TMI Blog1971 (9) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ission to make a claim, profit exempt from payment of tax had been erroneously subjected to tax and it, therefore, included in the memorandum of appeal against the order of assessment, a ground that the Income-tax Officer had erred in not exempting such profit from tax under section 84. The assessee pointed out to the Appellate Assistant Commissioner at the hearing of the appeal that the benefit of section 84 had been allowed to the assessee in the subsequent assessment years and, if that was so, there was no reason why it should not be granted to the assessee also in the assessment year in question. The Appellate Assistant Commissioner, however, refused to entertain this contention on the ground that the claim for exemption under section 84 was not advanced before the Income-tax Officer, and it was, therefore, not possible to say that the Income-tax Officer had erred in not granting the benefit of section 84 to the assessee. The assessee thereupon preferred a further appeal to the Tribunal in which, apart from raising various grounds relating to other items in the assessment order, the assessee challenged the decision of the Appellate Assistant Commissioner that the assessee was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reference to this decision. But, before we go to this decision, we may profitably look at the language of section 251 which sets out the powers which may be exercised by the Appellate Assistant Commissioner in disposing of an appeal before him. It may be pointed out that the powers exercised by the Appellate Assistant Commissioner under section 251 are conferred in almost identical terms as the powers under section 31 of the Indian Income-tax Act, 1922, and, therefore, decisions given on the interpretation of section 31 of the Indian Income-tax Act, 1922, would be equally applicable in determining the proper scope and ambit of the powers of the Appellate Assistant Commissioner under section 251. Section 251, in so far as it is material for the purpose of the present discussion, provides in clause (a) that in disposing of an appeal against an order of assessment, the Appellate Assistant Commissioner " may confirm, reduce, enhance or annul the assessment, or he may set aside the assessment and refer the case back to the Income-tax Officer ". The Appellate Assistant Commissioner is given the power not only to confirm, reduce or annul the assessment but also to enhance it. This is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is before him he can 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. " This last passage was quoted with approval by the Supreme Court in Commissioner of Income-tax v. McMillan and Co. It must, therefore, be taken as settled that section 251, clause (a), confers not only appellate power on the Appellate Assistant Commissioner to reduce or annul the " assessment " at the instance of an assessee but also revisional jurisdiction to revise the "assessment" and enhance it : vide judgment of Hidaytullah J. in Commissioner of Income-tax v. Shapoorji Pallonji Mistry. This powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tside the subject-matter of the assessment and to entertain a new claim for exemption which was not considered and determined by the Income-tax Officer. Such a claim would not form the subject-matter of assessment and would, therefore, be outside the scope and ambit of the scrutiny of the Appellate Assistant Commissioner. The revenue thus pleaded for a narrow meaning to be placed on the word " assessment ". The question is which of these two rival constructions must be accepted as the correct construction. Now the earliest decision on this point is that of the Patna High Court in Jagarnath Therani v. Commissioner of lncome-tax. That was a case where the Appellate Assistant Commissioner sought to enhance the assessment by including income from two businesses which had not been assessed to tax by the Income-tax Officer. The Patna High Court took the view that this was not permissible to the Appellate Assistant Commissioner since the sources of income which he sought to assess had not been subjected to the process of assessment by the Income-tax Officer. It was observed by the Patna High Court : " But the subject-matter of the appeal is the assessment and the scope of the appeal m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de 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 to the charging section and his total income. In this view, it is said that the words " enhance the assessment " are not confined to the assessment reached through a particular process but the amount which ought to have been computed if the true total income had been found. There is no doubt that this view is also possible. " The question is whether we should accept the interpretation suggested by the Commissioner in preference to the one which has held the field for neatly 37 years. In view of the provisions of sections 34 and 33B by which escaped income can be brought to tax, there is reason to think that the view expressed uniformly about the limits of the powers of the Appellate Assistant Commissioner to enhance the assessment has been accepted by the legislature as the true exposition of the words of the section. If it were not, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a case of enhancement but that does not mean that the word " assessment " should have that meaning only in a case of enhancement and it should bear a different meaning in case of reduction or annulment. It must, therefore, be accepted as an incontrovertible proposition that the power of the Appellate Assistant Commissioner in dealing with an appeal against an order of assessment is restricted to the subject-matter of the assessment and the Appellate Assistant Commissioner cannot travel beyond the subject-matter of the assessment, whether it be for enhancement or for reduction or anulment of the assessment. The Appellate Assistant Commissioner, to quote the words of Chagla C.J., in Narrondass Manordass v. Commissioner of Income-tax can revise only " 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 ". If there is any item of income or claim for deduction which has not come in for consideration by the Income-tax Officer-which is not processed by the Income-tax Officer-it would not form the subject-matter of assessment and the Appellate Assistant C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do. " Then the Supreme Court was obviously referring to the power exercisable by the Appellate Assistant Commissioner in relation to a decision taken by the Income-tax Officer. What the Supreme Court meant to point out was that the Appellate Assistant Commissioner is entitled to question every decision taken by the Income-tax Officer and substitute his own decision. The power of the Appellate Assistant Commissioner is co-extensive with that of the Income-tax Officer in relation to the subject-matter of the assessment. The Supreme Court could not have intended as if by the back door to get rid of the limitation placed on the power of the Appellate Assistant Commissioner by its own decision in Commissioner of Income-tax v. Shapoorji Pallonji Mistry. If the observations of the Supreme Court in Commissioner of Income-tax v. Kanpur Coal Syndicate are read to mean that the Appellate Assistant Commissioner can also consider and process for the first time any item of income or claim on the ground that he can do what the Income-tax Officer could have done, the effect would be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om tax. The revenue urged that the attention of the Income-tax Officer was not focussed on the taxability or non-taxability of this part of the profit and it could not, therefore, be said that there was any consideration or decision by him in regard to the question whether it was exempt from tax. This contention of the revenue, plausible though it may seem, is in our opinion, not well founded. The power of the Appellate Assistant Commissioner, as we have already pointed out above, extends over the entire subject-matter of the assessment made by the Income-tax Officer and if there is any item of income which has come in for consideration by the Income-tax Officer and has been processed by him, it would form the subject-matter of the assessment and the Appellate Assistant Commissioner would be entitled to consider whether the assessment made by the Income-tax Officer in respect of it is right or wrong. Here, in the present case, the Income-tax Officer subjected to tax certain portion of the profit which was exempt from tax under section 84. It may be that he brought it to tax because no claim for exemption was made before him by the assessee, but the fact remains that it was subjecte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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