L R BROTHERS Vs. COMMR OF INCOME TAX

JUDGEMENT

(1.) The following question has been referred by the Income-tax Appellate Tribunal for opinion to this Court in compliance with the orders passed by this Court under Section 66 (2) of the Income Tax Act :

(2.) It appears from the statement of the case submitted by the Tribunal that in the accounts submitted by the assessee there were two accounts in the name of the sole proprietor Sri M. L. Garg. One was the personal account of the proprietor and the other was a loan account. These two accounts showed various defects as well as some withdrawals during the previous year in question. In the loan account there were withdrawals to the extent of Rs. 47,222/8/-, which were made in the month of March just before the previous year closed. It was held by the Tribunal that the sums received by the proprietor by these withdrawals in the month of March could not have been available to him for making the deposits which were made earlier. The Tribunal, however, accepted the view that all other withdrawals which had been made earlier by the proprietor could have been availed of by him in order to make the various deposits. Consequently, for the purpose of calculating the amount of deposit which the proprietor had to explain, those withdrawals were deducted out of the deposits. On this basis it was found that the assessee was required to account for deposits amounting to Rs. 1,80,212/-. The assessee on being called upon to submit his explanation presented a statement showing the sources from which he had drawn the money in order to make these deposits. There were various sources amongst which were bank balance available on the first day of the opening of the previous year, realisations made in respect of sales effected during the preceding year and profits for the preceding year. Another source disclosed was agricultural income earned by the assessee by carrying on an horticultural farm during a number of years preceding the previous year in question. The explanation given by the assessee -was scrutinized by the Income-tax authorities. The explanation of some of the sources was accepted whereas for others it was rejected. Ultimately it was held that the assesses had failed to give any adequate explanation for the deposits amounting to Rs. 68,958/-. This amount was then held to be concealed income of the previous year in question and was therefore added to the taxable income. In this reference, the assessee has challenged the correctness of this view taken by the Income-tax Appellate Tribunal.

(3.) Learned counsel for the assessee, while arguing this reference before us, wanted to urge that the order of the Income-tax Appellate Tribunal rejecting the various explanations given by the assessee for the sources from which he had drawn the money in order to make those deposits was incorrect and was without material, so that that portion of the order of the Appellate Tribunal should be scrutinized by us and corrected. It is to be noticed that the question whether the explanation given by the assessee was or was not correct was a question of fact. Neither in the application under Section 66 (1) of the Income-tax Act before the Appellate Tribunal nor in the application under Section 66 (2) of the Income-tax Act before this Court did the assessee seek any reference to this Court of the question whether the findings given by the Appellate Tribunal holding that the explanation was not correct were without material and vitiated in law. That question, therefore, is not before us in this reference. For the purpose of this reference, we have to accept the findings of fact given by the Appellate Tribunal on this point. Consequently, this reference has to be decided on the basis that, with regard to the deposits amounting to Rs. 68,958/- by the proprietor in the accounts of the assessee, either the assessee has failed to give an explanation or give explanations which were not accepted as correct. The whole of this sum of Rs. 68,958/- is shown as receipts during the previous year in question. The question arose whether in these circumstances a reasonable inference could be drawn that this amount represented the concealed income of the previous year in question. On this point our attention was drawn to a decision of a Bench of this Court in Mithoo Lal Tek Cband v. Commissioner of Income-tax, U. P., 1953-23 ITR 494: (AIR 1953 All 701) (A), where the law on the question of drawing inferences under such circumstances was explained after a discussion of the cases decided by various High Courts. The view expressed was as follows :