V.K.SINGHAL, J. - (1.) THE Tribunal has referred the following question of law arising out of its order dt. 8th July, 1983, in respect of the asst. year 1975 -76 under S. 256(1) of the INCOME TAX ACT, 1961: "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that in the fresh assessment proceedings on the directions of the AAC, the ITO had no jurisdiction to enhance the assessment ?"
(2.) AN assessment under S. 143(3) of the IT Act was finalised by the ITO on 6th Oct., 1976. The ITO observed that the assessee has built a house, in the construction of which a sum of Rs. 48,337 was spent. The ITO, who deputed the inspector to make the enquiry with regard to the construction, has estimated the investment to the extent of Rs. 56,800. On the basis of the report of the inspector, wherein a difference of Rs. 8,263 was found taking into consideration the cost of the old material of the demolished house, which was used by the assessee and for which due credit was given, the ITO made an addition of Rs. 5,000, as the assessee's income from undisclosed sources which was invested in the construction of the house. The assessee preferred an appeal before the AAC. It was argued that the report given by the inspector was not brought to the notice of the assessee, as to on what basis the estimate was made and what enquiries were conducted and therefore the addition of Rs. 5,000 so made is liable to be deleted. It was also submitted that the ITO may be directed to disclose full facts of the inspectors' enquiry and reasonable opportunity should be given for explaining his case in the light of the report of the inspector. The AAC set aside the assessment order and observed that no adverse order could be made unless the assessee is given a reasonable opportunity of being heard. The exact language used was : "Thus, the assessment order is set aside fully with direction to the ITO to examine the whole case afresh and then follow the correct procedure in law as stated above and then make a fresh assessment order accordingly." The ITO referred the matter regarding the cost of construction of the above property to the Departmental Valuation Officer, who estimated the cost of construction at Rs. 1 lakh. The ITO adopted the cost as per the Departmental Valuation Officer, figured at Rs. 1 lakh as against Rs. 48,337 disclosed by the assessee and the difference of Rs. 51,663 was treated as the assessee's "income from undisclosed sources". An appeal was preferred to the AAC, who has estimated the cost of construction at Rs. 73,270. The AAC observed that, as per the books of account maintained by the assessee, the investment is at a figure of Rs. 53,062 and for that purpose a break -up was taken for the cost of construction for 1973 -74, 1974 -75 and 1975 -76 which figured at Rs. 44,037, 4,300 and Rs. 4,725, respectively. It was found that the cost of construction shown by the assessee was Rs. 48,337 and the sum of Rs. 4,725 was the outstanding amount and thus the figure as per the books of account comes to Rs. 53,062 and not Rs. 48,337. The report of the approved valuer which was at a figure of Rs. 57,000 which was submitted by the assessee was also taken into consideration and a sum of Rs. 2,500 (instead of Rs. 16,500, Rs. 14,000 was considered reasonable) in respect of the excess deduction allowed by the approved valuer on account of old material and a sum of Rs. 13,770 which was allowed as deduction by the approved valuer on account of use of own trucks without any basis was added to it and the figure of Rs. 73,270 was taken as the final figure, resulting in an addition, under S. 69 of the Act, at a figure of Rs. 20,208. On the contention of the assessee that the ITO has no jurisdiction to travel beyond the figures of the earlier order which was set aside by the AAC, it was observed that, since the order is fully set aside in appeal, there is nothing in law to prevent the ITO from making a reference to the valuation side for obtaining the estimate from the official valuer as regards the cost of construction shown by the assessee. The assessee as well as the Revenue challenged the order of the AAC before the Tribunal and an objection was taken that the ITO while giving effect to the order of the AAC has travelled beyond his jurisdiction in reopening the entire issue inasmuch as the matter before the AAC was that the inspector's report was not confronted and therefore the ITO should have confronted the said report and proceeded for reframing the assessment by giving an opportunity. The Tribunal observed that the directions issued by the AAC have to be read in the context of the ground of appeal which was before him. The AAC has the power to enhance the assessment after affording opportunity, but no such powers were exercised nor any directions were given to the ITO for enhancement and, therefore, the ITO has exceeded his jurisdiction in enhancing the assessment while framing reassessment in consequence of the order of the AAC. As such, the addition which was initially made of Rs. 5,000 was found justified and the further additions beyond the figure of Rs. 5,000 were quashed. The provisions of S. 251(1)(a) confers jurisdiction on the AAC to confirm reduce, enhance or annul the assessment or he may set aside the assessment and refer the case back to the ITO for making a fresh assessment in accordance with the directions given by the AAC and after making such further enquiry as he may consider necessary and the ITO shall thereupon proceed to make such fresh assessment and determine where necessary, the amount of tax payable on the basis of such fresh assessment. From a perusal of the provisions of S. 251(1)(a), it is evident that, if the assessment order is annulled, then the ITO has no jurisdiction to proceed further for making an assessment, but, where it has only been set aside, then a fresh assessment has to be made in accordance with the directions given by the appellate authority. The ITO is bound by the directions given by the appellate authority. The new source of income, while making an assessment as per the remand order of the appellate