1962 (2) TMI 12 - SC - Income Tax

Appellate revision power cannot introduce undisclosed income; such income requires remand or escaped-income statutory procedures under assessment law.

Whether an appellate authority may assess an undisclosed new source is resolved by treating Section 31(3) as a revisional power confined to the assessment ... Power to enhance the assessment - revisional jurisdiction of the Appellate Assistant Commissioner - assessment confined to matters before the Income-tax Officer - power to remand for fresh assessment - procedure for bringing escaped income to taxPower to enhance the assessment - revisional jurisdiction of the Appellate Assistant Commissioner - assessment confined to matters before the Income-tax Officer - power to remand for fresh assessment - procedure for bringing escaped income to tax - Whether in an appeal filed by an assessee the Appellate Assistant Commissioner can discover and assess new sources of income not disclosed in the return and not considered by the Income-tax Officer - HELD THAT: - The Court held that although the Appellate Assistant Commissioner has power to enhance an assessment and exercises a revisional jurisdiction to revise the assessment and the processes leading to it, that power is confined to matters which were before and considered by the Income-tax Officer. The appellate authority cannot travel outside the record to introduce new sources of income not disclosed in the return or omitted from the Income-tax Officer's assessment. The Court relied on consistent High Court decisions to that effect and observed that special statutory provisions exist for bringing escaped income to tax by following the procedure provided elsewhere in the statute; legislative acquiescence in the long-standing construction of the appellate power reinforced that interpretation. Where a new source requires consideration, the proper course is to remand to the Income-tax Officer or to proceed under the statutory machinery for escaped income rather than for the Appellate Assistant Commissioner to assess de novo on undisclosed sources.The Appellate Assistant Commissioner cannot, in an appeal by the assessee, assess new sources of income not before the Income-tax Officer; such matters should be remanded or dealt with under the special procedure for escaped income.Final Conclusion: Appeal dismissed. The Appellate Assistant Commissioner's power of enhancement is confined to income and matters which were before the Income-tax Officer; new sources not considered by the Income-tax Officer cannot be assessed by the Appellate Assistant Commissioner and must be dealt with by remand or under the statutory procedure for escaped income. No order as to costs. Issues: Whether, in an appeal filed by an assessee, the Appellate Assistant Commissioner (under Section 31) can discover and assess a new source of income not disclosed in the return and not considered by the Income-tax Officer.Analysis: Section 31(3) empowers the Appellate Assistant Commissioner to enhance an assessment, confirm, reduce, annul, or set aside and direct fresh assessment. Competing statutory provisions (Sections 33B and 34) provide specific mechanisms for bringing escaped income from new sources to tax. Judicial authorities over several decades have interpreted the appellate power as a revisional jurisdiction confined to matters that were before or considered by the Income-tax Officer, with remand available where additional inquiry or fresh assessment is necessary. The interpretation that an appellate authority may itself travel outside the record to assess entirely new sources would bypass the statutory procedures for escaped income and the right of further appeal available when fresh assessment procedures are followed.Conclusion: The Appellate Assistant Commissioner cannot, in disposing of an appeal under Section 31, assess new sources of income that were neither disclosed in the return nor considered by the Income-tax Officer; such matters should be dealt with by remand or under the specific provisions for escaped income.Final Conclusion: The appellate power to enhance an assessment under Section 31(3) is limited to revising matters within the scope of the assessment record and does not authorize the Appellate Assistant Commissioner to independently introduce and assess new undisclosed sources of income; the appropriate course for such matters is remand or invocation of the statutory procedures for escaped income.Ratio Decidendi: Section 31(3) does not empower the Appellate Assistant Commissioner to independently assess new sources of income not before the Income-tax Officer; escaped income from new sources must be brought to tax under the procedures of Sections 33B and 34 or by remand to the assessing officer.