Rastogi, J. - (1.) THE assessee, Sri Vishnu Kumar Gupta, karta of an HUF, filed his return for the assessment year 1970-71, the previous year ended March 31, 1970, on 22nd July, 1971. He declared his income at Rs. 33,838, the details being as under : JUDGEMENT_69_ITR143_1983Html1.htm
(2.) DURING the course of assessment proceedings, the ITO issued a notice under Section 143(2) of the I.T. Act, 1961 (hereafter "the Act"). The-assessee committed default and, hence, the ITO made an ex parte assessment under Section 144 of the Act on November 27, 1972. The share income from M/s. Radhey Lal Devicharan was taken at Rs. 30,932. Apart from that, income from money-lending business was taken at Rs. 7,700. Under the head " Other sources ", the following interest income was taken : Besides this interest income, salary income from M/s. Devicharan Commercial Corporation was taken at Rs. 1,480. The, total income thus determined was Rs. 65,530. The assessee's appeal having failed, he took up the matter in further appeal before the Income-tax Appellate Tribunal (hereafter "the Tribunal.") and disputed, income from money-lending, interest income under the head "Other sources" and income from salary. It may be noted that the basis for estimating these incomes was the assessment order for the immediately preceding year, that is 1969-70, The assessee brought it to the notice of the Tribunal that for that year, the assessment order had been set aside in appeal by the AAC and the case had been remanded to the ITO for making the assessment afresh and that being so that order could not be treated as a basis for estimating the income for the year under consideration. Apart from this, in regard to income from money-lending business, it was urged that the money that the assessee had invested in the money-lending business had been withdrawn by him in the relevant previous year and had been utilized to a large extent in starting a new cold storage at Kannauj and, therefore, there was no income from that business. For the assessment years 1969-70 and 1970-71, this fact had been accepted by .the ITO. The Appellate Tribunal does not appear to have passed any definite order in regard to the admission of this fresh evidence. It, however, took the view that the assessee could not question the validity of the ex parte assessment and all that it could examine was as to whether the ITO had exercised the discretion vested in him under Section 144 of the Act in a judicial manner or in an arbitrary or capricious manner and that the burden of satisfying the appellate court,in this behalf was on the party challenging the exercise of the best judgment of the ITO. On this legal view, the Tribunal confirmed the estimates of income from money-lending, income from salary and interest income from Sheo Kumar Gupta and M/s. Devicharan Commercial Corporation." As regards interest income from M/s. Ram Kumar Ram Krishna and Company and M/s. Ram Kumar Gupta and Company, the Tribunal accepted the assessee's contention that since the assessee had denied that any such interest was due to him from these two parties, there was no basis for the ITO to estimate this income unless he had some material to contradict the assertion of the assessee. In fact the ITO had no such material. On the contrary a reference to the assessment files of these two parties would have shown that the assessee was not entitled to receive any interest from those parties during the previous year. As regards the interest income from M/s. Radhey Lal Devicharan, the Tribunal found that the assessee was a partner in that firm and his share income shown in the return included the amount of interest received by him from the firm. Therefore, the interest income could not have been separately assessed. In the result, the appeal was partly allowed. This decision was given on 19th February, 1975. Thereafter, the assessee moved an appHcatioa under Section 256(1) of the Act, which was rejected by the Tribunal, and then he moved an application under Section 256(2) before this court.' This court by its order dated November 21, 1977, directed the Tribunal to state a case and refer the following question for its opinion : "Whether the Income-tax Appellate Tribunal was right in its view that in dealing with an ex parte assessment it was not competent to take into account the material which was not before the Income-tax Officer when he framed the assessment, although the material placed before it went to the root of the matter inasmuch as no income was earned from the various sources which have been subjected to tax in the hands of the applicant ?"
(3.) IT may be noted that pending the disposal of the reference application, the assessee moved an application under Section 254(2) of the Act before 'the Tribunal. IT was stated in that application that the Tribunal had omitted to consider certain facts which had been brought to its notice at the time of hearing of the appeal and thus a mistake apparent from the record had crept in its order. The Tribunal rejected this application by its order dated October 29, 1977. In its opinion no mistake as alleged existed in its order and as such the application was not maintainable. It was submitted before us on behalf of the assessee by his learned counsel, Sri R.K. Gulati, that the view taken by the Appellate Tribunal in regard to the scope of its powers under Section 254(1) was erroneous. After hearing counsel for parties, we find "merit in this submission. Under Section 254(1), the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. It would be seen that the powers of the Tribunal in dealing with appeals are expressed in the widest possible terms and are similar to the powers of an appellate court under the Code of Civil Procedure, 1908.;