BITHAL DAS Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) AT the instance of the assessee, Sri Bithal Das, an HUF, and as directed by this court, the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, hereafter referred to as "the Tribunal", has drawn up a statement of the case and referred the following two questions for the opinion of this court:

(2.) THE facts stated in brief are that for the assessment years 1969-70 to 1971-72, the assessee had returned its total wealth at Rs. 10,58,100, Rs. 10,58,100 and Rs. 9,48,400, respectively. This did not include arrears of rent in respect of a house property situated at Calcutta and which had been in the tenancy of Smt. Lakhpatia Devi. THE monthly rent of that property was Rs. 600 and the arrears due in respect thereof as on the relevant valuation dates amounted to Rs. 28,000, 36,200 and Rs. 47,600. THE WTO called upon the assessee to explain the reason for not disclosing the aforesaid assets in its total wealth. THE reason given by the assessee was that since the aforesaid dues had become bad and it was doubtful that they would be realized, the assessee had not disclosed them. Apart from that, it was claimed that the assessee was maintaining its accounts on cash basis. THE WTO did not accept this contention and on account of the fact that every year the assessee had been able to recover some of the arrears of rent, held that the arrears of rent had not become irrecoverable or bad debts. Accordingly, he added the aforesaid amounts in the assessments for these years, respectively. THEse three orders were passed on one and the same date, i. e., February 12, 1974.

(3.) IT was submitted before us on behalf of the assessee by its learned counsel, Sri R. K. Gulati, that in view of the admitted fact that the assessee maintains its accounts on cash basis, the arrears of rent could not be included in its total wealth on the basis of accrual, it would not be necessary to enter into question No. 1 and reliance was placed on the decision of the Orissa High Court in the case of Vysyaraju [1971] 79 ITR 330 and that of the Karnataka High Court in A. T. Mirji v. CWT [1980] 126 ITR 93. We do not agree because we have first to examine the nature of the arrears of rent and then to see as to whether they can be included in the total wealth of the assessee. IT is, of course, not disputed that the assessee maintains its accounts on cash basis but, at the same time, as observed by the AAC, the assessee did not produce any balance-sheet before him nor any balance-sheet was available on the record. IT is also not in dispute that the assessee had filed a suit for the ejectment of the (tenant, recovery of rent and mesne profits in respect of this property in the 10th Court of the Subordinate Judge, Alipore. That suit was decreed on December 1, 1967, for recovery of possession, for recovery of Rs. 80 as arrears of rent and mesne profits at the rate of Rs. 600 per month from December 5, 1965, till the recovery of possession. The amount of mesne profits was to be determined in subsequent proceedings on an application filed by the plaintiffs on payment of proper court fee. A copy of this judgment has been filed with an affidavit before this court. The matter is now pending in appeal before the Calcutta High Court.