The Judgment of the Court was delivered by

Sabyasachi Mukharji, J.:— In this reference under section 256(1) of the Income-tax Act, 1961, we are concerned with the jurisdiction and exercise of the discretion by the Appellate Assistant Commissioner. In order to appreciate the questions referred to this court it is necessary to refer to certain facts. The assessment relates to the assessment year 1961-62, the previous year being the financial year ending on March 31, 1961. For the said year the assessee had disclosed an income of Rs. 6,000 in his return, stating that such income was derived by him as a broker. But since no books of account had been maintained, the Income-tax Officer estimated the brokerage income at Rs. 8,000 on the basis of past records. The assessee, however, had opened an account with the Chartered Bank as far back as 1948 but from the bank's statements the Income-tax Officer could see that the account was not operated from the 1st November, 1956, to 31st May, 1960, and the balance in the account thereafter was about Rs. 500. On 30th May, 1960, the assessee had made a deposit of Rs. 30,000 in the said bank account and on the same date he drew a cheque of an equivalent amount for the alleged purpose of investing the sum of Rs. 30,000 with one Brijmohan Bangur. The Income-tax Officer called for an explanation regarding the source of the deposit. The assessee replied that since he had made a disclosure of his past earnings relating to the assessment years 1944-45 to 1951-52 to the extent of Rs. 32,400 and he had an initial capital to the tune of Rs. 9,600 he could save the sum of Rs. 30,000 out of such income. It appears that the assessee's disclosure regarding the past income had been accepted by the Income-tax Officer with the approval of the Inspecting Assistant Commissioner. But since the Income-tax Officer had found that after the disclosure in 1952, the assessee had purchased shares worth Rs. 19,920, the Income-tax Officer refused to believe that the assessee could have any large cash savings over and above such investment except the sum of Rs. 10,000 which was stated to be the circulating capital of his brokerage business. The Income-tax Officer, therefore, was not satisfied regarding the assessee's explanation as to the immediate source of the sum of Rs. 30,000 deposited with the Chartered Bank on 30th May, 1960. The assessment was completed after the Income-tax Officer had examined the records of the assessee. The assessee had stated in reply to the Income-tax Officer's question as to how he had kept his alleged savings. The assessee categorically replied that except for occasionally using the money in the course of his dalali business, he had never invested the money in any form but had kept his entire savings in his business chests till 30th May 1960, when it was deposited with the bank. The assessee had also stated that in 1962, his monthly expenses ranged between Rs. 250 to Rs. 300 per month over and above the sum of Rs. 1,484 which he had paid as annual insurance premium and, therefore, did not have any regular savings after 1951-52. According to the Income-tax Officer, there was absolutely no reason for keeping such huge money idle. He, therefore, came to the conclusion that the transaction of having deposited with the bank account a cheque drawn on the same date was a colourable transaction and in reality the assessee did not advance any such money out of his own savings. He, therefore, treated the same as the assessee's income from undisclosed sources.

2. Being aggrieved by the said order of the Income-tax Officer, the assessee came up in appeal before the Appellate Assistant Commissioner and contended that he did have substantial savings earned during the previous years to the assessment years 1944-45 to 1951-52 but considering the income which had been subjected to tax for these years, the Appellate Assistant Commissioner was of one with the opinion with the Income-tax Officer that the assessee could not have any sizeable savings in cash. But at the same time the Appellate Assistant Commissioner accepted an altogether fresh stand as taken before him by the assessee that the shares which the assessee had purchased some time after the disclosure was made in 1952, had been sold to M/s. Mugniram Bangur & Co., a well-known firm of share dealers in Calcutta, in 1959, and against the sale of such shares of M/s. Tata Iron and Steel Company, the assessee had received cash advance of Rs. 20,000 on 6th November, 1959. A copy of the account in the name of the assessee as found in the books of account of M/s. Mugniram Bangur & Co., which was certified by the latter was produced in support of such contention. The Appellate Assistant Commissioner admitted such fresh evidence and accepted the assessee's explanation that the said sum of Rs. 20,000 could have been available with the assessee for being deposited with the bank account on 30th May, 1960. He, therefore, reduced the income from other sources by Rs. 20,000 but directed the Income-tax Officer “………….. to make investigations regarding the sources of the appellant's income out of which the shares sold by him on 15th November, 1959, had been purchased and take appropriate action to assess the amount in the relevant year should it be found that the investment in the said shares remains unexplained.”

3. Against the said order of the Appellate Assistant Commissioner the revenue preferred an appeal before the Tribunal and contended that the Appellate Assistant Commissioner had erred in accepting an entirely new explanation regarding the sources of the sum of Rs. 20,000. Such explanation had not been offered to the Income-tax Officer. It was further stressed on behalf of the revenue that since the assessee in this case had been maintaining a bank account, he would not have kept any large sum of money at home and the fact of having sold shares for Rs. 20,000 was never disclosed to the department in connection with the assessment proceedings for 1960-61 and the alleged sale having taken place during the previous year to the assessment year. The Tribunal accepted the department's contention and held that the Appellate Assistant Commissioner had fallen into an error in accepting the story regarding the sale of shares which was made out before him for the first time because the assessee had all through maintained before the Income-tax Officer that he had enough cash savings, meaning thereby that he had surplus over and above the money that had already been invested in the shares. The assessee duly made a categorical statement regarding cash being kept in his chests as per his statement before the Income-tax Officer. The Tribunal held that the Appellate Assistant Commissioner had overlooked this aspect of the matter and simply accepted a new fact which, though apparently giving an explanation of the immediate source, still kept the money factor unexplained. The Tribunal, therefore, reversed the judgment of the Appellate Assistant Commissioner and restored the order of the Income-tax Officer. The Tribunal, inter alia, held as follows:

“All told we are not convinced about the assessee's story and we think that the Income-tax Officer had properly treated the whole of the amount of Rs. 30,000 as assessee's income from undisclosed sources which was not unlikely in view of the earlier disclosure made by him of the concealed income amounting to as much as Rs. 42,000. We would accordingly reverse the order of the Appellate Assistant Commissioner and restore that of the Income-tax Officer.”

