LALJIMAL GIRDHAR DAS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference under section 66(1) of the INdian INcome-tax Act, the following two questions have been referred to us :-

(2.) THE assessee is a Hindu undivided family carrying on the business of dealing in cloth under the name and style of Messrs Laljimal Girdhar Das at Gorakhpur. THEy had business dealings with two firms, Dilsukh Rai Jai Dayal of Banares and Ganesh Narain Onkar Mal of Bombay. THE accounts of the assessee, after having been assessed for the assessment year 1939-40, came up before the Income-tax Officer for purposes of assessment for the assessment year 1940-41. During these proceedings the Income-tax Officer found that a sum of Rs. 15,000 had been credited on Kuar Sudi 9, Samvat 1996 to the accounts of Naunidh Prasad, one of the members of the Hindu undivided family. THE same amount had also been debited on the same day to the accounts of firm Dilsukh Rai Jai Dayal. For the purpose of investigating these entries, the accounts of the previous year of the assessee were examined and it was discovered that, on Kuar Sudi 5, Samvat 1995, the accounts of Firm Ganesh Narain Onkar Mal of Bombay had been debited with the same amount whereas the accounts of Firm Dilsukh Rai Jai Dayal of Banares had been credited with that amount. THE accounts of Firm Ganesh Narain Onkar Mal of Bombay were also examined and it was found that for some years prior to Samvat 1995 that firm had shown a sum shown in the account books of the assessee itself. THEse facts are all mentioned in the statement of the case in which it is also related that this amount had no doubt been brought forward in the account books of the Bombay firm from a period prior to Dasehara Samvat 1993. In these circumstances, this sum of Rs. 15,000 was first treated by the Income-tax Officer as profits accruing in the year Samvat 1995-96 and was, therefore, assessed to income-tax in respect of the assessment year 1940-41. THE Appellate Assistant Commissioner of Income-tax reversed the decision holding that it could not be treated as income of the year Samvat 1995-96 as it represented the balance of the previous years. THEreupon the Income-tax Officer issued notice under Section 34 of the Indian Income-tax Act to the assessee to show cause why income-tax should not be assessed on this amount as it had escaped assessment during the assessment year 1939-40. It was held by the Income-tax Officer that this amount was brought in the accounts of the assessee for the first time on Kuar Sudi 5, Samvat 1995 when entries were made in the accounts of the Bombay and Banares firms and since adjustments had been made during the relevant previous year relating to the assessment year 1939-40, the assessee was liable to assessment over this amount in the year in question. THE assessee appealed to the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate Tribunal but unsuccessfully. He then asked for a reference to this Court and the case has now been referred to us by the Tribunal.

(3.) AS a result we answer the reference on the second question in the negative and hold that it has not been proved that this sum of Rs. 15,000 was the assessees income liable to be assessed to income-tax. The assessee is entitled to his costs which we assess at Rs. 200.