SHAH, - (1.) THE Judgment of the court was delivered by
(2.) FOR the assessment year 1952-53 respondents M/s. Manick andSons were assessed to tax in the status of a registered firm and their incomewas computed at Rs. 15,331.00 inclusive of Rs. 15,000.00 being undisclosedincome. FOR the assessment year 1953-54 the respondents returned Rs. 40,887.00 as their income from business. The Income-tax Officer discovered an672aggregate amount of Rs. 74,692.00 as "cash credits" which, in his view, werenot satisfactorily explained by the respondents. The Income-tax Officeraccordingly brought to taxa total income of Rs. 1,31,179.00 being Rs. 56,487.00 as income from business and Rs. 74,692.00 as income from "other sources'and assessed the respondents as an unregistered firm. The AppellateAssistant Commissioner in appeal reduced the income of the respondents frombusiness to Rs.38,420.00 and income from "other sources" to Rs.46,620.00.In second appeal the tribunal reduced the income from business toRs. 28,820.00 and confirmed the finding that the source of the cash creditsaggregating to Rs. 46,620.00 had remained unexplained. But the tribunalobserved that "there were certain special features in the case which neededproper consideration in determining the final assessment". The tribunal thenaggregated the income for the assessment years 1952-53 and 1953-54 for thetwo years, which he rounded off at Rs. 1,00,000.00 and apportioned in equalshares in the two years. FOR the assessment year 1952-53, the tribunalrecorded that the respondents had given an undertaking to file a voluntaryreturn for assessment on the basis of total income of Rs. 50,000.00. At the instance of the Commissiner of Income-tax, four questionswere referred to the High court of Kerala : "(1) Whether it was not beyond the jurisdiction of the AppellateTribunal to re-open the concluded assessment for assessment year 1952-53and to direct that the income should be revised in that year at Rs. 50,000.00as against Rs. 15,331.00 already fixed ? (2) Whether on the facts and circumstances of the case and theevidence on record, the tribunal was justified in directing that anyportion of the cash credits be assessed to income-tax in any year otherthan the assessment year 1953-54 ? (3) Whether on the facts and circumstances of the case andevidence on record, the tribunal was justified in finding that a portionof the cash credits were covered by the intangible additions made inyears 1952-53 and 1953-54 assessment ? (4) Whether on the facts and circumstances of the case and theevidence on record, the tribunal was justified in directing that theincome under the head 'business" for the assessment year 1953-54 bereduced to Rs. 50,000.00 ?" The High court declined to answer questions (1) and (2) and answeredquestions (3) and (4) in the affirmative. The Commissioner appeals withspecial leave. The judgment of the tribunal is not a reasoned decision on thequestions arising before it : it is cryptic and in parts obscure, and gives nogrounds for its conclusion. The judgment again lends countenance to amethod of assessment which the Indian Income-tax Act does not warrant.In Paragraph 5 of the order the tribunal observed that the cash creditsdiscovered by the Income-tax Officer aggregated to Rs. 74,692.00 which amountwas reduced by the Appellate Assistant Commissioner to Rs. 50,620.00. (Itis common ground that the correct figure should be Rs. 46,620.00). TheTribunal then observed that on the evidence on record "these residuary itemsmust remain unexplained". But the tribunal thought that because in theassessment year 1952-53 the total income of Rs. 15,331.00 was comparativelysmall compared to the income of the earlier years "some of that year's profitsmust have come into the" profits of the next year. The tribunal then setout a consolidated statement of account for two years :673 JUDGEMENT_671_1_1969Html1.htm and observed: "The assessee has undertaken to file a voluntary return for assess-ment year 1952-53 on the basis of a total income of Rs. 50,000.00. Inthese circumstances, the total business income of the assessee for theyear under appeal is reduced to Rs. 50,000.00 only." The unexplained cash credits found by the Appellate Assistant Commis-sioner and accepted by the tribunal were Rs. 46,620.00. The total income ofthe two years on the basis adopted by the tribunal was therefore Rs. 87,838.00.But the income of the two years was rounded off at Rs. 1,00,000.00 anddivided equally between the two years. For making up a consolidated state-ment of account the tribunal gave no reasons nor did it give any reasons"for debiting the intangible additions" of Rs. 15,000.00 and Rs. 6,000.00 againstthe cash credits. Counsel for the respondents suggested that the tribunalwas presumably of the view that Rs. 15,000.00 brought to tax as business incomein the assessment in 1952-53 must have been entered in the books of accountof the next year and that Rs. 6,000.00 called "trading deficiency" in the twobranches was entered as cash credit.
(3.) THE appeal before the tribunal raised a simple question-whetherthe cash credits aggregating to Rs. 46,620.00 or any part thereof were liable tobe taxed as income of the respondents in the year 1953-54. For that purposethe tribunal had to consider whether the respondents furnished any explana-tion leading to a justifiable inference that the amount or a part thereof didnot represent income of the respondents. In the view of the tribunal thecash credits had remained unexplained. But the tribunal still reduced thecash credits by Rs. 21,000.00, and then proceeded to amalgamate the incomefor the two years and to divide it equally. For reducing the cash credits byRs. 21,000.00 no reasons have been given, and amalgamation of the incomefor the two years and apportionment is without authority of law. An assessment which has become final may be reopened in appealby the Appellate Assistant Commissioner or the tribunal or in revision bythe Commissioner, or under an order of rectification of mistake, or pursuantto a notice of re-assessment. The tribunal hearing an appeal may givedirections for reopening assessment of the year to which the appeal relates :it cannot give any directions to re-assess in case of a period not covered by that674year. There is no sanction in law to enforce the undertaking given by therespondent when urging his appeal in respect of the year 1953-54, to makea voluntary return for the year 1952-53 ; and even if the respondents carriedout that undertaking the assessment of 1952-53 could not be reopened other-wise than in the manner prescribed by law. The undertaking must thereforebeignored. Under Section 33(4) of Income-tax Act, 1922, the Income-taxAppellate tribunal may, after giving both parties to the appeal an oppor-tunity of being heard, pass such orders thereon as it thinks fit. The powerconferred by that Ss. is wide, but it is still a judicial power whichmust be exercised in respect of matters that arise in the appeal and accordingto law. The tribunal in deciding an appeal before it must deal with ques-tions of law and fact which arise out of the order of assessment made by thethe Income-tax Officer and the order of the Appellate Assistant Commis-sioner. It cannot assume powers which are inconsistent with the expressprovisions of the Act or its scheme.;