# COMMISSIONER OF INCOME-TAX, CALCUTTA v. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA

- **Citation:** [1967] 3 S.C.R. 508
- **Court:** Supreme Court of India
- **Decided:** 1967-04-01
- **Bench:** J. C. Shah, S. M. S!Kri, V. Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-calcutta-v-rai-bahadur-hardutroy-motilal-chamaria-4070
- **Pages:** 10

## Headnote

Indian Income-tax Act, 1922, s. 31-Powers of Appellate Assistant
CommisJioner in
tippeal-Whether can
enhance income of assessee in
respect of sources of Income not considered by Income-·tax Officer for
purpose of taxation.
The account books of the respondent for the assessment year 1952-53
showed three swns of Rs. 2,50,000,
Rs. 1,50,000 and Rs. 30,000 as
borrowed from parties in Nepal. The income-tax. Officer added these
amounts to the total income of the assessee as secret income falsely
shown as loans. The Income-tax.
Officer noted that the assessee
bad
withdrawn ·at Calcutta <in March 31, 1952 a sum of Rs. 5,30,000 from a
Calcutta Bank and had sent a sum of
Rs. 5,85,000 to bis Forbesganj
branch on the same day to enable that branch to pay Rs. 2,50,000 to one
of the creditors. The transfer of the money from Calcutta to Forbesganj
on the same day was considered by the Income-tax Officer to be a physical impossibility. When the matter was in appeal before the Appellate
Assistant Commissioner, the latter not only confirmed the addition of the
aforesaid loan amounts to the income of the assessee but also held that
the swn of Rs. 5,85,000 transferred from Calcutta to the Forbesganj
branch was also unexplained income of the
assessee and after making
allowance for an earlier withdrawal added a further sum of Rs. 4,05,000
on this account to the assessed income of the resoondent. The Tribunal
held that the Appellate Assistant Commissioner had power to enhance the
income as he did but reduced the
enhancement to Rs. 1,55,000.
The
High Court however held, in reference, that the Appellate Assistant Commissioner had no power to make ·the addition as tlie sum of Rs. 5,85,000
had not been considered by the Income-tax Officer for the purpose of
assessment. In appeal to this Court,
· HELD : The High Court was right. The power of enhancement given
·to the Appellate Assistant Commissioner by s. 31 (3) of the Income-tax
Act, 1922 is restricted to the sources of income which have been the
subject-matter of consideration by the Income-tax Officer from .the point
of vie~· of taxabilitv.
Jn this context" 'consideration' does not 1nean 'incidental' or 'collaterai' examination of any matter by the Income-tax Officer
in the pwcess of assessment. [516 G1
In the oresent case it was manifest that the Income-tax Officer had
not considered the entry of Rs. 5,85,000. from the point of view of ita
taxabilitv and therefore the Appellate Assistant Commissioner had no
jurisdiction in an appeal under s. 31 of the Act to enhance the assess.
ment [516 F]
Con11niss1ont•r of Jnco111e-tax. Bon1hay. v. Shapoorji
Pt1llonji Mistry,
44 I. T. R 89 l fo!iowccl.
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Narrondas Manordass, Bo1nbay v. Conunissioner of Jnco1ne-tax, Cen.
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trcil, Bon1bay, :Jf J.T.R. 909, Com1nissioner of lnconie-tax v. '!vf/s. McMillan & Co., [1958] S.C.R. 689, Commissioner of lnco~ne.tax, Punjab v.
Nawab Sllall Nawaz Khan, 6 I.T .R. 370 and The K111g v. Jncome·lax
.Special Investigation Commissioners, [1936] 1 K.B. 487, considered.
C.I.T. v. MOTILAL CHAMARIA (Ramaswami, J.)
509·
A

## Text

508
COMMISSIONER OF INCOME-TAX, CALCUTTA
A
v.
RAI BAHADUR HARDUTROY MOTILAL CHAMARIA
April 1, 1967
[J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.]
Indian Income-tax Act, 1922, s. 31-Powers of Appellate Assistant
CommisJioner in
tippeal-Whether can
enhance income of assessee in
respect of sources of Income not considered by Income-·tax Officer for
purpose of taxation.
The account books of the respondent for the assessment year 1952-53
showed three swns of Rs. 2,50,000,
Rs. 1,50,000 and Rs. 30,000 as
borrowed from parties in Nepal. The income-tax. Officer added these
amounts to the total income of the assessee as secret income falsely
shown as loans. The Income-tax.
