PARAMESWARA OIL MILL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question has been referred for our opinion under Section 66(1) of the Indian Income-tax Act, 1922, at the instance of the assessee :

(2.) M/s. Parameswara Oil Mill, Chaluvadi Gurunadham and Co., Nellore (hereinafter referred to as "the assessee "), was assessed for the assessment year 1960-61 corresponding to the official year ending with March 31, 1960, as a registered firm. The assessee-firm was carrying on the business of an oil miller in purchasing groundnuts, decorticating them, crushing the kernel into oil and cake and selling the same. The Income tax Officer found cash credits in the account of one of the partners, C. Kannaiah. The peak credit of Rs. 13,189 was found on October 10, 1959. The source of the credits was not satisfactorily explained. Hence, the Income-tax Officer was of the view that there was an inflation in the purchase price recorded by the assessee and added a round sum of Rs 14.000 to the returned income on the ground that it was not properly accounted for. On appeal to the Appellate Assistant Commissioner, the addition of Rs. 14,000 was sustained on two grounds, i.e., the unexplained cash credits in the account of C. Kannaiah, one of the partners, and the inflation in the purchase price. On further appeal by the assessee, the Income-tax Appellate Tribunal found that the Income-tax Officer proceeded on the basis of the Chittor Market Committee's report which mentioned that the prices at Vadamalapet would be more by Rs. 5 or 6 per candy, but that information was not put to the assessee and an opportunity provided to rebut the same. Hence, the Appellate Tribunal set aside the order of the Appellate Assistant Commissioner and remitted the matter to him with a direction to obtain the rates prevailing at Vadamalapet and dispose of the appeal afresh after affording a reasonable opportunity to the department and the assessee for adducing any fresh evidence. The Appellate Assistant Commissioner, after the remand, examined the matter and found as a fact that there was no evidence of inflation in the purchase price. However, he sustained the addition of Rs. 13,189 under the head "Undisclosed sources" as the source of the credits was not satisfactorily explained by the assessee. The assessee once again preferred an appeal to the Income-tax Appellate Tribunal. The assessee contended before the Tribunal that the Appellate Assistant Commissioner had no jurisdiction to add a sum of Rs. 13,189 as income under the head "Undisclosed sources" because it constituted a new source of income. This contention of the assessee did not find favour with the Tribunal which dismissed the appeal. Hence this reference.

(3.) THE aforesaid decision is an authority for the proposition that the Appellate Assistant Commissioner is entitled to sustain the addition made by the Income-tax Officer on a ground different from the one which has been made by him. THE Appellate Assistant Commissioner cannot traverse beyond the four corners of the assessment which was the subject-matter of appeal before him. Irrespective of the fact that any items which have been considered by the Income-tax Officer are added to or deleted from the income returned by the assessee, the Appellate Assistant Commissioner must be held to have ample power and jurisdiction to consider not only "the items which have been added but also those which have been deleted by the Income-tax Officer in the order of assessment. When once the appeal is filed before the Appellate Assistant Commissioner, the assessment must be considered to be the subject-matter of the appeal and the Appellate Assistant Commissioner was empowered to remand the case to the Income-tax Officer with a direction to include in the assessment something or some items which ought to have been included by him, which he failed to do so. In the instant case, the item with which we are now concerned is the addition of Rs. 13,189, the peak credit which was found in the account of one of the partners, viz., C. Kannaiah, THE addition of Rs. 14,000 was made by the Income-tax Officer on the ground that there was inflation in the purchase price of groundnuts by the assessee. Though the Appellate Assistant Commissioner, on the material before him after remand, has arrived at a conclusion that there was no inflation in the purchase price of groundnuts, still it was open to him to sustain the addition of the cash credit of Rs. 13,189, the source of which has not been properly and satisfactorily explained by the assessee, as income of the assessee under the head "Undisclosed sources". This source is not business source but it falls under a different and distinct head "Undisclosed sources". THE undisclosed income from a known or disclosed source is distinct and different from an undisclosed source, though there may be undisclosed income from business or a known source. But, however, the Appellate Assistant Commissioner is empowered to include this item of Rs. 13/189 as income from undisclosed source though the Income-tax Officer sought to add the same as income of business on the ground that there was inflation in the purchase price. THE source in this context and set-up need not be construed as a source of income specified in Section 6 of the Act. Suffice it to say that the source with which the Appellate Assistant Commissioner was concerted while disposing of the Appeal under Section 31 of the Act, is one of the items or matters for consideration before him. If that particular item or matter was the subject-matter of assessment by the Income-tax Officer or if it was shown by the assessee in his return, the Appellate Assistant Commissioner will undoubtedly have the jurisdiction to decide about the same in the appeal although such item was sustained by the Income-tax Officer on a different ground : see Commissioner of Income-tax v. Jagdish Mills Ltd., 1964 51 ITR 266 (Guj.) Hence, we have no hesitation to hold that the Appellate Assistant Commissioner has ample power and jurisdiction to sustain the addition of Rs. 13,189 as income from an "undisclosed source" although the Income-tax Officer tried to sustain a sum of Rs. 14,000 inclusive of Rs. 13,189 as suppressed income from the business by inflating the purchase price of the groundnuts.