S KUMARASWAMI REDDIAR Vs. CIT

JUDGEMENT

(1.) THIS is a reference under S. 66 (2) of the Indian income-tax Act, by the Income-tax Appellate Tribunal, Madras Bench. The question referred is: "whether on the facts and in the circumstances of the case, an addition of the sum of Rs. 25, 856 having been made to the profits and gains of the business carried on by the assessee, the further addition of the sum of Rs. 17,402 representing the total of the credits in the books and deposits in the banks in the account year, is lawful". The assessee, S. Kumaraswamy Reddiar, is a wholesale and also retail piece goods merchant carrying on business at Alleppey and Quilon. In computing the profits on the assessee's business for the assessment year 1123 M. E. the Income-tax Officer found that the accounts maintained by the assessee were unreliable and the profits had therefore to be estimated. Accordingly he made an addition to the book version of the profits to the extent of Rs. 26,418 in respect of the Alleppey business and Rs. 11,438 as regards the Quilon business. He further found that certain deposits in banks and certain advances entered in the books of account at the Head Office totalling Rs. 83, 926 were only secret profits. The petitioner was assessed on this amount also. In appeal by the petitioner to the Appellate Assistant commissioner, Trivandrum, the estimated addition made by the Income-tax Officer was upheld but only to the extent of Rs. 14,418 for the business at Alleppey and Rs. 11,438 for Quilon together making up Rs. 25,856. He also upheld the addition made by the Income-tax Officer under the category of secret profits as limited to three items, viz. (i) Rs. 2,375 in the petitioner's wife's account (ii) Rs. 2,000 credited in the account of one Thiruvenkita Reddiar, and (iii)Rs. 13,027 representing deposits in bank (i. e.) Rs. 17,402 on the whole. The petitioner took further appeal to the Income-tax Appellate Tribunal, Madras objecting to the estimate of the extra income of the petitioner's business at alleppey and Quilon and also to the additions made of the credits and deposits as income of the petitioner. The contention was raised that the addition of the rs. 17,402 could not be sustained inasmuch as an addition of the profits of the petitioner's business at Alleppey and Quilon had already been made. THIS contention was rejected by the Appellate Tribunal. It is this contention that is again the subject of the reference here.

(2.) LEARNED counsel for the assessee contends that the department has no case that the amounts represented by the credits and bank deposits were income from some special undisclosed business which the petitioner had. LEARNED counsel referred in this connection to the passage in the order of the Appellate Assistant Commissioner where after referring to the contention raised on behalf of the assessee, "that both turnover and the gross profit thereon having been taken at rates considered reasonable it cannot be held that in addition to such profits the appellant had derived other unaccounted profits from the same business during the same year and on the same turnover" the observation was made "i cannot say that this contention is without force since the Income-tax Officer has assessed the alleged profits (secret) as part of the appellant's income from his cloth trade but not from any undisclosed sources". So if the assessee was already assessed on estimated income he could not again be assessed in respect of those amounts. LEARNED counsel for the Department however questioned this assumption of the appellate Officer and said that the Income tax Officer had really treated the credits and deposits in question not as income of the business at Alleppey or quilon but rather as coming from other sources which had not been disclosed in the books or in the return. And even assuming that the Income-tax Officer was not very clear on the point, the Appellate Tribunal had according to learned counsel, definitely proceeded on that basis when they said "we cannot accept the learned counsel's argument that these credits came out of suppressed account out of transactions disclosed in the books". We accordingly proceed on the footing that the amount of Rs. 17,402 did not represent part of the profits which already been estimated.