Balakrishna Eradi, C.J.
1. The Income-tax Appellate Tribunal, Cochin Bench (hereinafter called 'the Tribunal'), has referred to thiscourt under Section 256(1) of the Income-tax Act, 1961--for short, 'the Act'--the following question :
' Whether, on the facts and in the circumstances of the case, was the Tribunal justified in holding that the Income-tax Officer had jurisdiction to go into the source of income which was not considered in the original assessment and which was set aside by the Appellate Assistant Commissioner '
2. The assessee is an individual who was deriving income from property as well as by way of a share from partnership business, apart from his own separate business in timber and petrol agency. In the return filed by the assessee for the assessment year 1963-64, for which the accounting period was the year which ended on March 31, 1963, the assessee had put forward a claim for deduction of interest amounting to Rs. 60,749 on the basis that he had effected certain borrowals from Marwadi hundi brokers. On an investigation conducted by him into the said claim of the assessee the ITO found that the borrowals referred to by the assessee purported to be renewals of loans originally taken in January, 1961. The assessee was asked to produce evidence in proof of the genuineness of those transactions of borrowing. But he did not examine any of the parties connected with those transactions, nor even produce the discharged hundis. The ITO further found that the assessee had withdrawn large amounts of cash from the funds allegedly borrowed and out of the total borrowals shown in the accounts amounting to Rs. 4,81,000 the assessee had utilised for his own personal purposes Rs. 1,90,000. The borrowals alleged to have been made from the Marwadi hundi dealers aggregated to Rs. 1,05,000 and the claim for deduction of interest payment in respect thereof amounting to Rs. 42,693 was disallowed by the ITO on the ground that the genuineness of the borrowings had not been proved. But, while disallowing the said claim for deduction of interest, the ITO did not make any addition of the amounts covered by the alleged hundis as income from unexplained sources.
3. The assessee carried the matter in appeal before the AAC contending that the disallowance of the claim for deduction of interest on the hundi transactions was illegal and unwarranted. The AAC on examining the case was of opinion that certain matters required further investigation. He found that the capital account showed a debit balance of Rs. 60,000 which was not properly explained. At the same time it was seen that the total withdrawals amounted to Rs. 5,00,000, while the total deposit was approximately Rs. 4,00,000. The AAC, therefore, felt that there was some justification in the submission of the assessee that he was withdrawing and re-depositing moneys depending on the needs of the business. Since this crucial-aspect in the matter had not been gone into by the ITO before hefinalised the assessment disallowing the claim for deduction for the interest payment, the AAC set aside the assessment and directed the ITO ' to re-do the assessment after taking into account all the aspects of this case '. Inasmuch as he was setting aside the entire assessment, the appellate authority declined to consider the further point agitated by the appellant before him concerning the addition of Rs. 10,000 as gross profit.
4. Subsequent to the remand, the ITO conducted a reassessment and by his order dated April 3, 1973, he made an addition of Rs. 1,05,000 on the ground that it represented unexplained credit. This was done because the version put forward by the assessee about this that he borrowed the amounts from Marwadi money-lenders on the basis of hundis was found to be unacceptable, since even during the proceedings after remand the assessee did not produce any evidence in substantiation of the said case. The ITO found that all those hundi transactions were bogus and, accordingly, he added the amount of Rs. 1,05,000 as income from other sources. He also disallowed the assessee's claim for deduction of interest paid in respect of such loans.
5. The assessee again took up the matter before the AAC and one of the grounds raised by him was that while effecting the reassessment pursuant to the order of remand, the ITO did not have jurisdiction to make any addition of the amount represented by the hundi loans on the ground that they were unexplained credits. The AAC did not accept this contention. He held that the scope of the remand was wide enough to enable the ITO to examine all the aspects of the case and determine the total income of the assessee. However, on the merits, the AAC found that there was no justification for making an addition of the sum of Rs. 1,05,000.
6. The department carried the matter in appeal against the deletion of the addition and the assessee filed a cross-objection reiterating his contention that the ITO had acted without jurisdiction in making the impugned addition in the course of the reassessment proceedings, since that was totally outside the scope of the remand order. The Tribunal rejected the aforesaid contention put forward by the assessee in the cross-objections relating to the scope of the jurisdiction exercisable by the ITO in the proceedings after remand. At the instance of the assessee, the question aforesaid was referred to this court for determination.
7. The language of Section 251 of the Act (this provision corresponds to Section 31 of the Indian I.T. Act, 1922) is wide enough to enable the AAC to correct the ITO not only in regard to matters about which the assessee makes a grievance, but also with regard to any other matter which has been considered by the ITO and determined in the course of the assessment. Thecompetence of the AAC is not restricted to deal with the subject-matter of the appeal; he may examine all matters covered by the assessment order and correct the assessment in respect of such matters even to the prejudice of the assessee and may remand the case to the ITO for enquiring into the items which were not the subject-matter of the appeal--see Narrondas Manordass v. CIT : 31ITR909(Bom) and CIT v. McMillan & Co. : 33ITR182(SC) .
8. The scope of the proceedings after remand will necessarily have to be determined with reference to the terms of the order whereby the AAC had remitted the case to the ITO. Where, on appeal from an assessment, the AAC sets aside the assessment and directs the ITO to make a fresh assessment, without imposing any restrictions or limitations as to how the fresh proceedings are to be conducted by the ITO, the ITO has the same powers in making such fresh assessment as he had originally when making an assessment under Section 143 of the Act. So long as no restrictions have been placed by the appellate authority on the scope of the proceedings after remand while directing a fresh assessment to be made by the ITO, the ITO is competent to redo the assessment in accordance with law after taking into account all matters and aspects that would be relevant in making the original assessment. It is undoubtedly open to the AAC to limit the scope of the enquiry by the ITO to any specified aspect or issue. But, so long as that has not been done but the order of assessment has been set aside in toto and the ITO directed to redo the assessment afresh, the powers of the ITO are untrammelled by anything that he might have said or omitted to say in the original order of assessment which was set aside by the AAC. This is the view that has been taken by the Allahabad High Court in J. K. Cotton Spg. & Wvg, Mills Co. Ltd. v. CIT : 47ITR906(All) and Abhai Ram Gopi Nath v. CIT : 79ITR339(All) , with which rulings we are in respectful agreement. Tested in the light of the legal position explained above, the contention of the assessee that the ITO acted without jurisdiction in going into the source of the income amounting to Rs. 1,05,000 which was not considered in the original assessment cannot certainly stand. Far from imposing any restrictions or limitations on the scope of the proceedings to be conducted by the ITO after the remand, the AAC has by the order of remand specifically directed the ITO ' to redo the assessment after taking into account all the aspects of this case '. The matter is made even more clear by the further observation made by the appellate authority that inasmuch as he was setting aside the whole assessment, he considered it unnecessary to go into the further point agitated by the appellant concerning the addition of Rs. 10,000 as profit. This observation is totally inconsistent with any intention having been entertained by the appellate authority to limit the scope of the remand only to a consideration of the question of disallowance of the claim for the interest amount of Rs. 42,693.
9. In the light of the foregoing discussion, we hold that the Tribunal was perfectly right in taking the view that the ITO had full jurisdiction to go into the source of the income relating to the aggregate of Rs. 1,05,000 in the reassessment proceedings conducted by him pursuant to the order of remand dated May 19, 1969. The question referred is, accordingly, answered in the affirmative, i.e., against the assessee and in favour of the department. There will be no direction regarding costs.
10. A copy of this judgment, under the seal of the court and the signature of the Registrar, will be forwarded to the Tribunal, as required by law.