feels aggrieved by the order of the Appellate Assistant Commissioner and we can easily understand that he feels aggrieved. The assessee objects to the order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 34 of the Indian Income-tax Act. If we had been placed in the position of the Appellate Assistant Commissioner we ourselves would have issued a notice to the assessee calling upon it to show cause why the assessment should not be enhanced. There is only one assessment which is indivisible and the powers of the Appellate Assistant Commissioner to enhance the assessment are not circumscribed at all. The Appellate Assistant Commissioner suo motu may issue a notice calling upon the assessee to show cause why the assessment should not be enhanced. The Appellate Assistant Commissioner may even issue a notice at the instance of the Income-tax. It is open to an Incometax Officer to go to Appellate Assistant Commissioner and say that he has made a mistake and the assessment may be enhanced. it is open to the Income-tax Officer to say to the Appellate Assistant Commissioner that certain income has escaped assessment and, therefore, assessment may be enhanced. What we would have done however does not help us in the matter at all. We do not think it expedient to vacate the order of the Appellate Assistant Commissioner and direct him to dispose of the appeal according to law. In our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajkot income had been produced before him. He further pointed out that since the assessment had come up before the Appellate Assistant Commissioner in appeal and since the appeal was still pending, he would like to point out to the Appellate Assistant Commissioner that there was some error on the part of the Income-tax Officer in the interpretation of the Part B States (Taxation Concession) Order, 1950, and the assessment for 1950-51 should be enhanced by a sum of ₹ 4,00,000 being the remittance from Saurashtra as being chargeable to tax and having been erroneously excluded from assessment. On this the Appellate Assistant Commissioner passes an order setting aside the assessment and remanding the matter to the Income-tax Officer for reassessment. It is this order that is now challenged by the assessee as beyond the competence of the Appellate Assistant Commissioner. Now, in order to understand what the competence of the Appellate Assistant Commissioner is and what are the powers conferred upon the Appellate Assistant Commissioner is and what are the powers conferred upon the Appellate Assistant Commissioner, it is necessary to bear in mind certain salient facts. It is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry as the Income-tax Officer thinks fir or the Appellate Assistant Commissioner May direct, and the Income-tax Officer shall thereupon proceed to make such fresh assessment, and determine where necessary the amount of tax payable on the basis of such fresh assessment. It will be immediately noticed that in giving the power of enhancing the assessment, the Legislature has strikingly deviated from the ordinary principles that govern the court of appeal. Although the Department cannot appeal against the order of the Income-tax Officer and although the appeal is only by the assessee, even so the Legislature confers upon the Appellate Assistant Commissioner the power to make an order which is obviously to the prejudice of the appellant. Therefore, although the appellant May only complain of particular points in the assessment and he May be satisfied with regard to the rest of the assessment, the Appellate Assistant Commissioner's powers are not confined to consider only these points about which the assessee has a grievance but he May consider those points about which the assessee is satisfied and order the enhancement of the assessment. Now, it is clear that going by the plain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n revise not only the ultimate computation arrived at by the Income-tax Officer but he can revise every process which led to the ultimate computation or assessment. In other words, what he can revise is not merely the ultimate amount which is liable to tax, but he is entitled to revise 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. Turning to the authorities, we find that the position we have just stated is amply borne our. Mr. Kolah cited certain authorities on which he relied for a more limited purpose. His contention was that even if he is not right in the contention that he made and the powers of the Appellate Assistant Commissioner are wider, even so they are confined to this that if assessee goes in appeal complaining of an assessment under a particular head, then it May be open to the Appellate Assistant Commissioner to enhance the assessment under that head, but it is not open to him to deal with another head in respect of which the assessee had not appealed and in respect of the assessment of which head the assessee has been conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject-matter of the assessment, and, for all the reasons advanced by the appellant, it is in my opinion not entitled to assess new sources of income. The principle which clearly emerges from these observations that the Appellate Assistant Commissioner cannot travel beyond the subjectmatter of the assessment. Note that it is not the subject-matter of the appeal but the subject-matter of the assessment, and when the learned Judges say that the Appellate Assistant Commissioner is not entitled to assess new sources of income, this expression is not used in the sense in which Mr. Kolah wants us to use it, but in the sense that a source from which income May spring May not have been considered by the Incometax Officer at all, and if that be the position then it would not be open to the Appellate Assistant Commissioner to assess the assessee with regard to that source. It is in this sense that the source is looked upon by the Patna High Court as a new source. The same view is taken by the Madras High Court in Gajalakshmi Ginning Factory v. Commissioner of Income-tax ([1952] 22 I. T. R. 502). At page 510 we find the following observation : Of course, it would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of assessment by the Income-tax Officer. Therefore, though the facts May seem to support Mr. Kolah's contention, the principle which the Patna High Court has accepted is the same as was accepted by the Madras High Court and by the Patna High Court in the earlier decision. Then there is an unreported judgment of this Bench in Sheriff Jiva Co. Ltd., Mombassa v. Commissioner of Income-tax, Bombay City (IT Reference No. 10 of 1950), delivered on 9th October, 1950. There also were have explained the power of the Appellate Assistant commissioner in practically the same language and this is what we said : When the Appellate Assistant Commissioner exercises his power of enhancement, he is dealing with the subject-matter of appeal before him, enhancement is confined to the sources or items in respect of which the assessment has been made by the Income-tax Officer. Therefore, the appeal in not confined to the subject-matter of the appeal as restricted by the appellant himself, but the power of the Appellant Assistant Commissioner extends to considering all sources and items in respect of which the assessment is made, and the expression assessment is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner under section, 33B, but what are the powers of the Appellate Assistant Commissioner. To the extent that the Appellate Assistant Commissioner has a particular power, that power is taken away from the Commissioner under section 33B if the assessee appeals and permits the Appellate Assistant Commissioner to reverse an order passed by the Income-tax Officer. Of course, there are observations in these two judgments which go to show how wide and unfettered the powers of the Appellate Assistant Commissioner are. We do not think it can be seriously disputed that those powers are very wide, but the only question before us is whether there is any limitation upon those powers, and if there is a limitation, what is the nature and character of that limitation, and in the course of our judgment we have sought to indicate the nature and character of that limitation. It is not as if the Appellate Assistant Commissioner has completely unqualified powers; his powers are limited to the subjectmatter of the assessment and we have attempted to define what the subject-matter of the assessment is. Two questions have been submitted to us. We will take question (2) first, viz., Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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