P.B.Mukharji, J. - (1.) The question for determination on this Income Tax Reference is:-- "1. The Income Tax Appellate Tribunal in its order dated 27th March 1961, having held that the Income Tax Officer has made addition of Rs. 4,60,000/- to the income of the appellant without any basis and arbitrarily, was it justified in adding estimated income and is such addition arbitrary and fanciful and based on no materials? 2. In the facts and circumstances of the case was the Appellate Tribunal justified in coming to the conclusion that any part of the income of Hanuman and Company should be added to the income of the appellant or was the same done arbitrarily and without any materials?"
(2.) The statement of the case in this Reference makes the following farts relevant for the purpose of determining or deciding this question.
(3.) The assessee is Nandalal Kasera of 243 Ghittaranjan Avenue and an individual, owning some properties and having a share in the firm of Messrs. Bengal Kopak Ginning. The assessment year is 1948/49. The accounting year is 8003/4 Diwali ending on the 11th November, 1947. The original assessment for the year 1948/49 was completed on the 11th December 195S on a total income of Rs. 2,985 only it was then subsequently discovered and the Income-tax Officer came to know that the assessee had done extensive speculative business in jute and hessian, in his own name and also in the name of Messrs, Hanuman and Co. and had acquired considerable property from such business, which he had concealed. Notice was therefore issued under Section 34(1)(a) by the Income-tax Officer for the reassessment of the total income of the assessee. The assessee in reply filed a return of income showing a loss of Rs. 181 only. The assessee admitted before the Income-tax Officer that he had done some speculative business with one Madanlal Saraf which was supposed to result in a huge loss but the assessee had not shown that loss in the return filed on the flimsy grounds that he had no details relating to the transaction. Thereupon the Income-tax Officer issued notice under Section. 22(4) of the Act calling upon the assessee to produce all the books of account and vouchers. On the date of hearing the assessee appeared with his authorised representative and stated that he had not maintained any books of account whatever. Indeed the assessee denied any connection with Hanuman and Co. and in fact in his deposition recorded by the Income-tax Officer under Section 37 on the 8th January 1958 the assesses made the following statement: "I hereby declare that I have not done any business in the name of Messrs. Hanuman and Co. I have not entered into any business transaction with the said Hanuman and Co.";