TMI Blog1971 (8) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... 45 representing commission paid on borrowing shares for purposes of pledging them as security with the income-tax department for securing stay of recovery of certain taxes, in the computation of profits and gains of business of the assessee-company? 2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction of a sum of Rs. 6,174 being the legal expenses incurred by the company in the relevant previous year in connection with income-tax matters as a permissible deduction under the provisions of the Indian Income-tax Act, 1922? 3. Whether, on the facts and in the circumstances of the case, the Appellate Assistant Commissioner was competent to substitute the figure of Rs. 3,73,075 as the amount of loss carried forward from the assessment year 1959-60 in place of the sum of Rs. 5,60,148 shown by the Income-tax Officer in the assessment order ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount of Rs. 2,00,348 represented capital expenditure and was not a permissible deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922? " So far as the first two questions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch mistake which has been brought to his notice by an assessee: Provided that no such rectification shall be made, having the effect of enhancing an assessment or reducing a refund unless the Commissioner, the Appellate Assistant Commissioner or the Income-tax Officer, as the case may be, has given notice to the assessee of his intention so to do and has allowed him a reasonable opportunity of being heard : Provided further that no such rectification shall be made of any mistake in any order passed more than one year before the commencement of the Indian Income-tax (Amendment) Act, 1939." The Appellate Assistant Commissioner proceeded to correct the error under section 31, the relevant part of which is in the following terms:- "31. (1) The Appellate Assistant Commissioner shall fix a day and place for the hearing of the appeal, and may from time to time adjourn the hearing. (2) The Appellate Assistant Commissioner may, before disposing of any appeal, make such further inquiry as he thinks fit, or cause further inquiry to be made by the Income-tax Officer. (2A) The Appellate Assistant Commissioner may, at the hearing of an appeal, allow an appellant to go into any ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to the excess depreciation allowed, it would appear that the question of allowance of correct depreciation is also open before me because the appellant has itself agitated this point in ground of appeal No 6. It is, accordingly, open to me to correct a mistake in this regard also. I, therefore, direct the Income-tax Officer to correct the assessment by substituting the depreciation of Rs. 5,749 against the depreciation of Rs. 57,496 allowed by him. " On a further appeal to the Appellate Tribunal by the assessee, the Tribunal dealt with the matter as follows : " It is no doubt true that the Appellate Assistant Commissioner is competent only to correct the mistake appearing in his own order and that he cannot correct the mistakes appearing in the order of the Income-tax Officer. The Kerala High Court has enunciated this principle in Abdul Rahiman Sait v. Income-tax Officer, and it is held that one authority cannot proceed to rectify the mistakes in the order of any other authority. But, the Appellate Assistant Commissioner also has the power of enhancing an assessment." The scope of such powers has been explained by the Bombay High Court in Narrondas Manordass v. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of view of taxability. " In the present case in enhancing the assessment in the manner he has done, the Appellate Assistant Commissioner has not travelled outside the record of the assessment proceedings and has not discovered new sources of income which had not been considered by the Income-tax Officer. The latter had actually considered the loss of the earlier years which was liable to be set off against the income of the present year and he had also considered the depreciation to which the assessee was entitled. The Appellate Assistant Commissioner has merely revised the findings of the Income-tax Officer on these two points. Such revision is well within the competence of the Appellate Assistant Commissioner. The enhancement made by him is, therefore, confirmed. The contention of the learned counsel for the assessee is based on the following observations of the Supreme Court in Commissioner of Income-tax v. Amritlal Bhogilal Co. : "The powers of the Appellate Assistant Commissioner, however wide, have, we think, to be exercised in respect of the matters which are specifically made appealable under section 30(1) of the Act. If any order has been deliberately left o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Officer with a view to find out new sources of income and the power of enhancement under section 31(3) of the Act is restricted to the sources of income which have been the subject-matter of consideration by the Income-tax Officer from the point of view of taxability. In this context 'consideration' does not mean 'incidental' or 'collateral' examination of any matter by the Income-tax Officer in the process of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. In the present case, it is manifest that the Income-tax Officer has not considered the entry of Rs. 5,85,000 from the point view of its taxability and, therefore, the Appellate Assistant Commissioner had no jurisdiction, in an appeal under section 31 of the Act, to enhance the assessment." These observations do not help the learned counsel for the assessee and the matter is concluded by the decision in Rai Bahadur Hardutroy Motilal Chamaria's case and reference may be made to the observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhance the assessment. This by itself is sufficient to reject the contention. In any event, the decision of the Supreme Court is clear on the subject and following the same we answer the question referred to us in the affirmative. So far as the last question, i.e., question No. 4, is concerned, it presents no difficulty. The facts bearing on this question are as follows : On 20th of November, 1958, the assessee company wrote to Messrs. Hazemag of Germany calling for quotations for a dryer plant in its cement manufacturing business. A quotation was received in which the initial water content in limestones was mentioned at 16% and the residual water content at 2%. The assessee wrote to the company on 12th January, 1959, asking whether the plant will be able to reduce the water content from 16% or 14% to 0%. The manufacturers promised that this would be possible but made an enquiry why this was required. There was some correspondence and ultimately on 3rd March, 1959, the company placed the order. The manufacturers asked the assessee to open an irrevocable letter of credit in their favour for pound 32,000. The same was opened on 24th July, 1959. The assessee had written to the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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