Officer noted that the assessee
bad
withdrawn ·at Calcutta <in March 31, 1952 a sum of Rs. 5,30,000 from a
Calcutta Bank and had sent a sum of
Rs. 5,85,000 to bis Forbesganj
branch on the same day to enable that branch to pay Rs. 2,50,000 to one
of the creditors. The transfer of the money from Calcutta to Forbesganj
on the same day was considered by the Income-tax Officer to be a physical impossibility. When the matter was in appeal before the Appellate
Assistant Commissioner, the latter not only confirmed the addition of the
aforesaid loan amounts to the income of the assessee but also held that
the swn of Rs. 5,85,000 transferred from Calcutta to the Forbesganj
branch was also unexplained income of the
assessee and after making
allowance for an earlier withdrawal added a further sum of Rs. 4,05,000
on this account to the assessed income of the resoondent. The Tribunal
held that the Appellate Assistant Commissioner had power to enhance the
income as he did but reduced the
enhancement to Rs. 1,55,000.
The
High Court however held, in reference, that the Appellate Assistant Commissioner had no power to make ·the addition as tlie sum of Rs. 5,85,000
had not been considered by the Income-tax Officer for the purpose of
assessment. In appeal to this Court,
· HELD : The High Court was right. The power of enhancement given
·to the Appellate Assistant Commissioner by s. 31 (3) of the Income-tax
Act, 1922 is restricted to the sources of income which have been the
subject-matter of consideration by the Income-tax Officer from .the point
of vie~· of taxabilitv.
Jn this context" 'consideration' does not 1nean 'incidental' or 'collaterai' examination of any matter by the Income-tax Officer
in the pwcess of assessment. [516 G1
In the oresent case it was manifest that the Income-tax Officer had
not considered the entry of Rs. 5,85,000. from the point of view of ita
taxabilitv and therefore the Appellate Assistant Commissioner had no
jurisdiction in an appeal under s. 31 of the Act to enhance the assess.
ment [516 F]
Con11niss1ont•r of Jnco111e-tax. Bon1hay. v. Shapoorji
Pt1llonji Mistry,
44 I. T. R 89 l fo!iowccl.
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G.
Narrondas Manordass, Bo1nbay v. Conunissioner of Jnco1ne-tax, Cen.
H
trcil, Bon1bay, :Jf J.T.R. 909, Com1nissioner of lnconie-tax v. '!vf/s. McMillan & Co., [1958] S.C.R. 689, Commissioner of lnco~ne.tax, Punjab v.
Nawab Sllall Nawaz Khan, 6 I.T .R. 370 and The K111g v. Jncome·lax
.Special Investigation Commissioners, [1936] 1 K.B. 487, considered.
C.I.T. v. MOTILAL CHAMARIA (Ramaswami, J.)
509·
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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 535 of
(
1966.
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Appeal by special leave from the judgment and order dated
March 26, 1964 of the Calcutta High Court in Income-tax Reference No. 29 of 1961.
T. V. Vishwanath Iyer, A. N. Kirpal, S. P. Nayyar for R. N.
Sachthey, for the appellant.
S. T. Desai and R. C. Prasad, for the respondent.
The Judgment of the Court was delivered by
Ramaswami, J. This appeal is brought, by special leave, from
the judgment of the Calcutta High Court dated March 26, 1964
in Income-tax Reference No. 29 of 1961.
The respondent (hereinafter called the 'assessee') is an indivir
dual carrying on business in Jute, Cloth and Films.
The assessment year is 1952-53, the corresponding accounting year being
the calendar year 1951 for all business except Katihar Cloth
Importing Co. and the Jute Mills for which the accounting year
is financial year ending March 31, 1952.
During the year of
account the assessee claimed that he had borrowed three sums of
Rs. 2,50,000, 1,50,000 and Rs. 30,000 from three parties from
Nepal, Kharag Bahadur Nepali, Jiwanmal Santockchand and
Sohanlal Subhkaran respectively.
The Income-tax Officer added
these amounts to the total income of the assessee on the ground·
that the assessee had inflated the purchase of raw jute. The Income-tax Officer was not satisfied that these three loans were.
genuine loans but considered that they represented secret profits
made by the assessee by inflating the purchase of raw jute.
