Law:

Section:

Section 25 of the Income-tax Act, 1961 [Corresponding to section 31 of the Income-tax Act, 1922] - Commissioner (Appeals) - Powers of - Assessment year 1944-45 - Whether there is nothing in section 31(2) of 1922 Act which limits scope of further enquiry ordered under clause (2) as further inquiry by its very nature implies that fresh evidence should be led, and account books of assessee undoubtedly are fresh evidence - Held, yes - Whether, therefore, there is no bar to AAC when making a remand order permitting or directing ITO to take into consideration account books of assessee when making his re-assessment - Held, yes FACTS The assessee-firm was doing cloth business. Notices under sections 22(2) and 22(4) of 1922 Act had been served on the assessee but the assessee failed to comply with such notices. The ITO then made his assessment under section 23(4) of 1922 Act estimating the income of the assessee and levied penalty. An application under section 27 of 1922 Act was filed before the ITO, which was dismissed. On appeal, the AAC upheld the penalty. In respect of the appeal against the assessment itself the AAC remitted the matter to ITO to re-compute the income on the basis of further inquiry as well as the appellant's accounts. The ITO made some further inquiry, and mainly on the basis of accounts then produced he made a further assessment of Rs. 37,072. On appeal, the Tribunal while confirming the order under section 27 reduced the quantum of penalty. The Tribunal also reduced the assessment holding that the AAC had no right to permit the account books to be looked at. On reference HELD There is nothing in section 31(2) of 1922 Act which limits the scope of the further inquiry ordered under clause (2). Further inquiry by its very nature implies that fresh evidence should be led, and the account books of the assessee undoubtedly are fresh evidence. In law there is no bar to the AAC when making a remand order permitting or directing the ITO to take into consideration account books of the assessee when making his re-assessment. Note: The case was decided in favour of the revenue. R.K. Gauba and D.K. Kapoor for the Appellant. A.N. Kirpal for the Respondent.…

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