The Judgment of the Court was delivered by

Ramaswami, J.:— In this reference under section 256(1) of the Income-tax Act, 1961, the following question has been referred:

“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the Appellate Assistant Commissioner was justified in directing that the sum of Rs. 87,595 should be excluded from the assessment made by the order dated March 7, 1967?”

2. The assessee was carrying on business in cloth at Madurai and a business in purchase and sale of sugar in Madras. For the assessment year 1961-62, corresponding to the previous year 1960, the Income-tax Officer determined the income from the cloth business on the basis of the books of account at Rs. 8,204. Finding that regular books of account had not been kept for the business of sugar, he estimated the income from this source at Rs. 15,000. Accordingly, the total income was thus determined at Rs. 23,204 by an order dated February 14, 1964.

3. Aggrieved by the estimate made by the Income-tax Officer in respect of his business in sugar, the assessee filed an appeal to the Appellate Assistant Commissioner. By an order dated June 19, 1964, the Appellate Assistant Commissioner set aside the order of assessment and directed the Income-tax Officer to re-do the assessment in the light of the observations contained in his order.

4. Thereafter, while considering the matter afresh in the light of the directions given by the Appellate Assistant Commissioner, the Income-tax Officer called for a wealth statement from the assessee. In the wealth statement filed by the assessee, he disclosed cash to the tune of Rs. 1,19,339 as part of his assets as on March 31, 1961. The Income-tax Officer considered that out of this amount a sum of Rs. 87,595 represented income from undisclosed sources. Even after the reconsideration in the light of the order of the Appellate Assistant Commissioner dated June 19, 1964, the Income-tax Officer estimated the income from the business in sugar at Rs. 15,000 as it was done originally. But in addition to this estimation from the business in sugar, he included the sum of Rs. 87,595 as income from other sources. This fresh assessment order was made on March 7, 1967.

5. Aggrieved by the inclusion of this Rs. 87,595 as income from other sources, the assessee preferred an appeal to the Appellate Assistant Commissioner. In this appeal, he challenged the fresh assessment order dated March 7, 1967, on the ground that the Income-tax Officer exceeded his jurisdiction in travelling beyond the directions of the Appellate Assistant Commissioner. He also challenged the inclusion of Rs. 87,595 on merits. The Appellate Assistant Commissioner dealt with the first contention relating to the jurisdiction of the Income-tax Officer, and, agreeing with the assessee, held that the Income-tax Officer could not deal with any matter which was not before the Appellate Assistant Commissioner on the prior occasion, and since the order of the Appellate Assistant Commissioner related only to the income from business, the inclusion of Rs. 87,595 as income from other sources in the fresh assessment order was beyond the jurisdiction of the Income-tax Officer. In that view, he did not go into the merits of the contention in regard to this inclusion. Accordingly, the Appellate Assistant Commissioner directed the exclusion of the sum of Rs. 87,595 from the fresh assessment made by the Income-tax Officer. The revenue preferred an appeal to the Tribunal. The Tribunal also considered that the Appellate Assistant Commissioner on the prior occasion set aside the order and directed the Income-tax Officer to make a fresh assessment only on the specific question relating to the estimation of income from sugar business and that the jurisdiction of the Income-tax Officer, therefore, was restricted to the determination of the particular point alone. In that view, the Tribunal confirmed the order of the Appellate Assistant Commissioner. At the instance of the revenue the above question has been referred.

6. The learned counsel for the revenue submitted that when the assessment order was set aside with a direction to re-do the same in the light of the observations made by the Appellate Assistant Commissioner, the Income-tax Officer was entitled to consider the matter afresh as if it was an original assessment proceeding and his jurisdiction is neither limited nor restricted to the point that was considered by the Appellate Assistant Commissioner. On the other hand, the learned counsel for the assessee submitted that the Appellate Assistant Commissioner set aside the assessment order and directed the Income-tax Officer to make a fresh assessment only in regard to the assessment of the income from the business in sugar, and that, therefore, the Income-tax Officer's jurisdiction is restricted to the determination of that particular point alone, and he could not consider any source of income which he omitted to consider on the earlier occasion or any income which he considered and did not include in the assessable income.

7. The Appellate Assistant Commissioner, in his order dated June 19, 1964, after pointing out some of the aspects which were not taken into account by the Income-tax Officer in estimating the income from the business in sugar, ultimately held “after gathering all these materials, the assessment should be re-done in accordance with law and after giving a suitable opportunity to the appellant's representative. In the result, the assessment is set aside and the Income-tax Officer is directed to re-do the same in the light of the above observations.”

