LALJI HARIDAS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference arises out of a proceeding for assessment of the assessee for the asst. year 1949 50, the relevant account year being Samvat year 2004, for income shown in the account books and the financial year 1948 49, for income from undisclosed sources. The ITO served a notice on the assessee on 21st Dec., 1957, under S. 28(2) read with S. 46(1)(a) of the Saurashtra IT Ordinance, 1949, calling upon the assessee to file a return of his income for the asst. year 1949 50. In response to the notice, the assessee filed a return of his income under protest and in that return he disclosed an income of Rs. 46. Immediately after filing the return the assessee took certain proceedings for the purpose of challenging the jurisdiction of the ITO, but ultimately he failed in preventing the ITO from proceeding with the assessment, and the ITO made an assessment order dt. 17th Dec., 1958, holding that five cash credit entries appearing in the books of account of the assessee and aggregating to Rs. 4,74,000 represented undisclosed income of the assessee and was accordingly liable to be added in the assessable income of the assessee. The assessee preferred an appeal to the AAC and his grievance against the assessment order was that the ITO had acted contrary to the principles of natural justice and that no opportunity was given to him to examine witnesses in support of his case that the cash credit entries represented sale proceeds of gold and that certain relevant questions were also wrongly disallowed by the ITO. The AAC found that there was substance in this grievance of the assessee and he, accordingly, by an order dt. 3rd Sept., 1959, directed the ITO to make further inquiry into the case by giving an opportunity to the assessee to produce whatever evidence he wanted to adduce in support of his case, provided it was relevant and to make a report within three months. The assessee was of the view that the AAC ought to have set aside the assessment order and remanded the case to the ITO for making a fresh assessment and the AAC was wrong in keeping the appeal pending before him and directing the ITO to make further inquiry and report. The assessee, therefore, preferred an appeal to the Tribunal complaining against the order of the AAC. At the hearing of the appeal before the Tribunal a preliminary objection was raised on behalf of the ITO against the maintainability of the appeal. The ITO urged that since there was no substantive order passed by the AAC under S. 31(3) disposing of the appeal and the order passed by the AAC was merely an interim order causing further inquiry to be made by the ITO under S. 31(2), no appeal lay to the Tribunal under S. 31(1) and the appeal was, therefore, not maintainable. The ITO relied on a decision of the Bombay High Court in Girdhar Javer & Co. vs. CIT (1953) 24 ITR 540 (Bom) : TC7R.273, in support of this preliminary objection. The Tribunal however rejected the preliminary objection holding that the decision of the Bombay High Court in Girdhar Javer's case (Supra), was not a direct authority of the question raised by the preliminary objection but that there was a decision of the Patna High Court in Jitan Ram Nirmal Ram vs. CIT (1951) 19 ITR 500 (Pat) : TC8R.448, which was directly in point and according to that decision of the Patna High Court, an appeal lay against an order made by the AAC under S. 31(2). The Tribunal then proceeded to discuss the merits of the appeal and came to the conclusion that the order passed by the AAC under S. 31(2) causing further inquiry to be made by the ITO was a proper and valid order. The Tribunal in this view of the matter rejected the appeal of the assessee. The assessee then applied to the Tribunal for making a reference to the High Court on the question of law decided against him by the Tribunal. The Commissioner was also dissatisfied with the decision of the Tribunal as regards the preliminary objection but he could not make an application for a reference since the appeal was decided in favour of the Revenue. But when the application for reference made by the assessee came to be heard, he submitted to the Tribunal that the question of law arising out of the preliminary objection should also be referred to the High Court. The Tribunal accordingly referred the following two questions for our determination :

(2.) IT is apparent that the second question can arise for consideration only if the first question is answered in the affirmative and, therefore, we must first proceed to consider the first question. The first question raises the point whether an appeal lies to the Tribunal against an order passed by the AAC directing further inquiry to be made by the ITO under S. 31(2). Sec. 33(1) provides that any assessee objecting to an order passed by the AAC under S. 31 may appeal to the Tribunal within sixty days of the date on which such order is communicated to him. The right which is conferred on the assessee to prefer an appeal to the Tribunal is, therefore, limited to an order passed by the AAC under S. 31. If, therefore, the order of the AAC objected to by the assessee in his appeal to the Tribunal was an order under S. 31, the appeal would be maintainable under S. 33 (1). Now when we turn to S. 31 we find that the only orders contemplated in that section are those referred to in the various clauses of Sub S. (3). Sec. 31(2) does not contemplate an order to be passed on the appeal. What S. 31(2) provides is that the AAC may for the purpose of disposing of an appeal, make such further inquiry as he thinks fit or cause further enquiry to be made by the ITO. The AAC may under S. 31(2) make further inquiry himself or cause such further inquiry to be made by the ITO. It is no doubt true that when he decided to cause further inquiry to be made by the ITO, he would pass an order directing the ITO to make such further inquiry but that would be merely an interim order for the purpose of obtaining further material on the basis of which he can dispose of the appeal. Such an order would not stand on any different footing from a decision taken by him to make further inquiry himself. The appeal which is provided under S. 33(1) is an appeal against a substantive order disposing of the appeal and such a substantive order may be made under any of the different clauses of S. 31(3) but no appeal lies under S. 33(1) against a decision of the AAC under S. 31(2) to make further enquiry himself or to cause further enquiry to be made by the ITO.

(3.) THE Tribunal relied on the decision of the Patna High Court in Jitan Ram Nirmal Ram vs. CIT (supra) and held that this decision was a direct authority for the proposition that an appeal lies to the Tribunal under S. 33(1) against a direction issued by the AAC under S. 31(2). But when we turn to this decision we find that it does not say anything of the sort. The order of the AAC, which was impugned in appeal before the Tribunal in that case, was not by way of direction for further inquiry by the ITO under S. 31(2) but was an order setting aside in part the assessment made by the ITO and directing the ITO to make a fresh assessment as provided in S. 31(3)(b). It was a substantive order made under S. 31(3)(b) and was, therefore, clearly appealable even according to the view taken by the Bombay High Court in Girdhar Javer's case (supra). This decision of the Patna High Court does not, therefore, lay down that, where a direction is issued by the AAC under S. 31(2), it can be challenged by way of an appeal under S. 33(1) or S. 33(2).