The
Income-tax Officer noted that the assessee had withdrawn at
Calcutta on March 31, 1952, a sum of Rs. 5,30,000 from a
Calcutta bank and had sent a sum of Rs. 5,85,000 to hi~ Forbesganj branch on the same day to enable that branch to make payments including the repayment of Rs. 2,50,000 to Sri Kharag
Bahadur one of the alleged creditors noted above.
The Incometax Officer discussed the in1possibility of the aniount having
reached Forbesganj branch in Bihar on the very sanie day in order
to enable discharge of the creditors there on March 31 1952 In
regard to this aniount of Rs. 5,85,000 the Income-t~x officer
observed as follows :
"On 31-3-1952 the Calcutta Office has withdrawn
· Rs. 5,30,000 from the Bank and has sent Rs. 5,85,000
to Forbesganj, How the cash has reached Forbesganj
(in remote corner in North Bihar) on the same day to
enable the branch to make payments (including the sum
of Rs. 2,50,000 to Kharag Bahadur) is something diffi-
"5 l 0
SUPREME COURT REPORTS
11967] 3 S.C.R
cult to understand even in these days of fast travel.
Lloyds Bank in Calcutta would not have obliged the
assessee by paying out cash before 10 A.M. on 31-31952 and the only available train leaves in the night.
The journey including the ferry trip over the broad
ganges takes over 24 hours. Hence the entries in the
book cannot be taken to be genuine."
The assessee took the matter in appeal to the Appellate Assistant
Conunissioner and contended that the Income-tax Officer should
not have added the three items of Rs. 2,50,000, Rs. 1,50,000 and
Rs. 30,000 to the total assessable income. The Appellate Assistant Commissioner did not agree with this contention and confirmed the addition of Rs. 4,30,000.
At the same time,
the
Appellate Assistant Commissioner noticed the fact of the alleged
transfer of Rs. 5,85,000 from Calcutta to Forbcsganj on March
31, 1952 and its credit in the account~ books of the latter branch
·Oil the same date.
The Appellate Assistant Commissioner considered tjiat the amount of Rs. 5,85,000 should also be included
in the total income of the assessee, but before doing so he gave the
assessee a deduction of Rs. l,~0,000 being the amount withdrawn
earlier from the accounts of the two creditors, namely, Jiwanmal
·santokchand and Sohanlal Subhkaran and added the · balance of
Rs. 4,05,000.
This addition by the Appellate Assistant Commissioner amounted to an enhancement of the income which the
Income-tax Officer had assessed.
The assessee took the matter in
further appeal to the Appellate Tribunal which held that the
Appellate Assistant Commissioner was justified in coming to the
conclusion that the cash credits in the accounts were not explained
satisfactorily and some of the payments made at Forbesganj branoh
on March 31, 1952 were not made from the remittance from
Calcutta but from secret funds.
The Appellate Tribunal pointed
out that out of the payments claimed to haveocen made at Forbesganj
payments to Kharag Bahadur Nepali amounting to
Rs. 2,50,000 must also be excluded because it had been held by
the Income-tax Officer and the Appellate Assistant Commissioner
that the loan was not genuine; and since the loan was not genuine
it was not logical to say that it required repayment from secret
funds.
The Appellate Tribunal accordingly reduced the enhancement to Rs. 1.55,000.
Jn doing so the Appellate Tribunal rejected the contention of the assessee that the Appellate Assistant
Commissioner had no authority to enhance the income on the
oround that it was not the subject-matter of the assessment made
by the Income-tax Officer.
The Appellate Tribunal took the
view that the subject-matter in respect of which the enhancement
was made was, in fact, considered by the Income Tax Officer and
accordingly the Appellate Assistant Commissioner had jurisdiction
to make the enhancement.
At the instance of the assessee th~
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C.l.T. v. MOTJLA.J, CHA.MARIA (Ramaswami, /.)
511
Appellate Tribunal referred the following question of law for the
opinion of the High Court under s. 66( l) of the Incomr ·tax Act,
1922 (hereinafter called the 'Act') :
"Whether on the facts and in the circumstances of
the case the Appellate Assistant Commissioner was
within his authority in enhancing the assessment of the
assessee by Rs.
1,55,000 for the assessment
vear
1952-53 ?"