8. Section 251 deals with the powers of the Appellate Assistant Commissioner. The relevant portion of that section reads as follows:

“251. Powers of the Appellate Assistant Commissioner.—(1) In disposing of an appeal, the Appellate Assistant Commissioner shall have the following powers—

(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or he may set aside the assessment and refer the case back to the Income-tax Officer for making a fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner and after making such further inquiry as may be necessary, and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment…”

9. It is the contention of the learned counsel for the assessee that the order of the Appellate Assistant Commissioner dated June 19, 1964, is in the nature of a remand for the purpose of considering a particular issue relating to the estimation of the income from business in sugar and shall not be treated as one setting aside the entire order and remanding the entire proceedings for a reconsideration by the Income-tax Officer. We are unable to read the order of the Appellate Assistant Commissioner as in any way limiting the scope of the Income-tax Officer when he makes a fresh assessment order. Once the order of assessment is set aside it is open to the Income-tax Officer to consider the entire matter afresh and neither the order of the Appellate Assistant Commissioner in terms restricts the Income-tax Officer to consider the issue relating to the estimation of the income alone nor there is any warrant for reading such a restriction of the power either under section 251(1)(a) or under section 143(3) under which the Income-tax Officer makes a fresh assessment. In fact, we doubt very much as to whether the Appellate Assistant Commissioner could restrict the power of the Income-tax Officer while setting aside the assessment order itself and directing him to make a fresh assessment order. It might be open to the Appellate Assistant Commissioner without setting aside the order and directing the Income-tax Officer to make a fresh assessment to invoke his powers under section 250, call for a finding on a specific issue and dispose of the appeal himself. But if the order of assessment is set aside and the Income-tax Officer is directed to make a fresh assessment, we do not find anything in the provisions of the Act which would restrict the powers of the Income-tax Officer in passing an order under section 143(3). Once the order of assessment is set aside and the matter comes up for fresh assessment before the Income-tax Officer, we are of opinion that the powers will have to be decided with reference to the provisions under section 143(3) and not with reference to any observations made by the Appellate Assistant Commissioner in his order or with reference to the scope of the appeal before the Appellate Assistant Commissioner. A similar view was taken by this court in Sri Gajalakshmi Ginning Factory Ltd. v. Commissioner of Income-tax [1952] 22 ITR 502 Mad.. In that case, the assessee-company purchased a ginning factory with certain lands appurtenant thereto and also a plot containing some fruit stalls. In one of the subsequent accounting years, the assessee sold some portion of the land and also the fruit stalls and realised a profit of Rs. 9,397 from the sale of the land, and Rs. 3,800 from the sale of the fruit stalls. The Income-tax Officer treated the sum of Rs. 9,397 as capital receipt and assessed the sum of Rs. 3,800 under the head of business. The assessee appealed against that portion of the assessment order treating the sum of Rs. 3,800 as income from business, but the Appellate Assistant Commissioner upheld the order of the Income-tax Officer but reduced the amount to Rs. 2,800. The assessee filed a further appeal to the Income-tax Appellate Tribunal. The Tribunal considered that there was not enough material to distinguish a sum of Rs. 3,800 received from the sale of fruit stalls from the amount of Rs. 9,397 which was treated as capital asset by the Income-tax Officer and in that view remitted the matter to the Appellate Assistant Commissioner for a fresh consideration as to whether the sum of Rs. 3,800 is assessable as income from business. While considering this question, the Appellate Assistant Commissioner not only held that the sum of Rs. 3,800 was assessable to tax as income from business but also enhanced the assessment holding that the sum of Rs. 9,397 which was realised from the sale of vacant plots, was also assessable as income from business. This order was challenged by the assessee before the Tribunal, and later, at the instance of the assessee, a question relating to the jurisdiction of the Appellate Assistant Commissioner in the inclusion and the assessment of the sum of Rs. 9,397 was referred to this court under section 66(1). This court held that the Appellate Assistant Commissioner had the power under section 31 to assess the sum of Rs. 9,397 after the remand from the Tribunal. This court was of the view that after the remand the powers of the Appellate Assistant Commissioner would have to be decided only with reference to section 31 and not with reference to the order of remand itself and observed:

“It seems to us difficult to draw a distinction between cases where the Appellate Assistant Commissioner was dealing with an appeal which was heard by him in the first instance. The only power which he could exercise in disposing of an appeal whether received by him after remand or directly against the order of the Income-tax Officer is the one conferred upon him by section 31 of the Act, and it is not subject to any restrictions arising out of the subject-matter of the appeal.”

