DEVI PRASAD VISHWANATH PRASAD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) UNDER this court direction the Income-tax Appellate Tribunal, Allahabad Bench, has referred the statement of case for answering the question of law arising, viz :

(2.) THE assessee is registered firm dealing in handloom cloth, Kashi silk, etc., with its head office in Benares. For the assessment year 1946-47, for which the accounting period was September 27, 1944, to October 15, 1945, the assessee submitted a return showing loss. THE income-tax authorities rejected the accounts produced by it and made an assessment by estimating income under the proviso to section 13, at the rate of 10% profit. In the account books there was an entry of cash deposit of Rs. 20,000 standing in the name of one Banshidhar Rawatmal. THE income-tax authorities called upon the assessee to prove the nature and source of the deposit. THEy disbelieved the explanation offered by it and held that the sum of Rs. 20,000 was its income from some undisclosed source, i.e., from sources within their knowledge and not disclosed to the department. THEy added this sum of Rs. 20,000 to the estimated amount of profit and assessed it on an income of Rs. 35,883. THE assessment was maintained by the Tribunal on appeal, which rejected both the contentions advanced before it, namely, (1) the income-tax authorities were not justified in treating the cash deposit of Rs. 20,000, as the assessees income from an undisclosed source and (2) that they were not justified in rejecting the books of account and in making an assessment by estimate. THE assessee did not at all contend before the Tribunal that, if the sum of Rs. 20,000 was to be treated as its income, it could be treated as its income from its business and not from an undisclosed source and that it should have been held to have been included in the estimated income of the business and should not have been added to it. THE appeal before the Tribunal had proceeded on the footing that, if it was an income, from an undisclosed source and not from the business and was, therefore, in addition to the estimated income from the business. It, however, referred the question whether there was any material to justify the finding that the income was from a source other than the business under the express directions from this court.

(3.) THE next is Ramcharitar Ram Harihar Prasad v. Commissioner of Income-tax, another case from the Patna High Court, decided by Ramaswami and Rai JJ. THE material facts in that case were that the income-tax authorities estimated the assessees income by adding Rs. 15,644 to the income disclosed in the return and further added to it the sum of Rs. 85,370 on account of entries of cash credits in the accounts and the learned judges observed that this resulted in double taxation of the amount of Rs. 15,644. It was founded by the income-tax authorities that the assessee did not carry on any business other than the business for which the return was filed and that the income of Rs. 85,000 and odd was an undisclosed income from the business. Ramaswami J. pointed out at page 307 that an amount of a cash credit can be added to the estimated income from the business only when there is material to show that the assessee carries on an independent business apart from the business for which assessment is made. That would be a case of an exceptional nature. THE argument on behalf of the Commissioner of Income-tax that there was a possibility that the amount of Rs. 85,000 and odd was income from an undisclosed sources other than the business of which the return was filed was rejected with the remarks :