Appellate jurisdiction and tax characterisation: capital gains, partition receipts, and advance-tax interest were each treated as appealable or non-taxable on principle.

An appellate authority hearing an appeal for one assessment year cannot direct that capital gains be assessed in a different year; its jurisdiction is confined to the assessment order under appeal, and the direction was without jurisdiction. Amounts received after a general partition of Hindu undivided family property were capital assets, not segregated profits, so later remittances from those assets could not be taxed as income or profits accrued or arisen abroad. Interest charged under the advance-tax machinery formed part of the tax liability and was appealable where the assessee disputed liability to be assessed under the Act.

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Issues: (i) Whether the Appellate Assistant Commissioner could, while hearing the appeal for one assessment year, direct assessment of the capital gains from sale of the textile mills in a different assessment year; (ii) whether amounts brought from Rajnandgaon and Bikaner after a general partition of Hindu undivided family property could be assessed as remittances of profits; (iii) whether an appeal to the Appellate Assistant Commissioner lay against the levy of interest under section 18A.

Issue (i): Whether the Appellate Assistant Commissioner could, while hearing the appeal for one assessment year, direct assessment of the capital gains from sale of the textile mills in a different assessment year.

Analysis: The jurisdiction of the appellate authority was confined to the assessment order for the year under appeal. It could determine whether a particular item was income of that year, but it had no power in that appeal to decide the year in which the item should properly be taxed.

Conclusion: The direction to assess the capital gains in a different assessment year was without jurisdiction and the issue was answered in favour of the assessee.

Issue (ii): Whether amounts brought from Rajnandgaon and Bikaner after a general partition of Hindu undivided family property could be assessed as remittances of profits.

Analysis: On a general partition, the family estate is thrown into a common pool and the member receives an allotment of assets, not a segregated allotment of profits as such. The amounts received on partition lost their character as profits and became part of the assessee's capital assets. Amounts later brought into taxable territory from those assets were therefore not sums of income or profits accrued or arisen abroad within the meaning of the charging provision.

Conclusion: The amounts could not be assessed as remittances of profits and the issue was answered in favour of the assessee.

Issue (iii): Whether an appeal to the Appellate Assistant Commissioner lay against the levy of interest under section 18A.

Analysis: Interest under section 18A formed part of the machinery for assessment of tax liability and was an addition to the tax. Since the assessee had appealed against the assessment as a whole and disputed his liability to be assessed to that addition, the appellate remedy was available under the provision permitting an appeal by an assessee denying liability to be assessed under the Act.

Conclusion: The appeal was competent and the issue was answered in favour of the assessee.

Final Conclusion: The reference was substantially decided for the assessee on the substantive questions concerning appellate jurisdiction, characterization of post-partition receipts, and maintainability of the appeal against interest.

Ratio Decidendi: An appellate authority under the income-tax law cannot direct assessment of an item in a year not before it, and assets received on a general family partition do not retain their earlier character as profits merely because they are later brought into taxable territory; interest added under the statutory machinery for advance tax is part of the tax liability and is appealable where the assessee disputes liability to be assessed under the Act.

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