COMMISSIONER OF INCOME TAX Vs. JHAVERBHAI BIHARILAL AND COMPANY

JUDGEMENT

(1.) THESE are two references under Section 256(1) of the Income-tax Act, 1961, by a consolidated case statement. They arise out of six appeals and cross-appeals by the assessee and the Department. The references relate to the assessment years 1967-68 and 1968-69.

(2.) THE assessee is a firm of five partners. It was assessed as an unregistered firm. It deals in sale and purchase of bidi leaves and tobacco. While assessing, the Income-tax Officer found a sum of Rs. 1,25,000 plus interest of Rs. 4,106 thereon (total Rs. 1,29,106) credited in the books of the firm for the assessment year 1967-68 and a sum of Rs. 1,05,201 during the assessment year 1968-69. THE Income-tax Officer not having accepted the genuineness of the cash credits treated them as unexplained income and taxed them accordingly. THE Appellate Assistant Commissioner confirmed the findings of the Income-tax Officer in regard to the cash credits. THE stand of the assessee in regard to the cash credits in respect of all but two items did not find favour with the Appellate Tribunal as well. THE Tribunal, however, accepted the stand of the assessee in regard to loans of Rs. 20,598 and Rs. 8,247 (principal and interest) by Navjug Bidi Company and Ram Bidi Company, respectively. THE Tribunal thus held that out of the credits in the assessment year 1968-69, the assessee had successfully explained the loans of Rs. 28,845 from Navjug Bidi Company and Ram Bidi Company--both of Nepal. THE transactions in regard to loans from individuals during the year 1967-68 were rejected without any modification. THE finding of the Tribunal in regard to cash credits, therefore, was that the assessee had failed to explain the cash credits to the tune of Rs. 1,29,106 during the year 1967-68 and a sum of Rs. 85,356 during the year 1968-69. I have some difficulty in following the arithmetic of the Tribunal in regard to the unexplained sums, but that is not important. Suffice it to say that the case of cash credits was rejected by all the Revenue authorities. Thus far, there is no difficulty.

(3.) THE assessee during the assessment year 1967-68had shown gross profit of Rs. 1,84, 519 which worked out to 11.72%. This was considered to be low by the Income-tax Officer in view of the past records. For reasons assigned, the Income-tax Officer rejected the figures and estimated the profit at Rs. 2,16,000 which worked out to 13.5% gross profit. He thus added Rs. 32,156 for the year 1967-68 and for the assessment year 1968-69, a sum of Rs. 5,000 to the total income.