Decided on September 18,1968



Isaac, J. - (1.) THIS is a reference made by the Income-tax Appellate Tribunal, Madras Bench, under Section 66(2) of the Indian Income-tax, Act, 1922, as directed by this court on the application of the assessee. The question referred is : "Whether, on the facts and in the circumstances of the case, the addition of Rs. 60,813 or any portion thereof as the income of the assessee-family from undisclosed sources during the previous year ended March 31, 1951, relevant for the assessment year 1951-52 is valid and justified in law ?"
(2.) THE assessee is a Hindu undivided family consisting of Kannan Kunhi and his younger brothers, who are the sons of one Kollara Sankunni. He was carrying on business in Ceylon for quite a long time, until he returned to India in 1940 and finally settled down in his village, in Chowghat Taluk. Two years later, Kannan Kunhi started a business in Ceylon in partnership with others. THE assessee started a business in India for the first time on August 17, 1950 (corresponding to 1-1-1126). That was a business in toddy in Kerala; and the licence was taken in the name of Kannan Kunhi. For the assessment year 1951-52, the assessee was finally assessed by the Income-tax Officer by his order dated June 19, 1959, which is annexure A to this reference. THE total income was determined at Rs. 1,40,356 as follows : The assessee was not maintaining any accounts, before it started the toddy business, as according to the assessee it had only a small income from its agricultural properties. The books of account of the assessee relating to the toddy business started with a credit entry of Rs. 46,563 on August 17, 1950. It was also seen that the assessee purchased immovable properties on May 19, 1950, for Rs. 14,250 and on February 16, 1951, for Rs. 3,000. The income from undisclosed source is comprised of these three amounts. Regarding the sum of Rs. 28,480 assessed as share of income from the Ceylon firm, the assessee contended that Kannan Kunhi was a partner of this firm in his individual capacity and that the assessee had no interest therein. This contention, though it was rejected by the Income-tax Officer and the Appellate Assistant Commissioner, was accepted by the Appellate Tribunal. Regarding the sum of Rs. 63,813 assessed as income from undisclosed sources, the assessee contended that the said amount came from past remittances from Ceylon out of the earnings of the family and from savings from agricultural property. The above explanation was rejected by the Income-tax Officer; and his finding was affirmed both by the Appellate Assistant Commissioner and the Appellate Tribunal. The Appellate Assistant Commissioner, however, held that the sum of Rs. 3,000 invested by the assessee on February 16, 1951, for buying immovable properties could have come from the income of the toddy business. Accordingly, this amount was directed to be deleted; and the assessee's income from undisclosed sources was finally determined at Rs. 60,813. We are concerned in this reference only with the inclusion of this amount as part of the assessee's total income.
(3.) THE learned counsel for the revenue contended before us that the assessee had no case before the Appellate Tribunal that the addition of the above amount as income from undisclosed sources was wrong, that its only contention was that this addition should not be made, as the assessee's books of account were rejected, and that the question referred to this court does not, therefore, arise out of the order of the Appellate Tribunal. This contention was advanced on the basis of paragraphs 27 and 28 of the said order, which read as follows: "27. In regard to the addition retained by the Appellate Assistant Commissioner as income from undisclosed sources, it was urged that the department having rejected the books there was no justification for treating the sum of Rs. 60,813 as income from undisclosed sources. 28. No other point was argued." We are not able to follow the point stated in paragraph 27. The income from toddy business as estimated by the Income-tax Officer was only Rs. 47,703 ; and therefore a contention that the sum of Rs. 60,813 found as income from undisclosed sources would be covered by the difference between the estimated profits and the book profits could not possibly have been advanced. It is seen from the appeal petition filed before the Tribunal that the assessee raised a ground that its explanation regarding the amount assessed as income from undisclosed sources should have been accepted. In paragraph 37 of its order, the Appellate Tribunal states as follows : "37. In the assessment year 1951-52 the assessment of Rs. 60,813 remains to be considered. The books had been rejected only in so far as they did not help deducing the correct profit from the business but the fact of investment remains. The assessee had no proper and satisfactory explanation for the source for these sums. We uphold the assessment of Rs. 60,813 as income from undisclosed sources." ;

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