By its judgment dated March 26, 1964, the High Court answered
the question in the negative and in favour of the assessee.
Section 31 of the Act is to the following effect :
"31. (I ) 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 m~y
before disposing of any appeal, make su.ch f_urther mquiry as he thinks fit, or cause further mqu1ry to be
made by the Income-tax Officer ..... .
( 3) In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of
assessment,-
( a) confirm, reduc1i, enhance or annul the assessment, or
(b) set aside the assessment and direct the Incometax Officer to make a fresh assessment after
making such turther inquiry as the Income-tax
Officer thinks fit or the Appellate Assistant Commissioner may direct, and the Income-tax Officer
shall thereupon proceed to mak~ such fresh
assessment and determine where necessary the
amount of tax payable on the basis of such fresh
assessment ...... "
In Commissioner of Income-tax, Bombay v. Shapoorii Pallonji
Mistry(') it was held by this Court that in an appeal filed by the
assessee the Appellate Assistant Commissioner has no power to
enha~ce th~ assessment by discovering new sources of income not
mentioned m the return of the assessee. or considered by the
Income-tax Officer in the order appealed against.
In that case,
the assessee had received a sum of Rs. 40,000. In the proceedings
for the assessment year 1946-4 7, this came to the notice of the
Income-tax Officer.
Since the receipt fell within the accounting
year relative to the assessment, year 1947-48, the Income-tax
(1)44 I.T.R. 891.
512
SUPREME COURT
REPORTS
(1967] 3 S.C.R.
Officer did not assess the amount, making a note, "The question
will however be considered again at the time of 194 7-48 assessment."
In the return for the assessment year 1947-48, this
amount was not shown by the assessee.
The Income-tu Officer
also overlooked the note at the end of his order in the previous
year's assessment, with the result that this item was omitted from
the assessment order.
The assessee appealed to the Appellate
Assistant Commissioner against his assessment for the year 194748.
While the appeal was pending, the Income-tax Officer wrote
a letter to the Appellate Assistant Commissioner requesting him to
assess the amount of Rs. 40,000.
The Appellate Assistant Commissioner, after issuing notice, assessed the amount and included
it in the original assessment.
The question which was debated
before this Court was whether in an appeal filed by an assessee,
the Appellate Assistant Commissioner can find a new source of
income not. considered by the Income-tax Officer and assess it
under his powers granted by s. 31 of the Income-tax Act. It was
held by this Court that the powers of enhancement conferred on
the Appellate Assistant Commissioner under s. 31 only extended
to matters considered by the Income-tax Officer and if a new source
has to be considered then the power of remand may be exercised
and the Income-tu Officer should be required to deal with that
new source of income. At page 895 of the Report, Hldayatullah, J.
speaking for the Court stated as follows :
"The only question is whether in enhancing the
assessment for any year he can travel outside 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.
On the other hand, it must not be overlooked
that there are other provisions like sections 34 and 33B,
which enable escaped income from new sources to be
brought to tax after following a special procedure.
The
assessee contends that the powers of the Appellate Assistant Commissioner extend to matters considered by the
Income-tax Officer, and if a new source is to be considered, then the power of remimd should be exercised.
By the exercise of the power to assess fresh sources of
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C.I.T. v. MOTILAL CHAMARIA (Ramaswami, J.)
513
income, the assessee is deprived of a finding by two tri·
bunals and one right of appeal.
The question is whether we s~o~ld ac~ept the interpretation suggested by the Comnussmner m preference
to the one, which has held the field for nearly 37 years.
In view of the provisions of sections 34 and 33B b.Y
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."
Reference may be made, in this connection, to the decision in
Narrondas Manordass, Bombay v. Commissioner of Income-tax,
Central, Bombay(') in which the scope of the power of the Appellate Assistant Commissioner under s. 31 ( 3) was considered by the
Bombay High Court In that case, the asses.see carried on ~usi
ness at Rajkot and at Bombay, the accounting years at Ra1kot
and Bombay being different.
With regard to the profits of
Rajkot, the Income-tax Officer assessed
them
proportionately
at Rs. 1,17,643.
He also found that there were remittances
to the extent of Rs. 4,00,000 from Rajkot to Bombay, but
in view of the concession allowed by the Part B States
Taxation Concession Order he did not include this amount
in the assessable income.
