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Issues: Whether the Appellate Assistant Commissioner had power under section 31(2) of the Income-tax Act, 1922 to direct the Income-tax Officer to examine the assessee's books of account after a best judgment assessment under section 23(4), and whether the Appellate Tribunal was bound to consider the remand report made pursuant to such direction.
Analysis: Section 31(2) empowers the Appellate Assistant Commissioner to make or cause further inquiry before disposing of an appeal, but that power must be exercised for the purpose of deciding the appeal and cannot be used to revive a right to produce books of account which had already been lost when the assessee's application under section 27 was rejected. Once the assessee failed to produce the books in response to notice and the request to set aside the best judgment assessment was dismissed, the Income-tax Officer had to proceed under section 23(4) without those books. A remand directing their examination, where it merely gave the assessee a fresh opportunity to produce the same books, was inconsistent with that earlier refusal and was therefore not a valid exercise of power under section 31(2). As the remand direction itself was erroneous, the Tribunal was under no obligation to consider the report made pursuant to it.
Conclusion: The Appellate Assistant Commissioner had no valid jurisdiction on these facts to direct such examination, and the Appellate Tribunal was justified in ignoring the remand report; the questions were answered in the negative.
Final Conclusion: The reference was decided against the assessee and in favour of the Revenue on both questions.
Ratio Decidendi: The power of further inquiry under section 31(2) cannot be used to circumvent a concluded refusal under section 27 or to direct examination of books whose production had already been lawfully denied; a remand based on that course is not in accordance with law and need not be acted upon by the Tribunal.
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