COMMISSIONER OF INCOME TAX Vs. RAM ACHAL RAM SEWAK

JUDGEMENT

(1.) THESE are three connected applications under Section 256(2) of the Income-tax Act, 1961. Messrs. Ram Achal Ram Sewak, Akbarpur, are the assessees. The Income-tax Officer, Faizabad, noticed that the assessees had made deposits in a number of banks from the year 1959-60 to the year 1965-66. THESE deposits were treated by the Income-tax Officer as the assessees' income from undisclosed source. Assessment was made accordingly. The decision was upheld in appeal by the Appellate Assistant Commissioner. The assessees filed a number of appeals against the various assessment orders. The connected appeals were disposed of by the Income-tax Appellate Tribunal, Allahabad, by a consolidated judgment, dated April 13, 1967. The appeals were allowed with respect to assessment years 1959-60 and 1961-62. It was held that the deposits appearing for the two assessment years could be explained by the additional income assessed during the previous years. The appeal was partly allowed as regards the assessment year 1962-63. The Commissioner of Income-tax, U.P., maintained that no such set-off was permissible in law. He applied for a reference to the court. The application was dismissed by the Tribunal. The Commissioner of Income-tax, U.P., has, therefore, filed the present applications under Section 256(2) of the Act.

(2.) THE short question raised in the present applications is whether the deposits made by the assessees in various banks from year to year could be set off against the extra profit added during previous years. In Kuppuswami Mudaliar v. Commissioner of Income-tax, 1964 51 ITR 757, it was held by the Madras High Court that, where the income-tax authorities made an addition to the income of the assessee over and above the income as disclosed by the assessee, on an estimate basis, the amount so added must be treated as the real income of the assessee. It is not open to the authorities to take the view that the addition was only for purposes of taxation, and that it should not be regarded as the true income of the assessee.