Law:

Section:

Section 251 of the Income-tax Act, 1961 [Corresponding to section 3(3) of the Indian Income-tax Act, 1922] - Commissioner (Appeals) - Powers of - Assessment year 1944-45 - Assessee, an individual, was a partner in registered firm-There were various cash deposits standing in accounts to different partners of firm - ITO treated entire sum of cash credit as income of partnership firm from undisclosed sources - On appeal, AAC deleted said amount from account of firm and directed that entire sum must be brought into assessment in hands of individual partners - Whether once AAC concluded that view taken by ITO was wrong, he had no jurisdiction to issue a direction under section 31(3) of 1922 Act read with sub-section (4) that sums deleted should be assessed in hands of partners in their individual assessments - Held, yes FACTS The assessee, an individual, was a partner in a registered firm. There were various cash deposits aggregating Rs. 12,454 in the accounts of the different partners. The entire sum of Rs. 12,454 including the cash credit of Rs. 6,151 in the account of the assessee was treated by the ITO as the income of the partnership firm from an undisclosed source. On appeal, the AAC deleted the sum of Rs. 6151 in the account of the assessee on ground that it appeared on the first day of accounting period, of the commencement of business, and as such it could not be treated as income of that year of the firm. The AAC further directed that the entire sum of Rs. 12,454 must be brought into assessment in the hands of the partners. Pursuant to the direction so given, the ITO took action under section 34 of 1922 Act against the individual partners to show cause why the respective deposits in their capital account should not be brought to assessment as escaped income for the relevant year of assessment. This time the partners took the objection that the proceedings were barred by time and the direction issued by the AAC was beyond his jurisdiction. HELD Sub-section (4) of section 31 of 1922 Act is not an independent provision. It merely provides for certain consequential orders or directions which can be made by the AAC when he decides an appeal against the firm. If…

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