PADMARAJU G K Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE two questions on which the Tribunal, Hyderabad, was directed to state a case for the opinion of this Court under S. 66 (2) of the Indian IT Act were formulated in the following terms : "(1) Whether on the facts and circumstances of the case there is any material on which the Tribunal could find that a sum of Rs. 21,000 in the name of Kurma Rao is a fictitious credit and represented the income of the assessee from undisclosed sources ? and (2) Whether on the facts and in the circumstances of the case the proceedings initiated under S. 34 of the IT Act have been legally and validly initiated ?"

(2.) THE reference relates to the asst. yr. 1947-48, the corresponding accounting period being the financial year ended with 31st March, 1947. THE assessee is an HUF carrying on business in wholesale grains and pulses. For the relevant assessment year, the assessee was assessed on a total income of Rs. 2,28,658 of which the income from business amounted to Rs. 2,16,363. THE assessment was completed on 29th March, 1952. Some time later, it came to light that the assessee had introduced a spurious credit of Rs. 21,000 in the name of one of B. Kurma Rao on 16th March, 1947. This led the ITO to initiate proceedings under S. 34 (1) (a) of the Indian IT Act after obtaining the necessary approval of the CIT by a notice issued on 30th Aug., 1954. THE assessee submitted the same return as the earlier one asserting that the credit entry in the name of Kurma Rao was a genuine one and not a fictitious one.

(3.) THE assessee pleaded his inability to do so except filing the letters. THE ITO did not accept the story about this inheritance, as it was not supported by evidence of an acceptable kind especially having regard to the fact that there was no evidence of the depositor dealing with these monies in the past which could prove possession of these monies by him. He, accordingly, included the said amount in the assessable income as the assessee's own monies, out of undisclosed income. Dissatisfied with this order of assessment, the assessee went in appeal to the AAC. THE appellate authority felt that the source was duly proved and there was no reason to doubt the capacity of the lender. In this view of the matter, the appeal was allowed resulting in the deletion of Rs. 21,000 from the assessable income of the assessee.