Law:

Section:

Section 254 of the Income-tax Act, 1961 [Corresponding to section 33(4) of the Indian Income-tax Act, 1922] - Appellate Tribunal - Powers of - Assessment year 1953-54 - Whether Tribunal hearing an appeal may give directions for reopening assessment of year to which appeal relates, but it cannot give any directions to reassess in case of period not covered by that year - Held, yes - Whether where Tribunal discovered 'cash credits' in relevant assessment year it was entitled to enquire whether source of cash credits was explained and if it held that they represented capital or income of earlier years, it could exclude them from income liable to be taxed in year to which appeal related but it had no power to find on amalgamation of income an average of more years than one, or to give credit for what it called intangible additions; without explaining why credit was given - Held, yes FACTS For the assessment year 1952-53, the respondent was assessed in the status of a registered firm. For the assessment year 1953-54, the ITO discovered certain amount as "cash credits" which in his view, were not satisfactorily explained by the respondents. The ITO accordingly brought to tax a total income of Rs. 1,31,179 being Rs. 56,487 as income from business and Rs. 74,692 as income from "other sources" and assessed the respondent as an unregistered firm. The AAC reduced the income. In second appeal, the Tribunal reduced the income from business and confirmed the finding that the source of the cash credits had remained unexplained. But the Tribunal observed that "there were certain special features in the case which needed proper consideration in determining the final assessment." The Tribunal then aggregated the income for the assessment years 1952-53 and 1953-54 for the two years and apportioned in equal shares in the two years. For the assessment year 1952-53, the Tribunal recorded that the respondents had given an undertaking to file a voluntary return for assessment on the basis of total income of Rs. 50,000. On reference, the High court confirmed the view taken by the Tribunal. On appeal to the Supreme Court : HELD An assessment which has become final may be reopened in…

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