COMMISSIONER OF INCOME TAX Vs. BHAICHAND H GANDHI

JUDGEMENT

(1.) THE question referred to us for determination in this reference under S. 256(1) of the IT Act, 1961, (referred to hereinafter as "the said Act"), are as follows :

(2.) IN the course of the assessment proceedings for the asst. year 1962 63, for which the relevant previous year in the case of the assessee was Samvat year 2017, the ITO included Rs. 30,000 in the assessment on account of cash credits found in certain books which, according to the ITO, were the books of the assessee. The explanation offered by the assessee regarding the genuineness of these credits was not accepted by the ITO and he treated the amount as income from undisclosed sources. On an appeal by the assessee, the AAC confirmed the view of the ITO. On a further appeal to the Tribunal by the assessee, an argument was put forward on behalf of the assessee that in respect of one of the deposits included in the said sum of Rs. 30,000, namely, a deposit of Rs. 10,000, this deposit was shown on 21st Jan., 1961, in the bank account of the assessee. It was contended on behalf of the assessee that this amount was not an amount credited in the books of the assessee maintained by the assessee for the previous year ending on 8th Nov., 1961 (Samvat year 2017) and that the bank pass book was not a book maintained by the assessee. It was contended on behalf of the assessee that the amount, even if treated as undisclosed income of the assessee, could only be assessed in the financial year. The Tribunal accepted the contention of the assessee holding that the said bank pass book could not be treated as a book of the assessee, as contended by the Department, and held that it was not a book maintained by the assessee for any previous year as referred to in S. 68 of the said Act. It is from this decision that the aforesaid questions have been referred to us.

(3.) IN Baladin Ram vs. CIT (1969) 71 ITR 427 (SC) : (1969) 71 ITR 427 (SC) : TC42R.1072, it has been held by the Supreme Court that it is now well settled that the only possible way in which income from an undisclosed source can be assessed or reassessed is to make the assessment on the basis that the previous year for such an income would be the ordinary financial year. Even under the provisions embodied in S. 68 of the said Act, it is only when any amount is found credited in the books of the assessee for any previous year that the section will apply and the amounts so credited may be charged to tax as the income of that previous year, if the assessee offers no explanation or the explanation offered by him is not satisfactory.