1. To answer the question in this reference, at the instance of the Revenue, under section 256(1) of the Income-tax Act, 1961, a large body of facts needs to be set out.
2. The assessment year concerned is the assessment year 1948-49. The assessee's husband was assessed for the assessment year 1948-49 on March 19, 1953. Thereafter, the Income-tax Officer received information that the assessee's husband and the assessee had been prosecuted for illegally receiving premium (pugree) for letting out the assessee's husband's newly constructed property known as 'Candy Castle'. The assessee's husband had been acquitted, but the assessee had been convicted, because the court found that she, in the course of her management of the property under a power of attorney from her husband, had received an amount of Rs. 5,000 as premium from a tenant. Acting upon this information, the Income-tax Officer reopened the assessment of the assessee's husband for the assessment year 1948-49. The Income-tax Officer included a sum of Rs. 1,12,700 in the total income of the assessee's husband for that year. The matter was carried in appeal to the Income-tax Appellate Tribunal which excluded the amount of Rs. 1,12,700 from the total income. An application was made by the Revenue for reference of the questions arising out of the decision of the Tribunal. The application was rejected by the Tribunal. An application to this court for reference of the same questions was also rejected. This court, however, granted to the Revenue special leave to appeal to the Supreme Court. The appeal to the Supreme Court was rejected on January 9, 1967.
3. In the meantime, on June 11, 1964, the Income-tax Officer wrote to the assessee that he had learnt that the sum of Rs. 1,12,700 had been received by her as pugree in the assessment year 1948-49 and he proposed to assess that sum in her total income for that year under section 147(a) of the Income-tax Act, 1961. On January 14, 1965, the Income-tax Officer passed a reassessment order, including the sum of Rs. 1,12,700 in the assessee's income.
4. The assessee appealed to the Appellate Assistant Commissioner. She challenged, inter alia, the application of section 147(a) of the Income-tax Act, 1961. The Appellate Assistant Commissioner passed an order on January 31, 1972, the consideration of which is vital to this reference. The Revenue has not included it in the paper book. Counsel have, however, tendered a copy which has been taken on record as an exhibit.
5. The Appellate Assistant Commissioner having 'carefully considered the submissions made on behalf of the assessee', found it 'to be clear that either of the assessee's grounds for urging that action under section 147(a) is vitiated or illegal cannot be sustained. The action of the Income-tax Officer in initiating proceedings against the assessee under section 147(a) is held to be justified and this preliminary issue is decided against the assessee'.
6. The Appellate Assistant Commissioner found on merits that 'there is no basis for the income-tax Officer's conclusion that 16 tenants had paid the total amount of Rs. 1,12,700 during this year. No details of the 16 tenants who have paid this total sum of Rs. 1,12,700 is to be seen from the record'. In the Appellate Assistant Commissioner's opinion, before a decision could be given as to the correctness or otherwise of the assessment, it was necessary that further inquiries should be made. The Appellate Assistant Commissioner remanded the matter to the Income-tax Officer to enquire into the persons from whom commissions had been received by the assessee and the quantum thereof and determine the nature of the payments, namely, whether they were paid as pugree or commission to the assessee
7. The assessee preferred an appeal to the Tribunal. On behalf of the Revenue, an objection was raised to the maintainability of the appeal on the ground that the Appellate Assistant Commissioner had not finally disposed of the appeal but had directed a further inquiry and called for a report.
8. The Tribunal considered whether the order passed by the Appellate Assistant Commissioner was of an interim or transitory nature which did not resolve the points at issue one way or the other or whether it finally decided the matter in controversy in the appeal. It noted that one of the substantial grounds of appeal before the Appellate Assistant Commissioner was that the conditions of section 147 of the Income-tax Act, 1961, were not satisfied and that the reassessment was, therefore, liable to be cancelled. It concluded that the order of the Appellate Assistant Commissioner dismissing this substantial ground of appeal could not be classified as an order of an interim nature for the appeal on that point no more survived before the Appellate Assistant Commissioner.
