COMMISSIONER OF INCOME-TAX, CALCUTTA versus RAI BAHADUR HARDUTROY MOTILAL CHAMARIA

Citation: [1967] 3 S.C.R. 508 · Decided: 07-04-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

508 
COMMISSIONER OF INCOME-TAX, CALCUTTA 
A 
v. 
RAI BAHADUR HARDUTROY MOTILAL CHAMARIA 
April 1, 1967 
[J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.] 
Indian Income-tax Act, 1922, s. 31-Powers of Appellate Assistant 
CommisJioner in 
tippeal-Whether can 
enhance income of assessee in 
respect of sources of Income not considered by Income-·tax Officer for 
purpose of taxation. 
The account books of the respondent for the assessment year 1952-53 
showed three swns of Rs. 2,50,000, 
Rs. 1,50,000 and Rs. 30,000 as 
borrowed from parties in Nepal. The income-tax. Officer added these 
amounts to the total income of the assessee as secret income falsely 
shown as loans. The Income-tax. 
Officer noted that the assessee 
bad 
withdrawn ·at Calcutta <in March 31, 1952 a sum of Rs. 5,30,000 from a 
Calcutta Bank and had sent a sum of 
Rs. 5,85,000 to bis Forbesganj 
branch on the same day to enable that branch to pay Rs. 2,50,000 to one 
of the creditors. The transfer of the money from Calcutta to Forbesganj 
on the same day was considered by the Income-tax Officer to be a physi-
cal impossibility. When the matter was in appeal before the Appellate 
Assistant Commissioner, the latter not only confirmed the addition of the 
aforesaid loan amounts to the income of the assessee but also held that 
the swn of Rs. 5,85,000 transferred from Calcutta to the Forbesganj 
branch was also unexplained income of the 
assessee and after making 
allowance for an earlier withdrawal added a further sum of Rs. 4,05,000 
on this account to the assessed income of the resoondent. The Tribunal 
held that the Appellate Assistant Commissioner had power to enhance the 
income as he did but reduced the 
enhancement to Rs. 1,55,000. 
The 
High Court however held, in reference, that the Appellate Assistant Com-
missioner had no power to make ·the addition as tlie sum of Rs. 5,85,000 
had not been considered by the Income-tax Officer for the purpose of 
assessment. In appeal to this Court, 
· HELD : The High Court was right. The power of enhancement given 
·to the Appellate Assistant Commissioner by s. 31 (3) of the Income-tax 
Act, 1922 is restricted to the sources of income which have been the 
subject-matter of consideration by the Income-tax Officer from .the point 
of vie~· of taxabilitv. 
Jn this context" 'consideration' does not 1nean 'inci-
dental' or 'collaterai' examination of any matter by the Income-tax Officer 
in the pwcess of assessment. [516 G1 
In the oresent case it was manifest that the Income-tax Officer had 
not considered the entry of Rs. 5,85,000. from the point of view of ita 
taxabilitv and therefore the Appellate Assistant Commissioner had no 
jurisdiction in an appeal under s. 31 of the Act to enhance the assess. 
ment [516 F] 
Con11niss1ont•r of Jnco111e-tax. Bon1hay. v. Shapoorji 
Pt1llonji Mistry, 
44 I. T. R 89 l fo!iowccl. 
B 
c 
D 
E 
F 
G. 
Narrondas Manordass, Bo1nbay v. Conunissioner of Jnco1ne-tax, Cen. 
H 
trcil, Bon1bay, :Jf J.T.R. 909, Com1nissioner of lnconie-tax v. '!vf/s. Mc-
Millan & Co., [1958] S.C.R. 689, Commissioner of lnco~ne.tax, Punjab v. 
Nawab Sllall Nawaz Khan, 6 I.T .R. 370 and The K111g v. Jncome·lax 
.Special Investigation Commissioners, [1936] 1 K.B. 487, considered. 
C.I.T. v. MOTILAL CHAMARIA (Ramaswami, J.) 
509· 
A 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 535 of 
( 
1966. 
n 
c 
D 
E 
F 
G 
H 
Appeal by special leave from the judgment and order dated 
March 26, 1964 of the Calcutta High Court in Income-tax Refe-
rence No. 29 of 1961. 
T. V. Vishwanath Iyer, A. N. Kirpal, S. P. Nayyar for R. N. 
Sachthey, for the appellant. 
S. T. Desai and R. C. Prasad, for the respondent. 
The Judgment of the Court was delivered by 
Ramaswami, J. This appeal is brought, by special leave, from 
the judgment of the Calcutta High Court dated March 26, 1964 
in Income-tax Reference No. 29 of 1961. 
The respondent (hereinafter called the 'assessee') is an indivir 
dual carrying on business in Jute, Cloth and Films. 
The assess-
ment year is 1952-53, the corresponding accounting year being 
the calendar year 1951 for all business except Katihar Cloth 
Importing Co. and the Jute Mills for which the accounting year 
is financial year ending March 31, 1952. 
During the year of 
account the assessee claimed that he had borrowed three sums of 
Rs. 2,50,000, 1,50,000 and Rs. 30,000 from three parties from 
Nepal, Kharag Bahadur Nepali, Jiwanmal Santockchand and 
Sohanlal Subhkaran respectively. 
The Income-tax O

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