The assessee appealed with respect to the sum of Rs. l, 17 ,643 contending that the Rajkot
business had no profits at all but only loss.
The Appellate Assistant Commissioner thereupon set aside the assessment . and remanded the matter to the Income-tax Officer for reassessment after
enquiring into the matters contained in the second report.
It was
held by the Bombay High Court that the power conferred upon the
Appellate Assistant Commissioner was not confined to the matter
of Rs. l, 17 ,643 in respect of which the assessee had appealed, but
he had power to revise the whole process of assessment once an
appeal had been preferred, and the order remanding the case was
not invalid in law.
The decison of this case was approved by this
Court in The Commissioner of Income-tax v. M/s McMillan &
Co.(') The question to be considered in that case was whether it
was open to the Appellate Assistant Commissioner in exercise of
his powers under s. 31 ( 3) of the Act to reject the method of
accounting followed by th~ asscssee and accepted by the Ihcome-
!ax Officer, under the proviso to s. 13 of the Act, and compute the
mcome, profits or gams of the assessce under Rule 33 of the
Rules.
It was held by this Court that the question must be
answered in the affirmative and there was nothing in s. 31 read
(1) 31 I. T. R. 909.
(2) [19581 S. C.R. 689.
L7S,,p.C.T..'67-3
514
SUP.REUB ooua:r UPOl.TS
[1967) 3 S.C.R.
with the provisions of s. 13 of the Act which prevented the Appellate Assistant Commissioner, in an appeal preferred by .the assessee
from exercising the powers which the Income-tax Officer could
exercise under the proviso to s. 13 of the Act and to enhance the
taxable income of the assessee.
At page 70 I of the Report,
S. K. ·Das, J. quoted with approval the following passage from the
judgment of Chagla, C.J. in Narrondas's case{1) :
"It is clear that the Appellate Assistant Commissioner has been constituted a revising authority against
the decisions of the !ncome-tax Officer~ a ri:vlsing
authority not in the narrow sense of 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 compu- ·
tation 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."
It is necessary to bear in mind, in this connection, that it .is (11111}
the assessee who has a right. conferred under s. 31 to prefer ea
appeal against the order of assessment made by the Income-tax
Officer. If the assessee does not choose to appeal, the -order 1'f
assessment becomes final subject to any power of revision that the
Commissioner may have under s. 33B of the Act.
Therefore, it
would be wholly erroneous to compare the powers of the Apptillate
Assistant Commissioner with. the powers possessed by a court of
appeal, under the Civil Procedure Code.
The Appellate Assistant Commissioner is not an ·ordinary cc;mrt of appeal. It is impossible to talk of a court of appeal when only one party to the
original decision is entitled to appeal and not the other party, and
in view of this peculiar position the statute has conferred very wide
powers upon the Appellate Assistant Commissioner once an appeal
is preferred to him by · the · assessee. It is necessary also to
emphasise that the statute provides that once an assessment comes
before the Appellate Assistant Commissioner, his competence is
not restricted to examining those aspects of the assessment which
are complained of by the assessee; his competence ranges ~ver the
whole assessmt'-nt and it is open to him to correct the Income-tax
Officer not oniv with regard to a matter raised by the assessee but
a1so with regard to a matter which has been considered by the
(I) 31 l.T.R. 909 ..
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C,J.T. v. MOTILAL CHAMARIA (Ramaswami, J.)
5'15
-" Income-tax Officer and determined in the course of the a5$CSS·
ment.
It is also well-established that an assessee having once
filed an appeal cannot withdraw it.
In other words, the . assessee
having filed an appeal and bniugbt the machinery of the Act into
.working, cannot prevent the Appellate Assistant Comnlissioner
from ascertaining and settling the real sum to be assessed, by .inti
B
mation of bis withdrawal of the appeal.
Even if the ~,re
fuses to appeal at the hearing, the Appellate .Assistant Conunis·
sioner can proceed with the enquiry and if be finds that there has
been an under-assessment, he can enhance the assessment i[see
Commissioner of Income-tax, Punjab v. Nawab Shah.·· Nawaz
Khan(')]. In this context refrence may be made to the. deci&jon
of the Court of Appeal in The King v. Income Tax Special Come
missioners(') in which the .taxpayer sought to withdraw a notice
of ,appeal which had been given on his :behalf against an additional
assessment under Sch. D. The Commissioners of Inland Revenpe
were not satisfied that the assessment was adequate. The. Special
Commissioners then proposed to proceed with the hearing. Of . the
appeal in the ordinary way.
