Law:

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Section 251 of the Income-tax Act, 1961 [Corresponding to section 31(3) of the Indian Income-tax Act, 1922] - Commissioner (Appeals) - Power of - Assessment year 1952-53 - Whether power of enhancement of AAC under section 31(3) of 1922 Act is restricted to subject matter of assessment or source of income which have been considered expressly or by clear implication by ITO from point of view of taxability of assessee - Held, yes - Whether, therefore, AAC had no jurisdiction under section 31(3) of 1922 Act, to assess a source of income which had not been processed by ITO and which was not disclosed either in return filed by assessee or in assessment order - Held, yes FACTS The assessee carried on business in jute, cloth and films. During the year of account, the assessee claimed that he had borrowed three sums of Rs. 2,50,000, Rs. 1,50,000 and Rs. 30,000 from three parties. The ITO added these amounts to the total income of the assessee on the ground that the assessee had inflated the purchase of raw jute. The ITO noted that the assessee had withdrawn at Calcutta, a sum of Rs. 5,30,000 from a Calcutta bank and had sent a sum of Rs. 5,85,000 to his Forbesganj branch on the same day to enable that branch to make payments including the repayment of Rs. 2,50,000 to one of the alleged creditors noted above. The ITO discussed the impossibility of the amount having reached Forbesganj branch in Bihar on the very same day in order to enable discharge of the creditors there. On appeal, the AAC considered that the amount of Rs. 5,85,000 should also be included in the total income of the assessee, but before doing so, he gave the assessee a deduction of Rs. 1,80,000 being the amount withdrawn earlier from the accounts of the two creditors, and added the balance of Rs. 4,05,000. This addition by the AAC amounted to an enhancement of the income which the ITO had assessed. On further appeal, the Appellate Tribunal rejected the contention of the assessee that the AAC had no authority to enhance the income on the ground that it was not the subject-matter of the assessment made by the ITO. The Appellate Tribunal took the view that the subject-matter in respect of which the…

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