S R LAKSHMANAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN these tax case references under section 256(2) of the INcome-tax Act, 1961, (hereinafter referred to as "the Act"), at the instance of the assessee, the following question has been referred to this court for its opinion :"Whether there is any material for the tribunal to hold that the assessee had paid a sum of Rs. 40, 000 out of Rs. 2, 30, 000 as commission for repatriation ?" * The assessee is a partner in several firms carrying on hotel business in different places. He was carrying on business at Ceylon and was being assessed as a non-resident. He wound up his business at Ceylon, returned to INdia on October 10, 1971, and thereafter settled down at Tiruchirapalli. By his letter dated December 9, 1971, he informed the INcome-tax Officer that he had brought from Ceylon Rs. 2, 30, 000 being the sale proceeds of the business carried on by him there and that he had invested the same in the manner indicated therein. IN the course of assessment proceedings for the assessment year 1972-73, the assessee claimed that he had sold the business at Ceylon for Rs. 2, 30, 000 and got the money repatriated, though not through the normal channel.

(2.) THE Income-tax Officer despite doubting the claim of the assessee that the assets of the business sold in Ceylon were of the value of Rs. 2, 30, 000, took the view that the entirety of that amount would not have been available to the assessee for making investments, as the assessee should have necessarily paid commission for repatriating the money from Ceylon. Estimating such commission at 50 per cent., the Income-tax Officer brought to tax Rs. 1, 15, 000 under the head "Other sources". Aggrieved by this, the assessee preferred an appeal before the Appellate Assistant Commissioner and accepting the contention of the assessee that in view of the circular of the central Board of Direct Taxes, viz., F. No. 222/7/70-IT(A-II), dated August 5, 1971, there was no need for the assessee to establish by clinching evidence that in fact Rs. 2, 30, 000 had been repatriated from Ceylon, he held that the Income-tax Officer was not entitled to make an enquiry into the question of payment of commission for the illegal remittance and deleted the inclusion of Rs. 1, 15, 000 under the head "Other sources". On further appeals to the Tribunal by the assessee as well as the Department against the order of the Appellate Assistant Commissioner to the extent to which it was adverse to them, it was held that the amount of Rs. 2, 30, 000 having been brought into India in a clandestine manner, should have been so brought in only after payment of some commission in India, as no money was available with the assessee for payment in Ceylon as claimed by him and that it would not be unreasonable to hold that a sum of Rs. 40, 000 had been paid by the assessee by way of commission for repatriation and in that view sustained the addition of Rs. 40, 000 under the head "other sources".

(3.) THIS had not in any manner been contradicted and this necessarily shows that the assessee could not have paid any commission whatever in Ceylon to those who had assisted him in repatriating funds to India, though through an irregular channel.