Case: The Commissioner Of Income-Tax Vs. Shapoorji Pallonji Mistry

The assessee, who is the respondent here, had received on July 20, 1946 a sum of Rs. 40, 000/-. In the proceedings for a assessment for the assessment year, 1946-47, this came to the notice of the Income-tax Officer. Since the receipt fell within the accounting year relative to the assessment year, 1947-48, the Income-tax Officer did not assess the amount making a note, "The question will however be considered again at the time of 1947-48 assessment". In the return filed for the assessment year, 1947-48, this amount was not shown by the assessee. The Income-tax Officer also overlooked the note at the end of his order in the back years assessment, with the result that this item was omitted. The assessee appealed to Appellate Assistant Commissioner against his assessment for the year, 1947-48. While the appeal was pending, the Income-tax Officer wrote a letter to the Appellate Assistant Commissioner intimating him that he would like to be present, and also requesting him to assess the amount of Rs. 40, 000/-. The Appellate Assistant Commissioner, after issuing notice, assessed the amount and included it in the original assessment. The contention of the assessee was that the amount of Rs. 40, 000/- represented a receipt of a capital nature, while it was held to be a receipt on the revenue account. With this controversy, we are not concerned. The Tribunal agreed with the Appellate Assistant Commissioner, but on the application of the assessee, referred two questions to the High Court under s. 66(1). These questionWhether on the facts and in the circumstances of the case, the Appellate Assistant Commissioner was competent to enhance the assessment of the Appellant for the assessment year 1947-48 by a sum of Rs. 40, 000/- ?(2) Whether on the facts and circumstances of the case the said sum of Rs. 40, 000/- is a revenue receipt and assessable to tax in the assessment year 1947-48High Court answered the first question against the Department, and declined to answer the second, in a much as it become academic. This appeal has been filed with special leave, against the judgment of the High Court of Bombay.

Reasoning:
There is no doubt that the Appellate Assistant Commissioner can "enhance the assessment". It is admitted also by the assessee that within the four corners of the sources processed by the Income-tax Officer, the Appellate Assistant Commissioner can enhance the assessment. This power must, at least, fall within the words "enhance the assessment", if they are not to be rendered wholly nugatory. The controversy in this case is about his discovering new sources, not mentioned in the return and not considered by the Income-taxour opinion, this Court must be held not to have expressed its final opinion on the point arising here, in view of what was stated at pp. 709 and 710 of the Report. This Court, however, gave approval to the opinion of the learned Chief Justice of the Bombay High Court that s. 31 of the Income-tax Act confers not only appellate powers upon the Appellate Assistant Commissioner in so far as he is moved by an assessee but also a revisional jurisdiction to revise the assessment with power to enhance the assessment. So much, of course, follows from the language of the sectionis no doubt that this view is also possible. On the other hand, it must not be overlooked that there are other provisions like s. 34 and 33B which enable escaped income from new sources to be brought to tax after following a specialthe exercise of the power to assess fresh sources of income, the assessee is deprived of a finding by two tribunals and one right ofview of the provisions of ss. 34 and 33B by which escaped income can be brought to tax, there is reason to think that the view expressed uniformly about the limits of the powers of the Appellate Assistant Commissioner to enhance the assessment has been accepted by the legislature as the true exposition of the words of the section. If it were not, one would expect that the legislature would have amended s. 31 and specified the other intention in express words. The Income-tax Act was amended several times in the last 37 years, but no amendment of s. 31(3) was undertaken to nullify the rulings, to which we have referred. In view of this, we do not think that we should interpret s. 31 differently from what has been accepted in India as its true import, particularly as that view is also reasonably possible.