CIT, KERALA Vs. MANICK AND SONS

JUDGEMENT

(1.) FOR the assessment year 1952-53 respondents M/s. Manick and Sons were assessed to tax in the status of a registered firm and their income was computed at Rs. 15,331/ -inclusive of Rs. 15,000/-being undisclosed income. For the assessment year 1953-54 the respondents returned Rs. 40,887/-as their income from business. The Income-tax Officer discovered an aggregate amount of Rs. 74,692/-as "cash credits" which, in his view, were not satisfactorily explained by the respondents. The Income-tax Officer accordingly brought to tax a total income of Rs. 1, 31,179/-being Rs. 56,487 as income from business and Rs. 74,692/-as income from "other sources" and assessed the respondents as an unregistered firm. The Appellate Assistant Commissioner in appeal reduced the income of the respondents from business to Rs. 38,420/- and income from "other sources" to Rs. 46, 620/-. In second appeal the Tribunal reduced the income from business to Rs. 28,820/- and confirmed the finding that the source of the cash credits aggregating to Rs. 46,620/-had remained unexplained. But the Tribunal observed that "there were certain special features in the case which needed proper consideration in determining the final assessment." The Tribunal then aggregated the income for the assessment years 1952-53 and 1953-54 for the two years, which he rounded off at Rs. 1,00,000/-and apportioned in equal shares in the two years. For the assessment year 1952-53, the Tribunal recorded that the respondents had given an undertaking to file a voluntary return for assessment on the basis of total income of Rs. 50,000/-.

(2.) AT the instance of the Commissioner of Income-tax, four questions were referred to the High Court of Kerala.

(3.) THE appeal before the Tribunal raised a simple question whether the cash credits aggregating to Rs. 46, 620/- or any part thereof were liable to be taxed as income of the respondents in the year 1953-54. For that purpose the Tribunal had to consider whether the respondents furnished any explanation leading to a justifiable inference that the amount or a part thereof did not represent income of the respondents. In the view of the Tribunal the cash credits had remained unexplained. But the Tribunal still reduced the cash credits by Rs. 21,000/-, and then proceeded to amalgamate the income for the two years and to divide it equally. For reducing the cash credits by Rs. 21,000/ no reasons have been given, and amalgamation of the income for the two years and apportionment is without authority of law.