1997 (3) TMI 2 - SC - Income Tax

Appellate Assistant Commissioner may add income sources or items not previously considered under section 251; appellate power broad

The SC allowed the appeal, holding that the Appellate Assistant Commissioner's powers under section 251 include making additions based on income sources ... Scope of powers - Whether the sum was added by the Appellate Assistant Commissioner on new sources of income or items not considered by the Income-tax Officer from the point of view of assessability - HELD THAT:- Having regard to the decision in Jute Corporation of India Ltd.[1990 (9) TMI 6 - SUPREME COURT], it must be held that the High Court was in error in holding that the appellate power conferred on the Appellate Assistant Commissioner under section 251 was confined to the matter which had been considered by the Income-tax Officer and the Appellate Assistant Commissioner exceeded his jurisdiction in making an addition on the basis of the other 10 items of hundis which had not been explained by the assessee. This means that even if question No. 2 is answered in the affirmative, questions Nos. 1 and 3 must be answered in the negative. The appeal is, therefore, allowed, the impugned judgment of the High Court in so far as it relates to questions Nos. 1 and 3 is set aside and the said questions are answered in the negative, i. e., in favour of the Revenue and against the assessee. Issues involved:Scope of powers of the Appellate Assistant Commissioner under section 251 of the Income-tax Act, 1961.Detailed Analysis:The case involves an appeal regarding the powers of the Appellate Assistant Commissioner under section 251 of the Income-tax Act, 1961. The matter pertains to an assessment year where the Income-tax Officer included a substantial sum in the total income of the assessee related to ostensible transactions in hundi loans. The Appellate Assistant Commissioner not only upheld this addition but also included additional amounts not considered by the Income-tax Officer, leading to a further enhancement of the total income. Subsequently, the Tribunal deleted the additional amount added by the Appellate Assistant Commissioner, stating that he had exceeded his jurisdiction. The High Court was then asked to consider specific questions related to the jurisdiction and powers of the Appellate Assistant Commissioner in such cases.The High Court held that the Appellate Assistant Commissioner had overstepped his jurisdiction by considering new entries not assessed by the Income-tax Officer and adding them to the total income of the assessee. The High Court relied on a previous decision of the Supreme Court to support this conclusion, emphasizing that the Appellate Assistant Commissioner cannot assess new sources of income not previously considered by the Income-tax Officer.The Revenue appealed this decision, arguing that the High Court had misinterpreted the powers of the Appellate Assistant Commissioner under section 251 of the Act. The Revenue pointed out that a previous Supreme Court decision had questioned the restrictive interpretation adopted by the High Court, indicating that the Appellate Assistant Commissioner's powers are extensive and can encompass modifications not raised before the Income-tax Officer.In a detailed analysis, the Supreme Court referred to earlier judgments to clarify the powers of the Appellate Assistant Commissioner. The Court highlighted that the Appellate Assistant Commissioner's authority is coextensive with that of the Income-tax Officer, allowing for modifications to the assessment order based on additional grounds even if not initially raised. The Court emphasized that the Appellate Assistant Commissioner has broad powers in deciding appeals, subject only to statutory restrictions or limitations.Based on this interpretation, the Supreme Court concluded that the High Court erred in restricting the jurisdiction of the Appellate Assistant Commissioner. The Court held that the Appellate Assistant Commissioner had the authority to consider and assess additional grounds, even if not previously addressed by the Income-tax Officer. Consequently, the Supreme Court allowed the appeal, setting aside the High Court's judgment and ruling in favor of the Revenue on the questions raised.