JUDGMENT
G.G. Sohani, J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that while directing the Income-tax Officer to make a fresh assessment, the Appellate Assistant Commissioner was within his jurisdiction to direct the Income-tax Officer to inquire into the transactions between Lalchand & Co. and General Trading Co. and also to examine the applicability of Section 40A(3) of the Income-tax Act, 1961?”
2. The material facts giving rise to this reference, briefly, are as follows:
While framing the assessment of the assessee under the Act for the assessment year 1977-78, the Income-tax Officer found that the business carried on in the name of M/s. Lalchand & Co. was the benami business of the assessee firm. The Income-tax Officer, therefore, included the profits earned by M/s. Lalchand & Co. in the hands of the assessee. Aggrieved by this order, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner came to the conclusion that the Income-tax Officer did not thoroughly examine the transactions between General Trading Co., Lalchand & Co., and the assessee firm, before coming to the conclusion as to whether M/s. Lalchand & Co. was or was not a benami business of the assessee. The Appellate Assistant Commissioner also found that certain payments made by the appellant firm to General Trading Co. and Lalchand & Co. were not by means of crossed cheques as provided by Section 40A(3) of the Act. The Appellate Assistant Commissioner, therefore, after setting aside the order passed by the Income-tax Officer, remanded the matter to him with a direction to examine the transactions entered into between General Trading Co., Lalchand & Co. and the assessee and also to examine the applicability of Section 40A(3) of the Act and, thereafter, to proceed to frame assessment afresh, after giving the assessee a proper opportunity of hearing. Aggrieved by the decision of the Appellate Assistant Commissioner, the assessee preferred an appeal before the Tribunal. The Tribunal did not uphold the contention advanced on behalf of the assessee that the Appellate Assistant Commissioner had exceeded his jurisdiction in directing enquiries into the applicability of Section 40A(3) of the Act and in ordering investigation into the transactions between Lalchand & Co. and M/s. General Trading Co. The Tribunal, therefore, dismissed the appeal. Aggrieved by the order passed by the Tribunal, the assessee submitted an application for making a reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this court for its opinion.
3. Having heard learned counsel for the parties, we have come to the conclusion that this reference must be answered in the affirmative and against the assessee. The powers of the Appellate Assistant Commissioner in deciding an appeal under Section 251 of the Act are wide enough to include the power to examine all matters covered by the assessment order and even to correct the assessment in respect of all such matters to the prejudice of the assessee. The Appellate Assistant Commissioner by his order of remand has not introduced any new source of income not processed by the Income-tax Officer. The question as to whether any expenditure could not be deductible in view of the provisions of Section 40A(3) of the Act, was a matter which directly arose in the course of assessment and as the Income-tax Officer had failed to examine that aspect of the matter, the Appellate Assistant Commissioner had directed him to do so. In these circumstances, the Tribunal, in our opinion, was justified in holding that the Appellate Assistant Commissioner had not exceeded his jurisdiction in passing the remand order in question.
4. Our answer to the question referred to this court is, therefore, in the affirmative and against the assesses. In the circumstances of the case, parties shall bear their own costs of the reference.