authority, cannot be made. The assessee also cannot be allowed to agitate new points or grounds which were not dealt with by the appellate authority in his order and the concluded matter cannot be reagitated or redetermined afresh. In respect of a particular source of income, if the matter has been remanded and directions have been given to make a fresh assessment as in the present case, then subject to the directions which have been given by the AAC, the ITO has the same power in the fresh assessment, as he originally had in making an assessment under S. 143 of the INCOME TAX ACT, 1961, in respect of that point. If the AAC sent the matter back to the ITO without any restrictions, then no directions can be presumed or inferred on the powers of the ITO when he proceeds to make the fresh assessment in substitution of the order which has been set aside. If the directions have been given, then the basic principles of administration of justice demand that the ITO is bound by the directions of his higher authorities and he cannot travel beyond that. If any other interpretation is taken, it would be not only denial of justice, but destructive of the administration of justice resulting in indiscipline. The AAC may indicate in the order, the various points or the matters on which the enquiry is to be made. If such directions are given, then they have to be strictly followed and the ITO has to conduct the enquiry in accordance with the directions given and cannot ignore those directions. The only exception is when the law is amended retrospectively and it is only in that case, ignoring the directions of the appellate authority, that effect to the retrospective amendment by the legislature has to be given.
(3.) IN the present matter, as observed above, the operative part of the order of the AAC gives direction to the effect that the assessment is set aside fully with directions to the ITO (1) to examine the whole case afresh, and (2) then follow the correct procedure in law as stated above, and (3) then make a fresh assessment order accordingly. From these observations, it is evident that the assessment order was completely and fully set aside and directions were given to examine the whole case afresh. Further directions after examining the whole case afresh has been given to follow the correct procedure in law as stated above. The correct procedure which was referred to in these directions was that no adverse order could be made unless the taxpayer was given reasonable opportunity of being heard. Thus, it would be evident that while setting aside the entire order the directions were to examine whole case afresh and the further directions were to follow correct procedure in law and then to make a fresh assessment order. No restrictions have been placed by the AAC on the right of the ITO restricting the assessment to the figure, which was determined in the earlier assessment order, which has been set aside. As a matter of fact, the said order is no longer in existence and the necessity to direct the ITO to examine the whole case afresh makes it clear that no restrictions have been imposed on the power of the ITO to frame the assessment order afresh. The only restriction was that no adverse order could be made unless the taxpayer was given reasonable opportunity of being heard. This Court in the case of Rambilas Chandram vs. CIT (1986) 156 ITR 344 (Raj) has examined the point in dispute with regard to the power of the ITO. In that case, the assessment framed by the ITO was set aside in appeal with a direction that the ITO should make assessment after giving proper opportunity to the assessee. The ITO has made certain additions in the Tilli account and the Alsi account which were not made in the original assessment and the books of account were rejected. The additions in the groundnut account which were made in the original assessment order were reduced in appeal by the AAC and when the matter was taken before the Tribunal, it was contended that the additions in the Tilli account and the Alsi account were not made in the original assessment order and, therefore, the ITO has no jurisdiction to make the additions. It was observed by this Court that the AAC has set aside the assessment order and sent the matter back to the ITO for reframing the assessment after examining the various factors involved in detail giving an opportunity to the assessee before the additions are made and, therefore, this order of remand is without any restrictions and the ITO could exercise all powers which he could otherwise exercise at the time of making the original assessment. On the basis of this decision and the operative part of the order of the AAC, we find that the assessment order in the present case has also been set aside fully and the ITO was directed to examine the whole case afresh. The order of the AAC has not fettered the discretion of the ITO while framing the assessment order and examining the whole case afresh. Had the matter been restricted only to providing the opportunity to the assessee for confronting the report of the income -tax inspector, then there was no necessity to direct the ITO to examine the whole case afresh. The directions in the present case cannot be considered as restricted to the grounds of appeal, because, while passing an order, the AAC could set aside the entire assessment order for making the fresh assessment. The examination of the whole case afresh, therefore, is similar to the case of Rambilas Chandram referred to above and the further direction to follow the correct procedure in law as mentioned in the appellate order, i.e., no adverse order could be made unless the taxpayer was given a reasonable opportunity of being heard, cannot be interpreted to mean that the addition beyond Rs. 5,000 cannot be made. In these circumstances, we are of the opinion that the Tribunal was not justified in holding that in the fresh assessment proceedings on the directions of the AAC, the ITO had no jurisdiction to enhance the assessment. The reference is accordingly answered in favour of the Revenue and against the assessee.;