HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Income-tax, Calcutta v. Rai Bahadur Hardutroy Motilal Chamaria
Civil Appeal No. 535 of 1966
[1967] 3 SCR 508 ·
Indian Income-tax Act, 1922: sections 13, 31(3), 33B, 34 and 66(1)
Sources & disclosures includedDownload original judgment / order
3-judge bench; unanimous judgment delivered by V. Ramaswami, J. · J. C. Shah, J. · S. M. Sikri, J. · V. Ramaswami, J.
Assessment years: 1952-53
01 · Facts of the case
For assessment year 1952-53, the assessee claimed three Nepal loans of Rs.2,50,000, Rs.1,50,000 and Rs.30,000. The officer treated the Rs.4,30,000 total as secret profits shown falsely as loans. In testing those entries, he noted that on 31 March 1952 the Calcutta office withdrew Rs.5,30,000 and purportedly sent Rs.5,85,000 to the Forbesganj branch the same day, an implausible physical transfer. On the assessee's appeal, the Appellate Assistant Commissioner confirmed the loan additions and separately treated the remittance as unexplained income, adding Rs.4,05,000 after an allowance. The Tribunal upheld the power to enhance but reduced that enhancement to Rs.1,55,000. The Calcutta High Court held there was no section 31 jurisdiction over the new source (SCR pp.508-511; PDF pp.1-4).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
The Court reconciled the breadth of section 31 with its established new-source limit. Once an assessee appealed, the Appellate Assistant Commissioner's competence was not confined to the specific grievance and could extend across the assessment processes and sources actually considered; the appeal also could not simply be withdrawn to halt that statutory inquiry (SCR pp.511-515; PDF pp.4-8). Yet enhancement did not extend to a source never processed for taxability by the officer. Consideration meant express or clearly implied application of mind to whether that source was taxable or non-taxable, not an incidental or collateral use during another inquiry. Here the officer cited the Rs.5,85,000 transfer only to test the genuineness of the Rs.4,30,000 loan entries. The Appellate Assistant Commissioner therefore could not tax the remittance itself as a different source in the pending appeal (SCR pp.515-517; PDF pp.8-10).
Source: Primary judgment: discussion
03 · Judicial decision
The Supreme Court affirmed the High Court's answer that the Appellate Assistant Commissioner lacked jurisdiction to enhance the assessment on the Rs.5,85,000 remittance source and dismissed Revenue's appeal with costs (SCR p.517; PDF p.10).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of the assessee on appellate jurisdiction. The Rs.1,55,000 enhancement could not be sustained under section 31 because the officer had not considered the remittance as a taxable source; the Court did not decide whether the remittance was factually income (SCR pp.516-517; PDF pp.9-10).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: for an enhancement dispute, build a source-by-source matrix from the return and assessment order. Record whether the officer merely noticed a fact, used it collaterally, or actually applied mind to that source's taxability. Separate the appellate authority's power to revisit an assessed source from the use of distinct statutory machinery for a genuinely new source, and do not convert a jurisdictional win into a merits finding (based on SCR pp.511-517; PDF pp.4-10).
Source: Primary judgment: reviewPoint
Source & verification
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Statutory scope
The judgment construes the Appellate Assistant Commissioner's powers under section 31(3) of the repealed Indian Income-tax Act, 1922 and the then companion reopening and revision provisions. It does not purport to settle the present scope of sections 147, 251, 263 or other current appellate and reassessment provisions. No current-law or later-treatment clearance was undertaken.
Later treatment
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