Law:

Section:

Section 150, read with section 145 of the Income-tax Act, 1961 [Corresponding to section 34(3), read with section 13 of the Indian Income-tax Act, 1922] - Income escaping assessment - In pursuance of an order on appeal, etc. - In course of assessment, ITO added two sums to income of assessee - On appeal, AAC came to conclusion that profits of assessee could not be computed properly from accounts kept by assessee - AAC accordingly exercised his powers under proviso to section 13 and computed loss of assessee - Whether in exercising his discretion under proviso to section 13, all that AAC did was to exercise a power which was conferred upon him by statute, a power which he could exercise in appeal; and in as much as no period of limitation was provided for exercise of that power, it was competent to AAC to exercise that power at any time - Held, yes - Whether, therefore, Tribunal was justified in law in upholding application of proviso to section 13 by AAC in computing income of assessee - Held, yes FACTS The assessee carried on the business of machinery manufacture on a fairly large scale, and in the assessment order, the ITO added two sums to the income of the assessee on the ground that certain items of machinery had not been accounted for in the books and that the valuation with regard to the cost of building had not been properly entered in the books of the assessee. On appeal the AAC held in favour of the assessee that the ITO was not justified in adding these two sums. But on looking at the accounts, he found that two items of sales had not been accounted for. He, therefore, came to the conclusion that the profits of the assessee could not be properly computed from the account kept by the assessee, and exercised his powers under the proviso to section 13 and computed the loss of the assessee. The Tribunal in appeal confirmed the AAC's order. In the instant appeal the assessee challenged the order of the Tribunal on ground that, under the proviso to section 13, it was only the ITO who could exercise the discretion conferred by that proviso and it was not open to the AAC to exercise that discretion. Further, the assessee contended that addition made by AAC…

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