R.K. Gulati, J. - (1.) AT the instance of the assessee, the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has made this reference to this court under Section 256(1) of the Income-tax Act, 1961 (for short "the Act").
(2.) THE brief facts are these : The assessee is a Hindu undivided family and the dispute pertains to the assessment year 1975-76. As a result of a search and seizure under Section 132 of the Act at the business and residential premises of the assessee, it was detected that the assessee was doing pawning business for the past several years. Pursuant to the search and seizure, the concealed income was summarily determined at Rs. 10,45,565 under Section 132(5) of the Act. The income-tax returns for the assessment years 1967-68 to 1975-76 were filed after the date of search and certain income was also disclosed under the voluntary disclosure scheme. For the assessment year in dispute, initially an income of Rs. 19,000 was returned from pawning which was revised at Rs. 25,000. Under the voluntary disclosure scheme an income of Rs. 12,000 was also declared for the assessment year in dispute. As the income returned was not found acceptable by the Income-tax Officer, he drew up a draft assessment order under Section 144B(1) of the Act and forwarded it together with the objections of the assessee to the concerned Inspecting Assistant Commissioner as contemplated under Section 144B of the Act, proposing an assessment on a total income of Rs. 1,84,470 after giving allowance of proposed reduction of Rs. 58,116 for possible savings. Sub-section (4) of Section 144B as it stood at the relevant time provided as under : "If any objections are received, the Income-tax Officer shall forward the draft order together with the objections to the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner shall, after considering the draft order and the objections and after going through (wherever necessary) the records relating to the draft order, issue in respect of the matters covered by the objections, such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment : Provided that no directions which are prejudicial to the assessee shall be issued under this sub-section before an opportunity is given to the assessee to be heard."
(3.) IT may be observed that Sub-section (5) of that provision provides that directions issued under Sub-section (4) shall be binding on the Income-tax Officer. During the pendency of the proceedings under Section 144B of the Act, the Inspecting Assistant Commissioner in the purported exercise of his power under Sub-section (1) of Section 144A of the Act, issued a notice to the assessee in connection with the proposed reduction of Rs. 58,116 for possible savings referred to in the draft assessment order. After hearing the assessee, the Inspecting Assistant Commissioner issued instructions under Section 144B as well as under 144A. In the instructions issued under Section 144A the Inspecting Assistant Commissioner directed as under : "In the computation of savings you have proceeded with a presumption that there was no partition in the Hindu undivided family and you have clubbed the income, both sarrafa business and pawning business. You have also added together the income declared by the individual as well as by the Hindu undivided family. However, I have given a finding that there was a partial partition in the Hindu undivided family and Shri Anirudh Prasad and Bhagwat Prasad were living separately. I have also held that sarrafa business was done by the above two persons in the individual capacity. Hence, presumption on which you have determined the income of the Hindu undivided family for probable savings falls through. Therefore, your computation is ab initio wrong. Moreover, as per provisions of the Disclosure Scheme of 1975, the declaration made by the Hindu undivided family under Section 14 is not binding on the Department. Therefore, unless very positive proof is given to show that unexplained investment found during seizure were made out of past savings simply because the assessee has stated so, cannot be accepted." ;