SABYASACHI MUKHARJI, J.

( 1 ) 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 assesses 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 sav

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