RAMASWAMI NAIDU V Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following thirteen questions have been referred in pursuance of an order of this court under Section 66(2) of the Indian Income-tax Act, 1922:

(2.) THE assessee is an industrialist of Coimbatore. He also owns some agricultural lands. He is a partner in a firm called Krishna & Co., which is the managing agent of a textile mill called Kadiri Mills Ltd. THE assessee had drawn from his business accounts during the assessment years 1950-51, 1952-53 and 1953-54 Rs. 4,445, Rs. 1,991 and Rs. 1,769, respectively, towards his personal expenses. Of the drawing of Rs. 4,445 for the year 1950-51, a sum to the extent of Rs. 2,137 was towards specific items of purchase of jewellery, travelling expenses, etc. That left a balance of Rs. 2,308 only for family expenses during that year. THE Income-tax Officer considered the above drawings as too low for the status of the assessee. THE explanation offered by the assessee was that his wants were few and his style of living was simple. THE Income-tax Officer did not accept this explanation. He considered that, having regard to the status of the assessee and the standard of living, the expenditure should have been not less than Rs. 12,000 a year. In that view he came to the conclusion that a sum of Rs. 10,000 should have been made out of the concealed income in the two assessment years 1950-51 and 1952-53, and that a sum of Rs. 8,000 should have been made from the concealed income in the assessment year 1953-54. Though the Income-tax Officer estimated undisclosed sources of income for 1953-54 also at Rs. 10,000, he apportioned a sum of Rs. 8.000 towards personal expenses and Rs. 2,000 as unaccounted investment in the name of his wife. That is how only a sum of Rs. 8,000 was added towards personal expenses for 1953*54.

(3.) THE learned counsel for the assessee submitted that, since the department itself has accepted that the assessee was in receipt of agricultural income to the tune of Rs, 8,791 during the assessment year 1949-50 and estimated the agricultural income at Rs. 32,500 during the assessment year 1951-52, there was no justification for including any amount as having been received and made from undisclosed sources for meeting the personal expenses of the assessee. But there is no evidence available as to the amount of income during the assessment years 1950-51, 1952-53 and 1953-54. THE assessee himself has shown his household expenses at Rs. 5,000 for the assessment years 1954-55 to 1956-57. It cannot be disputed that the assessee is an industrialist and the expenses for the family must have been much more than the amount shown in the accounts as personal drawings. THE Tribunal was also aware of the possibility of some savings from the agricultural income during the relevant years. Having regard to all these facts found, the Tribunal estimated and gave relief to the extent of only Rs. 5,000 per year. We are of opinion that the addition to the income returned on the basis of a finding that the assessee must have made some amount towards his personal expenses from undisclosed income was justified on the materials.