COMMISSIONER OF INCOME TAX Vs. NATHULAL AGARWALA AND SONS

JUDGEMENT

(1.) WHETHER the ratio of CIT v. Anwar Ali [1970] 76 ITR 696 (SC) still holds the field despite the designed deletion of the word "deliberately" from Section 271(1)(c) of the I.T. Act, 1961, and the pointed insertion of an exhaustive Explanation thereto by the Finance Act No. 5 of 1964 has come to be the focal question in this reference to the Full Bench. Equally at issue is the correctness of either one of the two strands of parallel judicial thought within this court itself.

(2.) SOMEWHAT regretfully it must be noticed that the issues aforesaid arise from an assessment made way back for the year 1964-65. The assessee, M/s. Nathulal Agrawala & Sons, Hazaribagh, had declared its income at merely Rs. 22,116. The ITO, however, completed the assessment at a nearly four-fold figure of Rs. 82,378. He included in this assessment a sum of Rs. 26,000 purporting to be in the names of the wives of three of the partners of the assessee firm. Admittedly, the ITO had required the assessee to explain the nature and sources of these alleged cash credits. This was said to be furnished by the assessee but the same was categorically rejected and an amount of Rs. 26,000 was added to the income as accruing from undisclosed sources. On appeal to the AAC, this addition was in terms challenged, inter alia, but he also rejected the explanation of the assessee and upheld the addition. On further appeal by the assessee, the matter came up before the Tribunal which categorically held that the explanation offered by the assessee was rightly rejected by the taxing authorities. However, it accorded a relief of Rs. 7,500 in this account.

(3.) IT is manifest from the above that the crucial issue herein is the true legislative intent in deleting the word "deliberately" from Section 271(1)(c) and the addition of the Explanation thereto and the resultant construction to be placed on these amendments. Equally it is plain that there already exists a vast volume of legal literature on the import and scope of the added Explanation. IT may, therefore, be unnecessary to launch an exhaustive dissertation on first principles in this context. Nevertheless, in view of the sharp cleavage of judicial opinion in other High Courts and, in particular, within our court itself, which has necessitated this reference, the question has to be examined both against the backdrop of its legislative history as also on the language of the statutory Explanation itself.