COMMISSIONER OF INCOME TAX Vs. DAULATRAM RAWATMULL

JUDGEMENT

(1.) The respondent, Daulatram Rawatmal, is a firm registered under the Income Tax Act, 1922. At all material times there were six partners of the firm. They were Nandlal Bhowalka, Giridharilal Bhowalka, Shyamlal Bhowalka, Bajranlal Bhowalka, Rawatmal Nopany and Rameshwarlal Nopany. The firm carried on business as dealers and commission agents in jute, rice and other commodities. For the account year 2001-2002 Bikram Samvat (September 27, 1944, to October 15, 1945) the firm was assessed in the assessment year 1946-47 by the Income-tax Officer Non - Companies - cum - E. P. T. Circle, under section 23(3) of the Income Tax Act. On February 19,1955, the Income-tax Officer, Central Circle VI, to whom the case was transferred by the Central Board of Revenue, issued a notice under section 34 of the Act calling upon the firm to file a revised return of income for the corresponding accounting year. Pursuant to this notice the firm filed a return showing an income of Rs. 2,75,168 according to its original assessment as reduced in appeal. The Income-tax Officer thereafter inspected the books of account of the assessee and found that on November 2,1944, an amount of Rs. 5,00,000 was tendered in cash to the Barabazar Branch of the Central Bank of India with instruction to transfer the same to the Bombay head office of the bank and a demand draft for the said amount was issued through the Bombay head office of the bank on its Jamnagar branch, which was at the material time situate in the territory of the Indian State of Nawanagar. Out of the remittance a fixed deposit receipt was purchased in the name of Raghunath Prasad Agarwalla, son of Rawatmul Nopany, with the Jamnagar branch of the Central Bank of India on November 8, 1944. this Raghunath Prasad Agarwalla died on August 16, 1945, and the fixed deposit receipt matured on December 19,1945. Upon maturity the sum of Rs. 5,00,000 was not paid to the heirs of Raghunath Prasad Agarwalla, but it was adjusted against the over draft of the assessee. The assessees books account showed a credit of Rs. 5,00,000 in the account of Raghunath Prasad Agarwalla. The account of Raghunath Prasad Agarwalla in the assessees books showed a current account involving large sums of money and the balance of Rs. 5,64,970 was carried forward to the next year. Although Raghunath Prasad Agarwalla had died in August, 1945, the account continued in the same name in the next year.

(2.) The Income-tax Officer also found that on November 15,1944, another amount of Rs. 5,00,000 was tendered in cash in the Barabazar branch of the Central Bank of the Central Bank of India with instructions to transfer the same to the Bombay head office of the bank and a demand draft was issued from Bombay in the name of B. N. Gupta, son of Bajranglal Bhowalka - a partner of the assessee - on the Jamnagar branch of the bank and that with the aid of this amount a fixed deposit account was opened with the Central Bank of India, Jamnagar, on November 21,1944. On December 2,1944, a letter of guarantee and "a letter of continuity" signed by Raghunath Prasad Agarwalla and B. N. Gupta along with promissory notes signed by the firm for keeping these two deposits under lien were lodged with the bank for securing over draft facilities for the assessee in the sum of Rs. 10,00,000.

(3.) The Income-tax Officer also found that an amount of Rs. 5,00,000 was tendered in cash in the Barabazar branch of the Central Bank of India on October 5,1944, with instructions to remit the same to the Jamnagar branch by a demand draft to be converted into a fixed deposit dated October 11,1944, in the name of Sheo Prasad Agarwalla, Son of Rameshwarlal Nopany -a partner of the assessee. This deposit was later offered as security for overdraft facility granted to Sri Hanuman Sugar Mills Ltd., in the managing agency of which the partners of the assessee had a controlling interest.