COMMISSIONER OF INCOME TAX Vs. ASSOCIATED GRAMENTS MAKERS

JUDGEMENT

(1.) THIS application under Section 256(2) of the Income-tax Act, 1961, has been filed by the Commissioner of Income-tax, Jaipur, praying that the Income-tax Appellate Tribunal (hereinafter referred to as" the Tribunal") should be directed to refer the following questions in the same form or in any modihed form as this court deems proper and thereafter answer the reference :

(2.) WHETHER, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the Income-tax Officer had no power to consider the fresh sources of income or new sources of income for enhancement in the income of the assessee when the assessment was set aside as per directions of the Appellate Assistant Commissioner ?

(3.) APPEALS are provided under Section 246 of the Income-tax Act, 1961, before the Appellate Assistant Commissioner and the Commissioner (APPEALS). These appeals are by assessees aggrieved by the orders mentioned in Section 246. Any order made under Section 143(3) is appealable and the powers of the appellate court are provided in Section 251, wherein the appellate authority has power to confirm, reduce, enhance or annul the assessment or he may set aside the assessment and refer the case back to the Income-tax Officer for making fresh assessment in accordance with the directions given in appeal and after making such further enquiry as may be necessary. These powers are, inter alia, mentioned as the other powers. According to Sub-section (2) of Section 251, the Appellate Assistant Commissioner has no power to enhance an assessment or penalty or reduce the amount of refund unless the appellant had a reasonable opportunity of showing cause against such enhancement or reduction. An Explanation has been provided according to which the Appellate Assistant Commissioner may consider and decide any matter arising out of the proceedings in which the order appealed against was passed notwithstanding that such matter was not raised before him. A perusal of Sections 246 to 251 makes it clear that any questions arising out of the assessment orders in an appeal by the assessee can be possible and wide powers are given to the appellate authority, but these powers are circumscribed to the assessment order in the matters arising therefrom or a matter arising out of the proceedings, even the appellate authority has suo motu considered the questions arising thereof but there is no provision to go beyond the matter arising out of the proceedings before the assessing authority, more particularly for which separate provisions are made in the Act. The Tribunal had elaborately discussed the provisions of the Act and the case-law on the subject and has rightly come to the conclusion that new sources not mentioned in the return or considered by the Income-tax Officer are beyond the scope of the powers of the Appellate Assistant Commissioner. The case relied on by learned counsel for the petitioner that the power of setting aside the assessment order remanding the case for reconsideration of the whole matter including the evasion of tax by the assessee is not applicable in the facts of the present case because the matter arising in that case was one which arose out of the proceedings before the Income-tax Officer. The question was not about new or fresh material for the purposes of enhancement. On the contrary, the case is clearly covered by the decision of the Supreme Court in CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 wherein it has been held that (headnote), "In an appeal filed by the assessee, the Appellate Assistant Commissioner has no power to enhance the assessment by discovering new sources of income not mentioned in the return of the assessee or considered by the Income-tax Officer in the order appealed against.", and the case reported in CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC), wherein it has been held that (headnote), " It is not, therefore, open to the Appellate Assistant Commissioner to travel outside the record, i.e., the return made by the assessee or the assessment order of the Income-tax Officer, with a view to finding out new sources of income and the power of enhancement under Section 31(3) 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". Their Lordships considered the meaning of the word " consideration" and held that "consideration" does not mean "incidental" or "collateral" examination of any matter by the Income-tax Officer in the process of assessment ; therefore, there must be something in the assessment order to show that the Income-tax Officer had 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 instant case, the Appellate Assistant Commissioner has, after issuing notice, himself considered the new material and has gone into new sources of income for the consideration of which he had no jurisdiction.