COMMISSIONER OF INCOME-TAX, KERALA vs. M/S. MANICK SONS

CIVIL APPEAL No. 2459/1966Supreme Court[1969] 3 S.C.R. 70814 February 1969Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, A.N. GROVER COMMISSIONER OF7 pages
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What were the facts?

For assessment year 1952-53, the Income-tax Officer added undisclosed income. For 1953-54, unexplained cash credits were added. The Income-tax Appellate Tribunal, hearing the appeal for 1953-54, considered the lower income assessed in 1952-53 and believed some undisclosed income from that year might have gone into the 1953-54 cash credits. The Tribunal amalgamated the income for both years, made an allowance for 'intangible additions', and determined a rounded figure of Rs. 1,00,000 for the two years. The assessment for 1953-54 was reduced to Rs. 50,000. For 1952-53, an undertaking was taken from the assessee to file a fresh return for Rs. 50,000. The department appealed to the Supreme Court after a reference to the High Court.

What did the Supreme Court hold?

The Supreme Court held that the appeal must be allowed. The Tribunal's power under Section 33(4) of the Income-tax Act, 1922, is wide but must be exercised judicially and according to law, dealing with matters arising in the appeal. The Tribunal cannot assume powers inconsistent with the Act. Specifically, the Tribunal had no power to amalgamate the income of two assessment years (1952-53 and 1953-54) and divide it equally between them. The Tribunal also lacked the power to make allowances for 'intangible additions' without giving reasons or supporting evidence. The direction to reopen the assessment for 1952-53 based on an undertaking was without jurisdiction, as the Act prescribes specific procedures for reassessment. The High Court's refusal to answer questions (1) and (2) and its affirmative answers to (3) and (4) were set aside. The Supreme Court answered question (1) and (2) in favour of the revenue (Tribunal had no jurisdiction), and question (3) and (4) in favour of the revenue (in the negative, meaning the Tribunal was not justified).

What were the issues?

1. Whether it was beyond the jurisdiction of the Appellate Tribunal to reopen the concluded assessment for assessment year 1952-53 and direct that the income should be revised to Rs. 50,000 as against Rs. 15,331 already fixed (turning on Section 33 of the Income-tax Act, 1922). 2. Whether, on the facts and circumstances, the Tribunal was justified in directing that any portion of the cash credits be assessed to income-tax in any year other than assessment year 1953-54 (turning on Section 33 of the Income-tax Act, 1922). 3. Whether, on the facts and circumstances, the Tribunal was justified in finding that a portion of the cash credits were covered by the intangible additions made in assessment years 1952-53 and 1953-54 (turning on Section 33 of the Income-tax Act, 1922). 4. Whether, on the facts and circumstances, the Tribunal was justified in directing that the income under the head 'business' for assessment year 1953-54 be reduced to Rs. 50,000 (turning on Section 33 of the Income-tax Act, 1922). Assessee's contentions: The Tribunal did not give directions to reopen the assessment for 1952-53 but merely recorded an undertaking by the respondents to voluntarily submit a return for Rs. 50,000. The final order prejudiced the respondents, and the Commissioner was not aggrieved. Revenue's contentions: The questions raised flowed from contentions before the Tribunal and enquiry was not barred. The Tribunal had no power to amalgamate income of two years, divide it equally, or make allowances for intangible additions without reasons.

Which sections of the Income-tax Act were involved?

Section 33

AI-generated summary — verify with the full judgment below

70Q COMMISSIONER OF INCOME·TAX, KERALA v. MIS. MANICK SONS February 14, 1969 ). C. SH,l\H, V. RAMASWAMI AND A. N. GROVER, JJ.j Income-tax Act, 1922, s. 33-Tribunal's Jowers-Tribunal cannot amalgamate income of two assessment years an divide It equally betwe•n them-Cannot take undertaking from a:rsessee fo file fresh return for earlier year and direct Jncotne~uu Officer to make assessment according- ly-Cannot make <rllowance for 'Intangible additions' without giving reasons.

For the asse.sment year 1952-53 the Income-tax Officer added a certain ntnount to the assessec's returned incotnc. as income from undis· closed sources.

For the 05'C>.sment year 1953-54 a still larger amount was added on account of unexplained cash credits. The Income-tax Appellate Tribunal when considering the appeal for 1953-54 took the view that since the income assessed in 1952-53 was much less than in earlier years some of the undisclosed income of that year must have gone into the cash credits disclosed in 1953-54, It therefore calculated the income for both the assessment years 1952-53 and 1953-54 together and after making some allowance for 'intangible additions' in each ye

The order continues below.

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