At that stage the taxpayer sought a
·I>
writ of prohibition to prohibit the Special Commissioners 1rom
bearing the appeal. It was held by the Court of Appeal tllat
notice of appeal having once been given, the Commissioners .were
bound to proceed in accordance with the Income Tax Acts and
determine the true amount of the assessment.
At page 493 of
the Report Lord Wright observed as follows :
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" .... in making the assessment and in dealing with
the appeals, the Commissioners are exercising statutory
authority and a statutory duty which they are bound to
carry out They are not in the position of judges decid·
ing an issue between two particular parties.
Their obli·
gation is wider than that. It is to exercise their judgment on such material as comes before them and to
obtain any material which they think is necessary and
which they ought to have, aud on that material to make
the assessment or the estimate which the law requires
them to make. They are not deciding a case interparties; they are assessing or estimating the amount on
which, in the interests of the country at large, the taxpayer ought to be taxed."
The principle that emerges as a result of the authorities of
this Court is that the Appellate Assistant Commissioner has no
jurisdiction, under s. 31(3) of the Act, to assess
a source of
H
income which has not been processed by the Income-tax Officer
and which is not disclosed either in the returns filed by the assessee
(!) 61_ T. R. 370.
<2) [ 1936] L K. B_ 487.
516
SUPREME COURT RBPOllTS
(1967] 3 S.C.ll.
or In the assessment order, and therefore the Appellate Assistant
Commissioner cannot travel beyond the subject-matter of the
assessment. In other words, the power of enhancement under
s. 31 (3) of the Act is restricted to the subject-matter of assessment or the sources of income which have been considered expressly or by clear implication by the Income-tax Officer from the
point of view of the taxability of the assessee.
It was argued by
Mr. Vishwanath Iyer on behalf of the appellant that by applying
the principle to the present case, the Appellate Assistant Commissioner had jurisdiction to enhance the quantum of income of the
assessee.
It was pointed out that the fact of alleged transfer of
Rs. S,85,000 to Fcirbesganj branch was noted by the Income-tax
Officer and also the fact that it did not reach Forbesganj on the
same day. So, it was argued that in the appeal the Appellate Assistant Commissioner had jurisdiction to deal with the question of
the taxability of the amount of Rs. 5,85,000 and to hold that it
was taxable as undisclosed profits in the hands of the assessee.
We are unable to accept the argument put forward on behalf of
the appellant as correct. It is true that the Income-tax Officer
has referred to the remittance of Rs. 5,85,000 from the Calcutta
branch, but the Income-tax Officer considered the despatch of this
amount only with a view to test the genuineness of the entries relating to Rs. 4,30,000 in the books of the Forbesganj branch.
It is manifest that the Income-tax Officer did not consider the
remittance of Rs. 5,85,000 in the process of assessment from the
point of view of its taxability. It is also manifest that the Appellate Assistant Commissioner has considered. the amount of remitl;uice of Rs. 5,85,000 from a different aspect, namely, the point
of view of its taxabi!ity.
But since the Income-tax Officer has
not aeplie4 his mind to the question of the taxability or nontaxability of the amount of Rs. 5,85,000, the Appellate Assistant
Commissioner had no Jurisdiction, in the circumstances of the
present case, to enhance the taxable income of the assessee on the
basis of this amount of Rs. 5,85,000 or of any portion thereof. As
we have already stated, it is not open to the Appellate Assistant
Commissionar 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 find out new sources of income and the power of
enhancement. under s. 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 tci show that the Income-tax Officer applied his mind
to the particular subject-matter or the partii:ular source of income
with a view to its taxability or to its non-taxability ~d not to any
incidental connection. In the present case it is manifest that the
B
c
D
E
F
G
H
C.I.T. v. MOTILAL CHAMARIA (Ramaswami, J.)
517
A
Income-tax Officer has not considered the entry of Rs. 5,85,000
from the point of view of its taxability and therefore the Appellate
Assistant Commissioner had no jurisdiction, in an appeal under
s. 31 of the Act, to enhance the assessment.
For these reasons we hold that the High Court rightly answerB
ed the question in favour of the assessee and this appeal must be
dismissed with costs.
G.C.
Appeal dismissed.