1. This is a departmental appeal against the order of the AAC made under Section 154 of the Income-tax Act, 1961 ("the Act").
2. The assessee is an individual. The assessment year is 1977-78 and the relevant previous year is the financial year ended 31-3-1977.
3. While framing the assessment for the year under appeal, the ITO made an addition of Rs. 32,100 on account of unexplained investment in the construction of a house property. Against the said addition, the assessee preferred an appeal before the AAC on the following grounds : i. That the learned ITO has erred in rejecting the return income of the assessee without considering the facts of the case.
ii. That the learned ITO is not justified in adding back Rs. 32,100 as unexplained investment in the house construction. The investment made in the house property by the assessee is fully proved and thus the addition made on this behalf is liable to be deleted.
4. The AAC, in his appellate order dated 5-11-1980, was of the view that the correct addition on account of unexplained investment would be Rs. 23,110 and not Rs. 32,100 taken by the ITO. Thereafter, he gave relief of Rs. 3,000 on account of cost of construction of the boundary wall.
5. Against the said decision of the AAC, the revenue had come up in appeal before the Tribunal, wherein, inter alia, it was argued that the AAC was not justified in giving the deduction of Rs. 3,000. The Tribunal vide its order dated 31 8-1981 in IT Appeal No. 203 (All.) of 1981 set aside the order of the AAC and directed him to give his decision afresh "after giving to the department an opportunity of being heard and rebuttal in the light of the additional documentary evidence on the point of incurring of expenses of Rs. 3,000 by the assessee in 1971".
6. In the meanwhile on 26-12-1980, it appears that the assessee moved an application under Section 154, wherein the assessee appears to have requested the AAC that since the construction was carried on in four years (from 1973-74 to 1977-78), the ITO may be directed to divide the unexplained investment on pro rata basis in the years from 1973-74 to 1977-78. In his order dated 27-2-1981 made under Section 154, the AAC directed the ITO to divide the unexplained investment on pro rata basis in the years from 1973-74 to 1977-78 in the following manner : The appellant has pointed out that there has occurred a mistake in the appellate order [Appeal No. 318/8/ of 1980-81 dated 5-11-1980 under Section 143(3) for the assessment year 1977-78 in as much as finding on one of the grounds has not been given while disposing of the appeal. The appellant has taken the stand in the said ground that the investment in construction of house No. D-59/103, 0-7, Sigra, Varanasi, may be divided on pro rata basis in accordance with the quantum of investment made in a particular year. The fact has been verified from the records and found correct. The same is being decided in favour of the appellant and the ITO is directed to divide the unexplained investment in the aforesaid property on pro rata basis in the years from 1973-74 to 1977-78.
7. Being aggrieved by the order of the AAC, the revenue has come up in appeal before us. Inviting our attention to the relevant grounds of appeal taken up before the AAC (reproduced above), the learned representative for the department submitted that the AAC was not justified in passing an order under Section 154 on a fresh plea taken up by the assessee, which was not his stand in the grounds originally taken up before the AAC. He, therefore, urged that the AAC ought not to have entertained the application made by the assessee under Section 154. He also highlighted the fact that the point regarding the unexplained investment in the house property in question was also a subject-matter of appeal by the revenue before the Tribunal and, therefore, the order of the AAC had merged with the order of the Tribunal in the result that the AAC had lost jurisdiction over the case. The learned counsel for the assessee, on the other hand, strongly relied on the order of the AAC and justified his action. He, however, was fair enough to state that no specific ground regarding spread over of the unexplained investment on pro rata basis was taken up before the AAC in the original appeal filed before him. He, however, strenuously argued that the grounds already taken up before the AAC (reproduced above) were wide enough and, therefore, there was nothing wrong in the order of the AAC made under Section 154.
8. We have considered the rival submissions of the parties and we find considerable force in the submissions made on behalf of the revenue.
When neither a ground nor a plea was raised before the A AC at the time of original hearing regarding the spread over of the unexplained investment on pro rata basis, we fail to appreciate how the AAC could accept such plea on an application made by the assessee under Section 154. Again, the issue regarding the investment in the house property in question was a subject-matter of appeal before the Tribunal and, therefore, in our considered opinion, the AAC had no jurisdiction to entertain the application made by the assessee under Section 154. In this view of the matter, we set aside the order of the AAC passed under that section.