- (1.) FOR the assessment year 1952-53 respondents M/s. Manick and Sons were assessed to tax in the status of a registered firm and their income was computed at Rs. 15,331/ -inclusive of Rs. 15,000/-being undisclosed income. For the assessment year 1953-54 the respondents returned Rs. 40,887/-as their income from business. The Income-tax Officer discovered an aggregate amount of Rs. 74,692/-as "cash credits" which, in his view, were not satisfactorily explained by the respondents. The Income-tax Officer accordingly brought to tax a total income of Rs. 1, 31,179/-being Rs. 56,487 as income from business and Rs. 74,692/-as income from "other sources" and assessed the respondents as an unregistered firm. The Appellate Assistant Commissioner in appeal reduced the income of the respondents from business to Rs. 38,420/- and income from "other sources" to Rs. 46, 620/-. In second appeal the Tribunal reduced the income from business to Rs. 28,820/- and confirmed the finding that the source of the cash credits aggregating to Rs. 46,620/-had remained unexplained. But the Tribunal observed that "there were certain special features in the case which needed proper consideration in determining the final assessment." The Tribunal then aggregated the income for the assessment years 1952-53 and 1953-54 for the two years, which he rounded off at Rs. 1,00,000/-and apportioned in equal shares in the two years. For the assessment year 1952-53, the Tribunal recorded that the respondents had given an undertaking to file a voluntary return for assessment on the basis of total income of Rs. 50,000/-.
(2.) AT the instance of the Commissioner of Income-tax, four questions were referred to the High Court of Kerala. '(1) Whether it was not beyond the jurisdiction of the Appellate Tribunal to reopen the concluded assessment for assessment year 1952-53 and to direct that the income should be revised in that year at Rs. 50, 000/- as against Rs. 15, 331/- already fixed? (2) Whether on the facts and circumstances of the case and the evidence on record, the Tribunal was justified in directing that any portion of the cash credits be assessed to income-tax in any year other than the assessment year 1953-54? (3) Whether on the facts and circumstances of the case and evidence on record, the Tribunal was justified in finding that a portion of the cash credits were covered by the intangible additions made in 1952-53 and 1953-54 assessment? (4) Whether on the facts and circumstances of the case and the evidence on record, the Tribunal was justified in directing, that the income under the head 'business' for the assessment year 1953-54 be reduced to Rs. 50,000?" The High Court declined to answer questions (1) and (2) and answered questions (3) and (4) in the affirmative. The Commissioner appeals with special leave. The judgment of the Tribunal is not a reasoned decision on the questions arising before it: it is cryptic and in parts obscure, and gives no grounds for its conclusion. The judgment again lends countenance to a method of assessment which the Indian Income-tax Act does not warrant. In Para.5 of the order the Tribunal observed that the cash credits discovered by the Income-tax Officer aggregated to Rs. 74, 692/-which amount was reduced by the Appellate Assistant Commissioner to Rs. 50,620/-. (It is common ground that the correct figure should be Rs. 46,620/-). The Tribunal then observed that on the evidence on record "these residuary items must remain unexplained." But the Tribunal thought that because in the assessment year 1952-53 the total income of Rs. 15,331/-was comparatively small compared to the income of the earlier years "some of that year's profits must have come into the profits of the next year." The Tribunal then set out a consolidated statement of account for two years: and observed: "The assessee has undertaken to file a voluntary return for assessment year 1952-53 on the basis of a total income of Rs. 50,000. In these circumstances, the total business income of the assessee for the year under appeal is reduced to Rs. 50,000/-only." The unexplained cash credits found by the Appellate Assistant Commissioner and accepted by the Tribunal were Rs. 46,620/-. The total income of the two years on the basis adopted by the Tribunal was therefore Rs. 87,838/-. But the income of the two years was rounded off at Rs. 1,00,00/- and divided equally between the two years. For making up a consolidated statement of account the Tribunal gave no reasons nor did it give any reasons "for debiting the intangible additions" of Rs. 15,000/- and Rs. 6,000/-against the cash credits. Counsel for the respondents suggested that the Tribunal was presumably of the view that Rs. 15,000/- brought to tax as business income in the assessment in 1952-53 must have been entered in the books of account of the next year and that Rs. 6000/- called "trading deficiency" in the two branches was entered as cash credit.
(3.) THE appeal before the Tribunal raised a simple question whether the cash credits aggregating to Rs. 46, 620/- or any part thereof were liable to be taxed as income of the respondents in the year 1953-54. For that purpose the Tribunal had to consider whether the respondents furnished any explanation leading to a justifiable inference that the amount or a part thereof did not represent income of the respondents. In the view of the Tribunal the cash credits had remained unexplained. But the Tribunal still reduced the cash credits by Rs. 21,000/-, and then proceeded to amalgamate the income for the two years and to divide it equally. For reducing the cash credits by Rs. 21,000/ no reasons have been given, and amalgamation of the income for the two years and apportionment is without authority of law.;