COMMISSIONER OF INCOME TAX Vs. CHANDRAKANT M TOLIA

JUDGEMENT

(1.) IN pursuance of the direction given by this court in T. C. P. Nos. 422 and 423 of 1977, under section 256(2) of the INcome-tax Act, 1961, the Tribunal referred the following two questions for the opinion of this court :

(2.) THE assessee is an individual deriving share income from various firms and was also carrying on agency business individually and deriving income from dividend, sitting fees, etc. For the assessment years 1962-63 and 1963-64, assessments were originally completed on a total income of Rs. 24,567 and Rs. 21,417, respectively. It came to be known subsequently that the assessee borrowed loans on hundis and that such loans were not real and were bogus in nature. THE Income-tax Officer, therefore, reopened the assessments for the assessment years 1962-63 and 1963-64 under section 147(a) of the Income-tax Act, 1961, and the alleged hundi credits of Rs. 1,80,000 and Rs. 75,000, respectively, were brought to tax since the assessee was unable to discharge the onus under section 68 of the Income-tax Act, 1961. Interest on such unproved hundi credits was also disallowed. In the course of reassessment proceedings, the Income-tax Officer initiated penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961, and referred the case to the Inspecting Assistant Commissioner under section 274(2). In the meanwhile, the Appellate Assistant Commissioner and the Tribunal confirmed the reassessments in quantum appeals.

(3.) THE assessee (since deceased) was partner in four firms, viz., (1) M/s. C. J. Seth and Company, Madras (2) M/s. Rathod Trading Company, Madras (3) M/s. Pagada Metal Industries and (4) C. J. Sheth and Company, Bangalore. THE assessee was also carrying in an agency business and was deriving income by way of dividends, sitting fees, etc. For the assessment year 1962-63, the return of income was originally filed on March 21, 1963, admitting a total income of Rs. 21,988. THE assessment was completed on a total income of Rs. 24,567. Subsequently, this assessment was reopened under section 147(a) as there were hundis credits and interest relating thereto. THE reassessment under section 143(3) read with section 147(a) of the Income-tax Act, 1961, was finalised on March 22, 1973, on a total income of Rs. 2,43,060, which included a sum of Rs. 1,80,000 as unproved hundi credits.