The power of the Appellate Assistant Commissioner is limited to the assessment year to which the appeal relates, and the jurisdiction of the tribunals and authorities to subject the amount concerned to tax within the relevant assessment year is crucial.

A. Narayana Pai, J.—The assessee is a Hindu undivided family trading in cotton and other goods. Their accounting year is Deepavali to Deepavali. Their income for the accounting year May 20, 1946, to November 12, 1947, was assessed to tax under the Income Tax Act for the assessment year 1948-49. During the scrutiny of accounts, the officer discovered the following entries purporting to be loans received from one Raja Sathyamma :

Rs.

28-11-1946 10,000

23-12-1946 10,000

25-12-1946 10,000

06-01-1947 2,000

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Total : 32,000

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2. The officer refused to believes these entries as representing genuine loans. The explanations offered by the assessee were found by him to be unsatisfactory, with the result, he added the said sum to the income returned by the assessee.

3. Upon appeal by the assessee, the Appellate Assistant Commissioner agreed with the finding of the Income Tax Officer. He, however, pointed out that the proper categorisation of this sum should have been under the heading "income from undisclosed sources". He also thought that the display of this figure by the officer in his order of assessment in such a way as to suggest that the officer was dealing with it as part of the business income must have been a matter of inadvertence. However, the definite opinion of the appellant authority was that the said sum of Rs. 32,000 was only an income of the assessee from undisclosed.

4. The assessee went on second appeal to the Appellant Tribunal. The Tribunal also accepted all the findings of the first two authorities. One further point was raised before the Tribunal, namely, that as an item of undisclosed income, the said Rs. 32,000 could have been brought under assessment for the assessment year 1948-49 only if the receipts going to make up the figure were all receipt falling within the financial year immediately preceding the assessment year, but that because the above four entries fall completely outside the said financial year, the same could not have been taxed. The Tribunal refused to go into that question, because the said point had not been raised either before the Appellate Assistant Commissioner or in the grounds of appeal presented to the Income Tax Appellate Tribunal either.

5. The Tribunal having refused to state a case on assessee's application under sub-section (1) of section 66 of the Income Tax Act, he petitioned to this court under sub-section (2) thereof in Civil Petition No. 215 of 1950. By an order made therein on April 11, 1962, this court called upon the Tribunal to refer the following questions :

(i) Whether the Income Tax Tribunal, the Appellate Assistant Commissioner and the Income Tax Officer were wrong in taking into consideration the fact that in the past the assessee's accounts were not found to be correct and that during the previous years Smt. Raja Sathyamma's name had been falsely used as a creditor of the assesses-firm ?

(ii) Whether, in law, the Appellate Tribunal can refuse to consider the question of law urged before it if the same could have been decided on the material before it ?

6. Accordingly the Tribunal has now made this reference together with a statement of the case.

7. So far as the second question is concerned, there can be no doubt that the answer to it will have to be in favour of the assessee.

8. It is well-established that the option given to an assessee to choose an accounting year other than the one ending on March 31 as a previous year for purposes of Income Tax is limited to known sources. So far as what are called undisclosed sources are concerned, there is neither any possibility of the assessee exercising such option nor any possibility of applying anything but the principal definition of the previous year, namely, that it is a period of 12 months ending on March 31, next preceding the year for which the assessment has to be made.

9.