BANKIM J SHAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is an individual and, in this reference, we are concerned with his income -tax assessment for the asst. year 1970 - 71. The assessee derives income from dividend, interest and share of profit from Superior Engineering and Moulding Works. In his return of income for the asst. yr. 1970 -71, the assessee disclosed a total income of Rs. 8,822. In Part IV of the return of income, the assessee claimed exemption in respect of a sum of Rs. 70,000 on the ground that it represented income of casual nature. According to the assessee, the said sum of Rs. 70,000 represented prize money received by him in a cross -word puzzle competition conducted by one "Kundan Sabda Sparda" ("Sparda" for short) and, as such, the said sum was not taxable. The ITO called upon the assessee to produce before him the proprietor of Sparda along with his books of account in order to verify the claim made by the assessee. The ITO addressed several letters to the assessee to which the assessee's representative replied by saying that all the documentary evidence was lying in the possession of the IT Department. The ITO recorded statements of the assessee as well as his father, J. M. Shah. The ITO pointed out to the assessee that, since he was claiming exemption in respect of the aforesaid sum of Rs. 70,000, the burden was on him to prove that he was entitled to such exemption and he called upon the assessee to produce such evidence as he might consider necessary in support of his claim for exemption. The assessee was also given an opportunity to make inspection of the documents and evidence which the ITO had collected in the course of his inquiry. The ITO examined the witnesses and the assessee was given an opportunity to crossexamine them. In his assessment order, the ITO, on appreciation of the evidence on record, held that the sum of Rs. 70,000 in respect of which the assessee had claimed exemption did not represent genuine prize money as claimed by the assessee. He held that the said sum of Rs. 70,000 represented the assessee's income from undisclosed sources. The ITO further held that the assessee had paid commission of Rs. 2,100 to one N. S. Patel for the bogus prize which was alleged to have been received. In the view which he took, the ITO added Rs. 70,000 and Rs. 2,100 to the income disclosed by the assessee in his return and framed the assessment accordingly.

(2.) BEING aggrieved by the inclusion of the sums of Rs. 70,000 and Rs. 2,100 in his total income, the assessee carried the matter in appeal before the AAC. The AAC, confirming the view of the ITO, held that there was enough material on record to hold that sum of Rs. 70,000 received by the assessee was not genuine prize money, as claimed by him, but was unaccounted money which was shown as prize money. He also upheld the addition of Rs. 2,100 added for the commission paid to N. S. Patel.

(3.) BEING aggrieved by the order of the AAC, the assessee preferred an appeal before the Tribunal ("the Tribunal" for short). The Tribunal examined the evidence on record in detail and found that the persons who wanted to bring out their unaccounted money contacted the proprietor of Sparda through their agents and filled in forms with the correct solutions of the cross -word puzzles. Prizes were declared in favour of such parties and cheques were issued in their favour for the prize money which were cleared from the moneys deposited by them. The Tribunal found that Sparda did not have enough funds of its own to distribute prizes. On appreciation of the evidence and material on record, the Tribunal came to the conclusion that the alleged prize declared in favour of the assessee did not represent a genuine prize. The Tribunal also pointed out other material circumstances which strengthened the conclusion reached by it. The Tribunal, therefore, held that the assessee had failed to satisfactorily explain the source of Rs. 70,000 credited by him in his books. It, therefore, upheld the decision of the AAC and the ITO that the sum of Rs. 70,000 was liable to be taxed in the hands of the assessee as income from undisclosed sources. For the same reasons, it also upheld the addition of Rs. 2,100 paid byway of commission to N. S. Patel. In the result, the Tribunal dismissed the assessee's appeal. It is in the background of the above facts that the Tribunal has referred to us, for our opinion, the following questions under S. 256(2) of the IT Act, 1961 :