JUDGMENT

In this appeal, by special leave, the question that falls for consideration relates to the scope of the powers of the Appellate Assistant Commissioner while dealing with appeals against orders of the Assessing Officers under Section 251 of the Income Tax Act, 1961 (hereinafter referred to as the Act ). The matter relates to the assessment year 1956-57. M/s. Nirbheram Daluram (hereinafter referred to as the assessee ) is a partnership firm carrying on business in grains, rice, gunny bags and oil seeds, etc. Under order dated March 11, 1957 assessment was originally made on a total income of Rs. 28,724/-. On re-assessment in proceedings initiated under Section 147 of the Act the Income Tax Officer included in the total income a sum of Rs. 2,45,000/- referable to ostensible transactions in hundi loans shown by the assessee. The assessee filed an appeal against the said assessment order passed by the Income Tax Officer. The Appellate Assistant Commissioner not only sustained the said addition of Rs. 2,45,000/- but he also took notice of 10 other items of ostensible hundi loans amounting to Rs. 2,30,000/- and directed that the total income be enhanced by the sum of Rs. 2,30,000/-. On further appeal, the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal ) deleted the said addition of Rs. 2,30,000/- made by the Appellate Assistant Commissioner on the view that in doing so the Appellate Assistant Commissioner had exceeded his jurisdiction. At the instance of the Revenue, the Tribunal was directed by the High Court of Madhya Pradesh to refer the following questions of law for opinion:-

"(1) Whether in the facts and circumstances of the case, he Tribunal was justified in deleting a sum of Rs. 2,30,000 freshly added by the Appellate Assistant Commissioner?

(2) Whether the sum of Rs.2,30,000/- was added by the Appellate Assistant Commissioner on new sources of income of items not considered by the Income Tax Officer from the point of view of assessability?

(3) Whether the Appellate Assistant Commissioner had no jurisdiction or power to the sum of Rs. 2,30,000/- under the facts and circumstances in which he has added the same?

By the impugned judgment dated February 28, 1980, the High Court has answered these questions against the Revenue. The High Court has held that the Appellate Assistant Commissioner had no jurisdiction to consider the new entries which were not considered at all by the Income Tax Officer and to add the amount of Rs. 2,30,000/- to the total income of the assessee. According to the High Court, the items containing that amount constituted new sources of income which were not the subject matter of assessment before the Income Tax Officer and, therefore, it was not open in appeal to consider these sources and to assess them. In taking this view the High Court has placed reliance on the decision of this Court in Additional Commissioner of Income Tax, Gujarat v. Gurjargravures Pvt. Ltd.1, wherein it was held that the Appellate Assistant Commissioner had no power to grant exemption under Section 84 of the Act since the Income Tax Officer did not considered the item from the point of view of its non-taxability. Feeling aggrieved by the said decision of the High Court, the Revenue has filed this appeal.

Shri Ranbir Chandra, the learned counsel appearing for the Revenue, has submitted that the High Court was in error in construing narrowly the powers conferred on the Appellate Assistant Commissioner under Section 251 of the Act. The learned counsel has pointed out that the decision in Additional Commissioner of Income Tax, Gujarat v. Gurjargravures Pvt. Ltd. (supra), on which reliance has been placed by the High Court, was a decision of a two Judge Bench and that its correctness has been doubted by a Bench of three Judges in Jute Corporation of India Ltd. v. Commissioner of Income Tax2.

In Jute Corporation of India Ltd. v. Commissioner of Income Tax (supra) this Court has referred to the earlier deci