9. The Tribunal also noted that 'it was clear beyond any doubt that the Appellate Assistant Commissioner did not find it possible on the material on record to justify and uphold the addition of Rs. 1,12,700'.
10. The Tribunal found that the Appellate Assistant Commissioner's order was not an interim order but a final order disposing of both these points raised by the assessee before him. The Tribunal, accordingly, held that the assessee had a right of appeal.
11. Having upheld the maintainability of the appeal, the Tribunal set out to consider whether the Income-tax Officer had validly made the reassessment under section 147(a) of the Income-tax Act, 1961. It held that the Income-tax Officer initiated proceedings under section 147(a) against the assessee not because he had reason to believe that income chargeable to tax in the hands of the assessee had escaped assessment but, in case the Revenue's appeal before the Supreme Court in her husband's case did not succeed, to enable the amount to be taxed in her hands. The Tribunal, accordingly, held that the reassessment under section 147(a) was liable to be cancelled as one of the essential conditions thereof was not satisfied. The Tribunal then considered the evidence on record and found that the Revenue could not show any material which could have caused in the mind of the Income-tax Officer a reasonable belief that an amount exceeding Rs. 50,000 had escaped assessment. The Tribunal also held, on a consideration of the material before it, that there was nothing to justify the conclusion of the Income-tax Officer that the assessee had received a pugree amount exceeding Rs. 50,000. Assuming that the assessee had received pugree amounts, the Revenue had failed to satisfy the Tribunal, it said, that the amounts constituted income in her hands. The Tribunal considered, in the circumstances, that the Appellate Assistant Commissioner had directed a fresh and further fishing and roving inquiry in the hope of being able to gather some evidence and information on the strength of which the inclusion of income could be justified. The discretion vested in the Appellate Assistant Commissioner to direct a further inquiry could not, the Tribunal said, be exercised for such a purpose. The Tribunal held that the Appellate Assistant Commissioner had erred in calling for a remand report.
12. Arising out of the judgment and order of the Tribunal, the only question of law which is referred to us reads thus :
'Whether, on the facts and in the circumstances of this case, the assessee was entitled to prefer the present appeal ?'
13. It is, of course, clear that if it be held that the assessee was not entitled to prefer an appeal to the Tribunal, then the entirety of the Tribunal's order would fail.
14. Mr. Jetly, learned counsel for the Revenue, submitted that since the Appellate Assistant Commissioner had passed only a remand order directing the Income-tax Officer to make further inquiries, no appeal lay to the Tribunal. In any case, he urged, the assessee could have filed the appeal, even as regards her submissions on section 147(a) of the Income-tax Act, 1961, after the Appellate Assistant Commissioner had considered the remand report and passed a final order.
15. No authorities were cited by Mr. Jetly in support of his submissions.
16. As we have stated earlier, it is an admitted position that the remand order was passed by the Appellate Assistant Commissioner under section 250 of the Income-tax Act, 1961. Section 253 provides that an assessee, aggrieved by an order passed by the Appellate Assistant Commissioner under, inter alia, section 250, may appeal to the Tribunal there against. Ipso facto, therefore, the appeal by the assessee to the Tribunal was competent.
17. Further, the Appellate Assistant Commissioner by his order concluded the assessee's contention that the Income-tax Officer's action under section 147(a) of the Income-tax Act, 1961, was not justified by holding that 'the action of the Income-tax Officer in initiating proceedings against the assessee under section 147(a) is held to be justified and this preliminary issue is decided against the assessee'. There being a final determination of this issue against the assessee, the assessee was entitled to appeal to the Tribunal.
18. Certainly, the assessee could have waited until the Income-tax Officer had made the inquiries that the Appellate Assistant Commissioner had directed him to make, until the Appellate Assistant Commissioner had considered the remand report and until the Appellate Assistant Commissioner had passed a final order before filing the appeal The point is not what the assessee could have done. The point is, was the assessee entitled to file an appeal against the Appellate Assistant Commissioner's order of remand. She was, as we have said, entitled to do so.
19. In the result, the question is answered in the affirmative and in favour of the assessee.
20. The Revenue shall pay to the assessee the costs of this reference.