- (1.) THIS is an application under Section 256(2) of the Income-tax Act, 1961, for directing the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, to state the case and refer the following questions of law said to be arising out of its order passed in I.T.A. No. 49 of 1973-74 for the assessment year 1953-54 to this court for its opinion.
(2.) THE assessee, the late Rao Raja Hanut Singh, since deceased and now represented by his legal representatives was a scion of the former administrator of the State of Marwar, Sir Pratap Singh, the Maharaja of Idar. THE assessee was a renowned international polo player and sportsman of distinction having been conferred with titles and honours, both by the erstwhile British Government as well as after independence, by the Government of India. THE assessee frequently used to visit Britain especially during the polo season. He had bank accounts in Britain throughout the relevant period which fell within the realm of the respective assessment years 1953-54 to 1969-70. During this period, the assessee received certain payments in the bank accounts in Britain in each year from the companies on the board of which members of the Leiners families were in controlling positions and the assessee has utilised that amount for meeting his expenses. Apart from the three companies, namely, P. Leiner and Sons Ltd., P. Leiner and Sons (Wales) Ltd. and Treforest Chemical Co. Ltd. (hereinafter called the three "Leiner companies"), there was a fourth company, namely, Leiner Overseas Ltd. (hereinafter called "the Overseas"), which was incorporated on or about October 10, 1952, as a private company. This was a subsidiary of P. Leiner and Sons Ltd. The assessee and two persons, namely, Hari Singh and Vijay Singh, were directors of the Hira Crushing (India) Company Ltd. incorporated on or about January 19, 1953. This was a company of the assessee and the members of his family and relations inasmuch as all the shares of the company were held by the assessee and his near relations of Rao Raja Hanut Singh. Hari Singh, the son of the assessee, was an employee of the Overseas. On January 24, 1953, a "Technical consultancy agreement" was entered into between Hira Crushing Company and the said Overseas for which a separate agreement was executed. The entire considerations which were to be paid passed from one company to another under the said agreement was paid by the parties to the agreement about which there is no dispute. In the original assessments for the year 1953-54 to 1966-67, the returns were filed and assessments were made without reference to money deposited in the bank account in the U.K. by the aforesaid first mentioned three Leiner companies. For the assessment years subsequent to 1965-66, namely, 1966-67, 1967-68, 1968-69 and 1969-70, wherein the question arose whether the amount paid in the assessee's account by the three P. Leiner companies were income received by the assessee by way of commission. With that enquiry, the assessments for the assessment years 1953-54 to 1966-67 were also reopened and the enquiries were made in those transactions for the relevant period. During the course of these proceedings, the assessee claimed that the deposits made in the bank account of the assessee were not for any consideration or remuneration paid to the assessee but was only for reimbursement of expenditure incurred by him in the U.K. because of the hospitality extended by the three Leiner companies to him on account of personal relationship as well as on account of his status which the players thought might help in their business propositions at large because of his connections. The Assessing Officer thought otherwise. According to him, the amounts deposited by the three Leiner companies in the account of the assessee were by way of commission paid to the assessee and were his revenue receipt by way of income. The fact that he has utilised the said receipt for meeting expenses while he was in the U.K. is of little consequence and therefore the entire deposits made in his accounts for the respective assessment years were included in the taxable income of the assessee for the respective year as income received in the U.K. In some of the assessment years finding that the assessee has expended in the U.K. in excess of the amount received in the bank account, the difference between the receipts in the bank account and excess expenditure estimated to have been made by the assessee by the Income-tax Officer was further added to the taxable income of the assessee by way of income from undisclosed sources.
(3.) THESE additional sums were for the assessment year 1954-55 and for the assessment years 1959-60 to 1966-67, as per the table showing a summary of findings in the assessment order dated June 16, 1972. In the said table, separate amount received and treated as income of the assessee for each assessment year from 1952-53 to 1969-70 was also detailed. The assesses aggrieved by the order passed by the Income-tax Officer appealed before the Appellate Assistant Commissioner against the assessment of each year. The Appellate Assistant Commissioner by his order dated January 22,1973, agreed with the explanation offered by the assessee and held that no element of income was there in the deposits made in the account of the assessee by the three Leiner companies with whom the asses-see or Hira Crushing Co. Ltd. had no business connection whatever. The Appellate Assistant Commissioner also found that in the years in which the assessee has overspent the deposits as found by the Assessing Officer, for such excess expenses sources has been properly explained by the assessee, firstly, for the reason that estimate of the expenditure has been made on higher side and that excess expenditure in some of the deposits, if any could be met by the excess amount deposited in the earlier years. In view of these findings the additions made by the Income-tax Officer on account of income by way of commission as well as income from undisclosed sources received in the U.K. were deleted. ;