Jaganmohan Reddy, J. - (1.) These appeals are by the Commissioner of Income-tax, Bihar and Orissa, against the judgment of the High Court of Patna in references under Section 66 (2) of the Income Tax Act, 1922 (hereinafter called the 'Act') which answered the questions referred to it in favour of the assessee and against the appellant.
(2.) We shall presently set out the questions called for by the High Court, but before we do so, it is necessary to state the facts on which those questions have to be determined.
(3.) The assessee is an individual having income from salary, interest on securities, rents from house properties, dividends etc. In the year 1954-55 for which the previous year is 1st November, 1952 to 31st October, 1953, the assessee filed a return on 28th February, 1955 declaring a total income of Rupees 2,60,737/-. On 24th February, 1958 a revised return was filed including therein property income amounting to Rs. 550/-. The Income-tax Officer completed the assessment on 30th September, 1958 on a total income of Rs. 21,15,845/- which included a sum of Rs. 10,80,000/- treated as the assessee's income from undisclosed sources "for investment in shares in the name of Sri Kalyan Shum Shere, J. B. Rana" (hereinafter referred to as 'the Rana'). The assessee disputed the inclusion of this amount of Rs. 10,80,000/-. The Income-tax Officer treated this amount as income from undisclosed ources for the following reasons:- From the statement of case, it would appear that on July 1, 1952 the assessee sold 50,000 ordinary shares of Rhotas Industries Ltd. (R. I. Ltd.) to Dalmia Jain Collieries Ltd. (D. J. C. Ltd.). Another 10,000 shares of R. I. Ltd. were sold on the same day to Maheshpur Collieries (M. C. Ltd.). He also sold 40,000 and 35,000 ordinary shares of S. K. G. Sugar Ltd. the former to D. J. C. Ltd. and the latter to M. C. Ltd. on the same day, viz. 31st July 1952. Thereafter, in the year 1953, the two vendor companies are alleged to have sold these shares for a sum of Rs. 10,80,000/- to one Rana as follows:- (a) On 30th May 1953 the D. J. C. Ltd. sold 40,000 ordinary shares to S. K.G. Sugar Ltd. for Rs. 3,20,000/-. Again on 28th August, 1953, the D. J. C. Ltd. sold 50,000 ordinary shares to R. I. Ltd., for Rs. 4,00,000/-; (b) On 30th May, 1953, M. C. Ltd. sold 35,000 ordinary shares of S. K. G. Sugar Ltd. for Rs. 2,80,000/-; and on 28th August, 1953, the same company sold another 10,000 ordinary shares to R. I. Ltd. for Rs. 80,000/-.;