COMMISSIONER OF INCOME TAX Vs. GEORGE THOMAS K

JUDGEMENT

(1.) THE references under section 256 of the Income-tax Act raise a common question in regard to the assessability to tax and the penalty of the same assessee, common to all these cases. I.T.R. Case No. 22 of 1975 is in respect of the assessment year 1962-63; I.T. R. Case No. 23 of 1975 raise the question of the legality and correctness of the levy of penalty for the having submitted the return for the same assessment year, viz., 1962-63; ITR Case No. 24 of 1975 is in respect of the assessment for the year 1963-64; and ITR Case No. 25 of 1975 is in respect of the assessment for the assessment year 1969-70.

(2.) THE statement of the case relates to assessment year 1962-63. THE assessee is individual in status. He runs a printing press known as "Kerala Dwani" and also a Malayalam Daily newspaper of the same name. THE assessee filed a return of income declaring a loss of Rs. 3,37,183. As per the account maintained by the assessee, according to the Income-tax Officer, in his alleged capacity as the vice-President of the India Gospel Mission, there were various remittances from the United State of America credited in that account, which receipts amounted in this year to Rs. 5,85,637. THE assess had two bank accounts with the Indian Overseas Bank, Kottayam, Of two accounts, one is in the name of the assessee and the other is in the name of India Gospel Mission of which the assessee claims to be the vice-President. THE credit of Rs. 5,85,637 appears in the account of India Gospel Mission. An examination by the Income-tax Officer of the utilisation of the funds credited in that account revealed that a major part of funds have been turned over to the newspaper Kerala Dwani, a sizable portion of household expenses -purchase of cow, payment of house rent of father, personal trips of Bombay, etc., purchase of property by the assessee, providing loan facilities to the assessees close relatives like father, brothers, etc., without interest. THE personal expenses met from out of these funds and the amounts utilised for the purchase of properties in the names of the assessee and his five brothers are claimed by the assessee as loans taken by him in his individual capacity to be repaid in subsequent years. THE Income-tax Officer found that no interest is seen charged on such drawings, that the account showed that the assessee has been operating these funds in an independent manner not covered by any stipulated principles or directions, the purchases, the advance made for the purchase of properties, etc., find a place in the balance-sheet prepared for the India Gospel Mission. At one stage the assessee claimed that the newspaper Kerala Dwani had been taken over by the India Gospel Mission and he has nothing to do with it. But the Income-tax Officer found that the statutory declarations that are to be published by every newspaper every year show that the assessee in his individual capacity is the owner of the press and the newspaper, and do not show at any place the India Gospel Mission or himself as the vice-President of the India Gospel Mission as connected with the newspaper at all. THE Income-tax Officer observed that an examination of the whole case revealed that the funds have been received mostly for assisting the assessee in running the newspaper. On these fact the Income-tax Officer found that the funds of the India Gospel Mission and the newspaper "Kerala Dwani" have all been mixed up into one unit and that the assessee has been operating upon all these as individual owner of both the newspaper and the funds. He also observed that there is no doubt that the remittances that came to the assessee are entirely connected with his business activities and have been entirely utilised for the business and personal activities of the assessee. He inferred that the entire receipts of cash from the U.S.A. is relatable to the business activities of the assessee and is assessable to tax as the assessees income. So he came to the conclusion that the assessee is only trying to explain away the utilisation of funds for his own purposes as loans taken in his personal capacity from his own self as the vice-President of the India Gospel Mission. Following the judgment of the Supreme Court in the case in P. Krishna Menon v. Commissioner Income-tax, 1959 35 ITR 48, he brought the amount of Rs. 5,85,637 shown as received from India Gospel Mission as per the ledger maintained by the assessee in the name of India Gospel Mission to tax as income of the assessee.

(3.) INCIDENTALLY, it may be stated that when at the instance of the Commissioner of Income-tax, Kerala, appropriate questions about the income nature and the eligibility for exemption under section 4(3)(vii) of the Indian Income-tax Act, 1922, the amounts being receipts of casual and non-recurring nature not arising from business or the exercise of a profession or occupation, were referred to the Kerala High Court, that court, subsequent to the decision of the Tribunal for this assessment year 1962-63, by their judgment in I.T.R. Nos. 32 & 33 of 1971 on the file the High Court dated 19th July, 1973 (now reported as Commissioner of Income-tax v. Dr. K. George Thomas, 1974 97 ITR 111 ), had answered those questions in favour of the department, thus finding that the assessment years 1960-61 and 1961-62 the amounts are chargeable to tax. But there, as seen from the facts stated in the order of the Tribunal as well as the High Court judgment for those two years, the receipt of funds was by the assessee himself and not, as in this assessment year, credited in the accounts of India Gospel Mission, maintained by the assessee.