TMI Blog1967 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 30,000 from three parties from Nepal, Kharag Bahadur Nepali, Jiwanmal Santokchand and Sohanlal Subhkaran, respectively. The Income-tax Officer added these amounts to the total income of the assessee on the ground that the assessee had inflated the purchase of raw jute. The Income-tax Officer was not satisfied that these three loans were genuine loans but considered that they represented secret profits made by the assessee by inflating the purchase of raw jute. The Income-tax Officer noted that the assessee had withdrawn at Calcutta on March 31, 1952, a sum of Rs. 5,30,000 from a Calcutta bank and had sent a sum of Rs. 5,85,000 to his Forbesganj branch on the same day to enable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 Rs. 2,50,000 to Sri Kharag Bahadur one of the alleged creditors noted above. The Income-tax Officer discussed the impossibility of the amount having reached Forbesganj branch in Bihar on the very same day in order to enable discharge of the creditors there on March 31, 1952. In regard to this amount of Rs. 5,85,000 the Income-tax Officer observed as follows : " On March 31, 1952, the Calcutta office has withdrawn Rs. 5,30,000 from the bank and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan was not genuine it was not logical to say that it required repayment from secret funds. The Appellate Tribunal accordingly reduced the enhancement to Rs. 1,55,000. In doing so the Appellate Tribunal rejected the contention of the assessee that the Appellate Assistant Commissioner had no authority to enhance the income on the ground that it was not the subject-matter of the assessment made by the Income-tax Officer. The Appellate Tribunal took the view that the subject-matter in respect of which the enhancement was made was, in fact, considered by the Income-tax Officer and accordingly the Appellate Assistant Commissioner had jurisdiction to make the enhancement. At the instance of the assessee the Appellate Tribunal referred the following question of law for the opinion of the High Court under section 66(1) of the Income-tax Act, 1922 (hereinafter called the " Act ") : " Whether, on the facts and in the circumstances of the case, the Appellate Assistant Commissioner was within his authority in enhancing the assessment of the assessee by Rs. 1,55,000 for the assessment year 1952-53 ? " By its judgment dated March 26, 1964, the High Court answered the question in the nega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it in the original assessment. The question which was debated before this court was whether in an appeal filed by an assessee, the Appellate Assistant Commissioner can find a new source of income not considered by the Income-tax Officer and assess it under his powers granted by section 31 of the Income-tax Act. It was held by this court that the powers of enhancement conferred on the Appellate Assistant Commissioner under section 31 only extended to matters considered by the Income-tax Officer and if a new source has to be considered then the power of remand may be exercised and the Income-tax Officer should be required to deal with that new source of income. At page 895 of the report Hidayatullah J., speaking for the court, stated as follows : " 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 by the Income-tax Officer with a view to finding out new sources of income, not disclosed in either. It is contended by the Commissioner of Income-tax that the word 'assessment' here means the ultimate amount which an assessee must pay, regard being had t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent after enquiring into the matters contained in the second report. It was held by the Bombay High Court that the power conferred upon the Appellate Assistant Commissioner was not confined to the matter of Rs. 1,17,643 in respect of which the assessee had appealed, but he had power to revise the whole process of assessment once an appeal had been preferred, and the order remanding the case was not invalid in law. The decision of this case was approved by this court in Commissioner of Income-tax v. McMillan Co. The question to be considered in that case was whether it was open to the Appellate Assistant Commissioner in exercise of his powers under section 31(3) of the Act to reject the method of accounting, followed by the assessee and accepted by the Income-tax Officer, under the proviso to section 13 of the Act and compute the income, profits or gains of the assessee under rule 33 of the Rules. It was held by this court that the question must be answered in the affirmative and there was nothing in section 31 read with the provisions of section 13 of the Act which prevented the Appellate Assistant Commissioner, in an appeal preferred by the assessee, from exercising the powers w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver the whole assessment and it is open to him to correct the Income-tax Officer not only with regard to a matter raised by the assessee but also with regard to a matter which has been considered by the Income-tax Officer and determined in the course of the assessment. It is also well-established that an assessee having once filed an appeal cannot withdraw it. In other words, the assessee having filed an appeal and brought the machinery of the Act into working cannot prevent the Appellate Assistant Commissioner from ascertaining and settling the real sum to be assessed, by intimation of his withdrawal of the appeal. Even if the assessee refuses to appear at the hearing, the Appellate Assistant Commissioner can proceed with the enquiry and if he finds that there has been an under-assessment, he can enhance the assessment (see Commissioner of Income-tax v. Nawab Shah Nawaz Khan). In this context reference may be made to the decision of the Court of Appeal in King v. Income-tax Special Commissioners in which the taxpayer sought to withdraw a notice of appeal which had been given on his behalf against an additional assessment under Schedule D. The Commissioners of Inland Revenue were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it did not reach Forbesganj on the same day. So, it was argued that in the appeal the Appellate Assistant Commissioner had jurisdiction to deal with the question of the taxability of the amount of Rs. 5,85,000 and to hold that it was taxable as undisclosed profits in the hands of the assessee. We are unable to accept the argument put forward on behalf of the appellant as correct. It is true that the Income-tax Officer has referred to the remittance of Rs. 5,85,000 from the Calcutta branch, but the Income-tax Officer considered the despatch of this amount only with a view to test the genuineness of the entries relating to Rs. 4,30,000 in the books of the Forbesganj branch. It is manifest that the Income-tax Officer did not consider the remittance of Rs. 5,85,000 in the process of assessment from the point of view of its taxability. It is also manifest that the Appellate Assistant Commissioner has considered the amount of remittance of Rs. 5,85,000 from a different aspect, namely, the point of view of its taxability. But since the Income-tax Officer has not applied his mind to the question of taxability or non-taxability of the amount of Rs. 5,85,000, the Appellate Assistant Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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