Case: Commissioner Of Income-Tax, Calcutta Vs. Rai Bahadur Hardutroy Motilal Chamaria

having once filed an appeal cannot withdraw it. In other words, the assessee having filed an appeal and brought the machinery of the Act into working cannot prevent the Appellate Assistant Commissioner from ascertaining and settling the real sum to be assessed, by intimation of his withdrawal of the appeal. Even if the assessee refuses to appear at the hearing, the Appellate Assistant Commissioner can proceed with the enquiry and if ho finds that there has been an under-assessment, he can enhance the assessment [See Commr. of Income-tax, Punjab v. Nawab Shah Nawaz Khan, (1938) 6 ITR 370 = (AIR 1938 Lah 741)]. In this context reference may be made to the decision of the Court of Appeal, in The King v. Income Tax Special Commrs., 1936-1 KB 487 in which the tax-payer sought to withdraw a notice of appeal which had been given on his behalf against an additional assessment under Schedule D. The Commissioners of Inland Revenue 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 tax-payer sought a writ of prohibition to prohibit the Special Commissioners from hearing the appeal. It was held by the Court of Appeal that notice of appeal having ones been given, the Commissioners were bound to proceed in accordance with the Income-tax Acts and determine the true amount of the assessment. At p. 493 of the Report Lord Wright observed as follows :"......... 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 deciding an issue between two particular parties. Their obligation is wide 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, and on that material to make the assessment or the estimate which the law requires them to make. They are not deciding a case inter parties; they are assessing or estimating the amount on which, in the interests of the country at large, the tax-payer ought to be taxed." 5. The principle that emerges as a result of the authorities of this Court is that the Appellate Assistant Commissioner has no jurisdiction.Under section 31(3) of the Act, to assess a source of income which has not been processed by the Income-tax Officer and which is not disclosed either in the returns filed by the assessee 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 section 31 (3) of the Act is restricted to the subject-matter of assessment or the source 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. Viswanath 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. 5,85,000 to Forbesganj 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 remittance of Rs. 5,85,000, from a different aspect namely, the point of view of its taxability. But since the Income-tax Officer has not applied his mind to the question of the taxability or non-taxability 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 Commissioner 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 Section 31 (3) of the Act is restricted to the sources of income which have been the subject-matter of consideration by the Incometax 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 to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. In the present case it is manifest that the 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 section 31 of the Act, to enhance the assessment.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]It is necessary to bear in mind, in this connection, that it is only the assessee who has a right conferred under section 31 to prefer an appeal against the order of assessment made by the Income-tax Officer. If the assessee does not choose to appeal, the order of assessment becomes final subject to any power of revision that the Commissioner may have under section 33B of the Act. Therefore, it would have wholly erroneous to compare the powers of the Appellate Assistant Commissioner with the powers possessed by a court of appeal, under the Civil Procedure Code. The Appellate Assistant Commissioner is not an ordinary court 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 over the whole assessment and it is open to him to correct the Income-tax Officer not only with regard to a matter raised by the assessee but also with regard to and matter which has been considered by the Income-tax Officer and determined in the course of the assessment. 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 brought the machinery of the Act into working cannot prevent the Appellate Assistant Commissioner from ascertaining and settling the real sum to be assessed, by intimation of his withdrawal of the appeal. Even if the assessee refuses to appear at the hearing, the Appellate Assistant Commissioner can proceed with the enquiry and if ho finds that there has been an under-assessment, he can enhance the assessment5. The principle that emerges as a result of the authorities of this Court is that the Appellate Assistant Commissioner has no jurisdiction.Under section 31(3) of the Act, to assess a source of income which has not been processed by the Income-tax Officer and which is not disclosed either in the returns filed by the assessee 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 section 31 (3) of the Act is restricted to the subject-matter of assessment or the source 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 assesseeWe 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 remittance of Rs. 5,85,000, from a different aspect namely, the point of view of its taxability. But since the Income-tax Officer has not applied his mind to the question of the taxability or non-taxability 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 Commissioner 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 Section 31 (3) of the Act is restricted to the sources of income which have been the subject-matter of consideration by theIncometaxOfficer 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 to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. In the present case it is manifest that the 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 section 31 of the Act, to enhance the assessmentIt is necessary to bear in mind, in this connection, that it is only the assessee who has a right conferred under section 31 to prefer an appeal against the order of assessment made by theIncometaxOfficer. If the assessee does not choose to appeal, the order of assessment becomes final subject to any power of revision that the Commissioner may have under section 33B of the Act. Therefore, it would have wholly erroneous to compare the powers of the Appellate Assistant Commissioner with the powers possessed by a court of appeal, under the Civil Procedure Code. The Appellate Assistant Commissioner is not an ordinary court 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 over the whole assessment and it is open to him to correct theIncometaxOfficer not only with regard to a matter raised by the assessee but also with regard to and matter which has been considered by theIncometaxOfficer and determined in the course of the assessment. 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 brought the machinery of the Act into working cannot prevent the Appellate Assistant Commissioner from ascertaining and settling the real sum to be assessed, by intimation of his withdrawal of the appeal. Even if the assessee refuses to appear at the hearing, the Appellate Assistant Commissioner can proceed with the enquiry and if ho finds that there has been an, he can enhance the assessment[See Commr. of, Punjab v. Nawab Shah Nawaz Khan, (1938) 6 ITR 370 = (AIR 1938 Lah 741)]. In this context reference may be made to the decision of the Court of Appeal, in The King v. Income Tax Special Commrs.,1 KB 487 in which ther sought to withdraw a notice of appeal which had been given on his behalf against an additional assessment under Schedule D. The Commissioners of Inland Revenue 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 ther sought a writ of prohibition to prohibit the Special Commissioners from hearing the appeal. It was held by the Court of Appeal that notice of appeal having ones been given, the Commissioners were bound to proceed in accordance with theIncometaxActs and determine the true amount of the assessment. At p. 493 of the Report Lord Wright observed as follows :"......... 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 deciding an issue between two particular parties. Their obligation is wide 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, and on that material to make the assessment or the estimate which the law requires them to make. They are not deciding a case inter parties; they are assessing or estimating the amount on which, in the interests of the country at large, ther ought to be taxed."