10. Though this decision related to a remand order made by the Appellate Tribunal to the Appellate Assistant Commissioner and the powers of the Appellate Assistant Commissioner in such a remanded matter, we are of the view that the ratio of this decision is applicable even for the purpose of-determining the jurisdiction of the Income-tax Officer after the order has been set aside by the Appellate Assistant Commissioner, with a direction to make a fresh assessment.

11. More directly a point was considered by the Allahabad High Court in J.K Cotton Spinning & Weaving Mills Co. Ltd. v. Commissioner of Income-tax. That case related to the jurisdiction of the Income-tax Officer to include the “deemed dividend” under section 23A after the Appellate Assistant Commissioner set aside the original assessment order, and remanded the proceedings for a fresh assessment under section 31 of the Indian Income-tax Act, 1922. It was held that though the Income-tax Officer, while making a fresh assessment in compliance with the Appellate Assistant Commissioner's directions, was bound by the directions given, subject to carrying out those directions, he has the same powers as he had originally when making the assessment order under section 23. It is not in dispute in our case that the direction of the Appellate Assistant Commissioner in regard to the consideration of the circumstances pointed out by him in the assessment of the income from business in sugar was carried out by the Income-tax Officer. Therefore, the Income-tax Officer had all the powers he had originally when making the assessment order under section 143(3). This decision in J.K Cotton Spinning & Weaving Mills Co. Ltd. v. Commissioner of Income-tax was followed in a later decision of the same High Court in Abhai Ram Gopi Nath v. Commissioner of Income-tax. Though these decisions were rendered under the provisions of the Indian Income-tax Act, 1922, the provisions of the Income-tax Act, 1961, are in pari materia with the provisions of the Indian Income-tax Act, 1922, in so far as these powers of the Appellate Assistant Commissioner and that of the Income-tax Officer while making a fresh assessment are concerned. The ratio of these judgments, therefore, is fully applicable and governs the instant case. In the order in appeal against the fresh assessment the Appellate Assistant Commissioner has referred to the judgment of a single judge of the Andhra Pradesh High Court in Pulipati Subbarao and Co. v. Appellate Assistant Commissioner of Income-tax [1959] 35 ITR 673 AP. in support of his view that the Income-tax Officer's jurisdiction was restricted by the order of the Appellate Assistant Commissioner remanding the matter for fresh disposal. Though prima facie that decision appears to support that view, we are unable to agree with the view expressed in that case. Practically, there is no discussion, and even the decision of this court in Sri Gajalakshmi Ginning Factory Ltd. v. Commissioner of Income-tax [1952] 22 ITR 502 Mad., which was rendered long earlier to that judgment, had not been referred to. Further, that is a case falling under section 31(3)(c) relating to the registration of firms, and it did not deal with a question of an order of the Appellate Assistant Commissioner under section 31(1)(b), which, in our view, is a little different. In any case we are not inclined to accept the view taken in Pulipati Subbarao and Co. v. Appellate Assistant Commissioner of Income-tax in preference to the view expressed in Sri Gajalakshmi Ginning Factory Ltd. v. Commissioner of Income-tax, in J.K Cotton Spinning and Weaving Mills Co. Ltd. v. Commissioner of Income-tax [1963] 47 ITR 906 All. and in Abhai Ram Gopi Nath v. Commissioner of Income-tax.

12. The reference is, therefore, answered in the negative and in favour of the revenue.

13. The learned counsel for the assessee pointed out that in the view taken by the Appellate Assistant Commissioner that the Income-tax Officer had no jurisdiction to consider and include the sum of Rs. 87,595 in the fresh assessment order made by him, he did not go into the question of inclusion on the merits, and that, therefore, the matter will have to be remanded to the Appellate Assistant Commissioner for a fresh disposal on the merits. But that matter is not before us and the only question that was referred to we have answered. It might be that it is open to the assessee to raise this point before the Tribunal when the matter is dealt with under section 260. It will be equally open to the revenue to contend that such a question cannot be raised at this stage. We have no doubt that the Tribunal will deal with the matter according to law.

14. The revenue will be entitled to its costs which we fix at Rs. 250.