T DEVASAHAYA NADAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following questions stand referred under the Indian Income-tax Act "1. Whether the Tribunal was entitled to use the statement of Solomon Nadar as material for basing any finding adverse to the assessee when Solomon Nadar was not made available for examination by the assessee ?.2. Whether independent of Solomon Nadar's statement, there was any material for the Tribunal to find that Rs. 24, 000 constituted the income of the assessee in the relevant year of account." *THE assessee is a general merchant in Ceylon. He owns house-properties in India. His assessment under the Indian Income-tax Act, for the assessment year 1947-48, corresponding to the previous year ended on March 31, 1947, was completed under section 23(3). But, subsequently, the Income-tax Officer commenced proceedings under section 34 of the Act on the basis of certain information that the assessee had acquired properties in Ceylon during the accounting year but failed to disclose it in the books of account. THE properties of the value of Rs. 24, 000 were said to have been purchased at Baligoda, Ceylon. In response to the notice, the assessee submitted that the original assessment was not liable to be reopened and that he had not made any money besides the income which has already been taxed. THE Income-tax Officer added Rs. 24, 000 to the income previously computedOn appeal, the Appellate Assistant Commissioner confirmed this view of the Income-tax Officer.

(2.) THE assessee contended before him that he did not purchase any property at Baligoda during the accounting year and produced before him a certificate given by the Registrar of Lands Office at Ratnapuram stating that no new property was registered in the name of the assessee during the relevant year. THE addition was sustained on the strength of information got from one Solomon Nadar, who stated that he was a partner of the assessee in "black market" operations, that the total profit of Rs. 48, 000 was divided and taken in two equal shares. At that stage, the assessee came to know that the department acted upon Solomon Nadar's statement that the assessee had earned an income of Rs. 24, 000 from the activities of a firm of which both Solomon Nadar and the assessee were partners. THEre was no denial of the partnership, but the assessee only stated that he had fallen out with Solomon Nadar. This is tacit admission that Solomon Nadar was not a person unknown to him and that they were connected with each other financiallyTHEre was a further appeal to the Income-tax Appellate Tribunal by the assessee. THE Tribunal thought it fair that the assessee should have an opportunity to cross-examine Solomon Nadar, who had not been examined in his presence. THE Tribunal, therefore, remanded the proceedings to the Income-tax Officer for further examination of Solomon Nadar after due notice to the assesseeUnfortunately, Solomon Nadar, who was a resident of Ceylon, did not choose to go to India. Every time a date was fixed for the enquiry, he was resourceful to offer some excuse for his not being able to be present. Ultimately, he sent the following letter on February 11, 1958, to the department"Besides the information hitherto furnished, I think I will have no more information to furnish. While my statement has been accepted and assessment has been completed including the undisclosed profits, it is left to your department to determine the tax liability of the above who was then a partner. In the circumstances, the cross-examination of Mr. Devasahaya Nadar on me will be of no benefit and is not warranted." *In the remand report, reference was made by the officer that the assessee had purchased a property No. 1 Gorakpola, Kalathara District, Colombo, for Rs. 6, 000 many years ago and that he had been receiving a rental income of Rs. 25 per mensem from that property and that this item of purchase was not reflected in the account books of the assesseeOn these materials, the Tribunal considered the question afresh and reached the conclusion that there were materials on record to justify the addition made by the department.