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Parameswara Oil Mill Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 35 of 1968
Judge
Reported in[1972]85ITR151(AP)
ActsIncome Tax Act, 1922 - Sections 31
AppellantParameswara Oil Mill
RespondentCommissioner of Income-tax
Appellant AdvocateA. Gangadhara Rao and ;P. Sitarama Raju, Advs.
Respondent AdvocateP. Rama Rao, Adv.
Excerpt:
direct taxation - jurisdiction of appellate assistant commissioner - section 31 of income tax act, 1922 - reference made on jurisdiction of appellate assistant commissioner (a.a.c) to make additional assessment on ground of new source of income - a.a.c empowered by virtue of section 31 (3) to confirm, reduce, enhance or annul order of assessment - section 31 (3) (b) also empowers him to make fresh assessment - held, a.a.c entitled to sustain addition made by income tax officer on grounds different from assessed by him. - - 4. it is now well settled that the appellate assistant commissioner, while exercising his powers under section 31(3)(a) of the act, is empowered in the case of an order of assessment, to confirm, reduce, enhance or annul the assessment. he has, therefore, plenary..........at the instance of the assessee :'whether, on the facts and in the circumstances of the case, the appellate assistant commissioner was right in sustaining the addition of rs. 13,189, even though he came to the conclusion that there had been no inflation in the purchase price, indulged in by the assessee ?'2. m/s. parameswara oil mill, chaluvadi gurunadham & 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.....
Judgment:

Kondaiah, J.

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 :

'Whether, on the facts and in the circumstances of the case, the Appellate Assistant Commissioner was right in sustaining the addition of Rs. 13,189, even though he came to the conclusion that there had been no inflation in the purchase price, indulged in by the assessee ?'

2. M/s. Parameswara Oil Mill, Chaluvadi Gurunadham & 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. Sri Gangadhara Rao, for the assessee, contends that the Appellate Assistant Commissioner has no jurisdiction to make an addition of Rs. 13,189 as income from undisclosed sources on the ground' that it constituted a new source. This claim of the assessee is opposed by Sri P. Rama Rao, standing counsel for the income-tax department, contending, inter alia, that the Appellate Assistant Commissioner is having ample power and jurisdiction to decide all the items which were the subject-matter of the assessment and the source in this context must be construed only as an item but not in the sense attributable under Section 6 of the Act.

4. It is now well settled that the Appellate Assistant Commissioner, while exercising his powers under Section 31(3)(a) of the Act, is empowered in the case of an order of assessment, to confirm, reduce, enhance or annul the assessment. Under clause (b) of Sub-section (3) to Section 31, he may set aside the assessment and direct the Income-tax Officer to make a fresh assessment. In disposing of the appeal under Section 31, his powers are conterminous with those of the Income-tax Officer. He has, therefore, plenary powers in disposing of an appeal under Section 31. He is entitled to do what the Income-tax Officer can, in making the assessment do, and he can also direct the Income-tax Officer to do what he has, in his opinion, failed to do. It is well settled that the powers of the Appellate Assistant Commissioner under Section 31 were not confined to the subject-matter of the appeal but extended to the subject-matter of the assessment. He is entitled to remand with a direction to the Income-tax Officer to consider what in his opinion has been erroneously left over and make a proper assessment according to law. In Commissioner of Income-tax v. McMillan & Co., : [1958]33ITR182(SC) the Supreme Court has approved the following observations made by Chagla C.J. in Narrondas Manordass v. Commissioner of Income-tax, [1957] 31 I.T.R. 909 (Bom.):

'It is clear that the Appellate Assistant Commissioner has been constituted a revising authority against the decisions of the Income-tax Officer ; a revising 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 computation 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 fiable 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.'

5. 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 I.T.R. 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.

6. For all these reasons, the question is answered in the affirmative and against the assessee. The assessee shall pay the costs of this reference. Advocate's fee Rs. 250.


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