K SAMBASIVAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference application under the Indian Income-tax Act and the question referred to this court is whether, on the facts and in the circumstances of the case, the assessment made on August 24, 1956, in respect of assessment year 1951-52 is legal The assessee had a business in Ceylon and he started a new business at Tiruchirapalli in bullion some time in April, 1950. The Income-tax Officer, Tiruchirapalli, assessed him to tax for the assessment year 1951-52 relevant to the accounting year ended March 31, 1951. In the books of account of the assessee the sum of Rs. 29, 430-8-10 made up of three sums of Rs. 10, 000, Rs. 8, 000 and Rs. 11, 430-8-10 was shown as capital. The assessee stated that the sum of Rs. 10, 000 was advanced to him by his father-in-law. THIS was his first version. He later on submitted that he got the amount from his uncle, Thambi Pillai Saravanamuthu. The sum of Rs. 8, 000 was stated to be given to him by his father, who collected outstandings due to him from third parties in the Federated Malay States. A sum of Rs. 11, 430-8-10 was alleged to have been advanced by the assessee's father during his lifetime but collected by the assessee and brought to India. The Income-tax Officer however chose to treat these sums of money as income earned by the assessee from undisclosed sources. The order of assessment is dated March 29, 1956. The officer acted under section 23(4) of the Act in making the assessment. That is a provision which enables the officer to make a "best judgment assessment" consequent on default by the assessee in complying with the statutory notices issued to him under section 22(4) or 23(2).

(2.) THE assessee filed an appeal against this order and also filed an application under section 27 of the Act to have the assessment cancelled. THE ground on which the assessee invoked the aid of section 27 was that he had not received any notice from the officer under section 22(4). On August 24, 1956, the officer passed an order cancelling his previous assessment and on the same day reassessed the assessee again holding that this sum of Rs. 29, 430-8-10 was income from hidden sources and not capital as represented by the assesseeIn the first assessment order dated March 29, 1956, the officer observed as follows

(3.) WE have already referred to the fact that the assessee preferred an appeal to the Appellate Assistant Commissioner against the assessment order under section 23(4). That appeal was dismissed on September 26, 1956, in these terms "The Income-tax Officer has reported, vide his letter, 276-S/51-52, dated September 15, 1956, that the assessment has been cancelled. Therefore this appeal becomes superfluous and is therefore dismissed."