MOHD HARON Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion to this court :

(2.) Whether, on the facts and the circumstances of the case, the Tribunal was justified in not considering that the burden lies on the Department to prove that the amount belonged to the assessee it was more so when the four partners had admitted that the amount belonged to them and was consequently justified in holding that the sum of Rs. 52,000 from out of Rs. 92,000 found in the assessee's premises was owned by the assessee ?" 2. Briefly stated, the facts giving rise to the present reference are as follows :

(3.) The applicant is a registered firm. It derives income from selling Banarasi sarees, silk ties, ready-made silk kurtas. For the assessment year 1977-78, the previous year ending on September 2, 1976, the applicant disclosed total sales of Rs. 10,29,620 and a gross profit of Rs. 97,336, which was about 10 per cent. of the sales. The Income-tax Officer while framing the assessment, had observed that immediately in the preceding assessment year, the applicant had shown total sales of Rs. 5,10,408 and a gross profit of Rs. 56,630, which was about 12 per cent. He further found that the stock account maintained by the applicant was not correct as it was not maintaining stock details in the course of its day to day business. The books of account have also been disbelieved by the Sales Tax Officer and the turnover has also been increased. Applying the provisions of Section 145 of the Act, the Income-tax Officer rejected the trading results and estimated the sales at Rs. 10,75,000. He applied a gross profit rate of 11 per cent. and made an addition of Rs. 20,914. He further found that a survey was conducted by the Income-tax Officer and the customs authorities on November 5, 1975, as a result of which an amount of Rs. 1,46,436 was found in two almirahs. In one almirah, Rs. 92,000 was found in a safe/belonging to M/s. Abdul Zain Abdul Matin and Co., a sister concern of the applicant. When asked to show cause as to why the aforesaid amount be not treated as unexplained investment, the applicant stated that a sum of Rs. 40,000 belonged to Maulana Azad Sarkar Hospital, Naseelpara, Bari Bazar, Varanasi, which had been collected by way of donation from various persons by the hospital, which has been accepted by the Income-tax Officer. The remaining amount of Rs. 52,000 was, however, added to the income of the applicant as the explanation offered that the said amount belonged to the four partners in equal shares of Rs. 13,000 each which the partners have saved from their withdrawals and earning and have kept apart for the marriage of their daughters was disbelieved. The appeal filed by the applicant did not meet with any success in respect of addition of Rs. 52,000 and determination of income by best judgment assessment. The applicant preferred a second appeal before the Tribunal. The Tribunal while maintaining the invocation of the provisions of Section 145 of the Act, had directed the Income-tax Officer to determine the gross profit at 11 per cent. on the declared turnover in the absence of any suppression having been found. The explanation given by the applicant regarding the amount of Rs. 52,000 has been disbelieved.