IMPORT EXPORT SALES CORPORATION Vs. COMMISSIONER OF INCOME TAX
LAWS(DLH)-1983-11-18
HIGH COURT OF DELHI
Decided on November 24,1983

IMPORT EXPORT SALES CORPORATION Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

S.S.CHADHA,J. - (1.)THIS reference under S. 256(1) of the INCOME TAX ACT, 1961 (hereinafter referred to as "the Act"), at the instance of the assessee poses the following question :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in disturbing the estimate made by the AAC by an order dated August 10, 1972, passed in pursuance of the Tribunal's order dated July 18, 1970, in I.T.A. No. 1915/1968 -69 of the amount available; as at the end of October 12, 1962, out of the intangible additions made in the assessee firm's assessment for the asst. year 1961 -62?"

(2.)THE assessee is a firm of wholesale dealers in paper. Its head office is in Delhi and it has a branch in Calcutta. It has also a factory at Bahadurgarh run since June 15, 1969, under the style of Hanuman Paper Company, where colouring and glazing of paper is done. The assessee introduced in the books of account of the Calcutta branch relevant to the asst. year 1965 -66, four different amounts totalling Rs. 45,000. The assessee had claimed the amounts to be genuine items of loan. The claim was, however, rejected by the ITO according to whom, the parties were mere name - lenders. The assessee contested the addition of Rs. 45,000 in an appeal to the AAC. The alternative plea raised was that the deposits should be taken as covered by the intangible additions made for the asst. year 1961 -62. The AAC accepted the alternative plea and deleted Rs. 45,000 as covered by the intangible additions made for the asst. year 1961 -62.
Aggrieved with the AAC's order deleting Rs. 45,000 from the income assessed for the asst. yr. 1965 -66, the ITO went in appeal to the Income -tax Appelate Tribunal (for short called the "Tribunal"). The Tribunal observed at the outset that the AAC had not been correct in taking into consideration Rs. 70,000 added to the trading account of the Hanuman Paper Company, as one of the items of intangible addition available to the assessee. They then proceeded to consider whether, and to what extent, the unexplained deposits of Rs. 45,000 occurring in the assessee firm's Calcutta books pertaining to the asst. year 1965 -66 could be said to be covered by the items of intangible addition made in the firm's assessment for the asst. year 1961 -62. The Tribunal held that any assessment of the unexplained deposits against the intangible additions made for the asst. year 1961 -62 would have to be made within the four corners of the Tribunal's order dated July 18, 1970, in I.T. A. No. 1915 (DEL)/ 1968 -69, whereby they had remanded to the AAC the appeal filed by the ITO against its income -tax assessment for the asst. year 1963 -64, involving the addition of Rs. 25,000 introduced on October 12, 1962, in the name of M/s Daluram Gagan Mull. On this basis, they found that the maximum amount of the intangible additions made in the past years which could legitimately have been expected to remain with the assessee at the end of October 12, 1962, was Rs. 5,774 and not Rs. 58,202 as held by the AAC in his order dated August 10, 1972. Taking into account certain other amounts which could have been drawn on by the, assessee for the purpose of the deposits aggregating to Rs. 45,000, they held further that Rs. 19,000 on an aggregate may have been available. Accordingly, they set aside the order of the AAC and restored the addition of uncovered balance of Rs. 26,000 as the assessee's income from undisclosed sources.

(3.)THE AAC in his order dated August 10, 1972, had worked out a figure of Rs. 58,202. The question is whether the Tribunal was justified in disurbing the finding of the AAC that the assessee's available cash balance as at the end of October 12, 1962, out of the intangible additions made in the firm's assessment for the asst. year 1961 -62 was Rs. 58,202. The Tribunal addressed itself to the rival contentions put forward by the assessee and the Department as to whether the addition of Rs. 25,000 representing an alleged loan from M/s Daluram Gagan Mull for the assessment year 1963 -64 and Rs. 45,000 representing alleged loans from M/s Daluram Gagan Mull and M/s Sureka Jute Company for the asst. year 1965 -66 could have been sustained in the background of substantially larger additions made, on an agreed basis, in the firm's assessment for the asst. year 1961 -62. Earlier, three different AAC's had gone into this question and came to the finding that even though the assessee firm had failed to prove that the alleged loans of Rs. 25,000 and Rs. 45,000 considered in the firm's assessments for the asst. yrs. 1963 -64 and 1965 -66 respectively had actually come from these two parties and the amounts could be legitimately treated as the firm's own money, no addition to cover the amounts of unexplained cash credit for these two years would be justified in view of the additions in the firm's assessment for the asst. yr. 1961 -62.
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