4. In the aforesaid circumstances, the following questions have been referred to this court under section 256(1) of the Income-tax Act, 1961:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Appellate Assistant Commissioner fell into error in admitting the evidence at the stage of the appeal before him?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in interfering with the discretion of the Appellate Assistant Commissioner in allowing the assessee to adduce evidence regarding the said sum of Rs. 20,000 received from the sale of the shares?”

5. As mentioned hereinbefore, we are concerned in this reference with the jurisdiction of the Appellate Assistant Commissioner to admit new evidence and to admit new explanation as well as the exercise of the discretion by the Appellate Assistant Commissioner in admitting such evidence and the power of the Appellate Tribunal in interfering with the exercise of such discretion. Before we proceed to deal with the questions referred to us, we have further to observe that after the categorical finding by the Tribunal that the explanation given by the assessee could not be accepted and that the Income-tax Officer came to the correct finding, the questions referred to us are really of academic interest so long as those findings by the higher appellate authority (sic) and in the premises, whatever be the answers to the questions, the ultimate decision will in no way be affected.

6. We find that the assessee had challenged these findings in his reference application by question Nos. 1 and 4. But the said questions had not been referred to this court. The assessee had moved an application being No. 2561 for directing the Tribunal to refer these questions. But we find that the assessee withdrew these questions as would appear from the statement of the case.

7. So far as the power or jurisdiction of the Appellate Assistant Commissioner is concerned, it is provided in sections 250 and 251 of the Income-tax Act, 1961, which is similar to section 31 of the Indian Income-tax Act, 1922.

8. It is true, as was contended by counsel for the assessee, that the Appellate Assistant Commissioner has very wide powers and in the interests of justice he can make further enquiry and he can admit new ground of appeal. He can also give deductions not claimed by the assessee, as was held by this court in the case of Union Coal Co. Ltd. v. Commissioner Of Income-Tax, Calcutta. [1968] 70 ITR 45 Cal.. In this case counsel for the revenue also did not dispute that in certain circumstances the Appellate Assistant Commissioner had jurisdiction to admit new grounds if it was necessary to admit new evidence. The point in this case is not whether the Appellate Assistant Commissioner is entitled to admit new ground or evidence either suo motu or at the invitation of the parties. In this case it is apparent that the Appellate Assistant Commissioner was not acting suo moto in admitting additional evidence. If the Appellate Assistant Commissioner was acting on being invited by the assessee, then there must be some ground for admitting new evidence in the sense that there must be some explanation to show that the failure to adduce evidence earlier sought to be adduced before the Appellate Assistant Commissioner was not wilful and not unreasonable. We find from the record that no such explanation was ever offered or referred to. If without any explanation at all the Appellate Assistant Commissioner admits evidence at the invitation of the parties, he would be exercising, in our opinion, a discretion not properly. He has undoubtedly a discretion vested in him to admit additional evidence in appropriate cases but admission of evidence at the instance of an appellant without any ground or explanation would not be exercising discretion properly and in such a case the appellate authority is competent, in our opinion, to interfere with the discretion exercised by the Appellate Assistant Commissioner. Reliance in this connection may be placed on the observations in the case of Ramgopal Ganpatrai & Sons Ltd. v. Commissioner of Excess Profits Tax, in the case of Byramji & Co. v. Commissioner of Income-tax [1943] 11 ITR 286 Nag. and in the case of Karamchand v. Commissioner of Income-tax [1931] 5 ITC 313 Lah..

9. Counsel for the revenue further contended that though the powers of the Appellate Assistant Commissioner were there but he was not competent to go into new source as has been held by the Supreme Court in the case of Commissioner of Income-tax v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443, 450, 451 SC., counsel for the revenue further contended that when the Appellate Assistant Commissioner in the instant case had directed the Income-tax Officer to enquire whether there was any sale as suggested by the assessee and to tax the sale proceeds accordingly, the Appellate Assistant Commissioner was in fact finding out the new sources of the assessee. Therefore, it was submitted on behalf of the revenue that the Appellate Assistant Commissioner was really directing a new source to be taxed or a direction on the Income-tax Officer to tax the new sources of the assessee. What indeed the Appellate Assistant Commissioner directed is to find out whether the explanation given by the assessee about the sale could be accepted or not and whether there was any income of the assessee from the undisclosed sources or not. It is in that light that the Appellate Assistant Commissioner gave the aforesaid direction. Therefore, we are unable to accept the contention on behalf of the revenue that the Appellate Assistant Commissioner had assumed the jurisdiction which he did not possess.

10. In view of the above, both these questions are answered in the affirmative and in favour of the revenue. Each party will pay and bear its own costs.

R.N Pyne, J.:— I agree.

11. Questions answered in the affirmative.