UDANI P J Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) : The two questions referred for decision, one under S. 66(1) of the Indian IT Act and the other under S. 66(2), both arising out of ITA No. 1310/1959-60, are in the following terms:

(2.) WHETHER, on the facts and in the circumstances of the case, the profits alleged to have been made by the assessee related to the asst. yr. 1949-50 or 1950-51; and if really they related to 1949-50, whether the Tribunal had jurisdiction to direct the ITO to tax the gains for the asst. yr. 1949-50 ?" 2. The reference relates to the asst. yr. 1950-51 for which the relevant accounting period is the year ended on 31st Aug., 1949. The assessment for that year was originally made on a total income of Rs. 18,125, being 1/3rd of the share of the assessee in the firm of M/s Udani Engineering Company, Madras. Subsequently, on information received by the ITO that the assessee had purchased land at Sembium situated within the Madras City limits on 6th Nov., 1946, in the names of his wife and his brother's wife for a sum of Rs. 30,000 and subsequently sold the same on 18th March, 1949, at a huge profit for a sum of Rs. 3,17,000, proceedings under S. 34(1) (a) of the Act were initiated. The assessee submitted a return dt. 9th Dec., 1953, disclosing the same income as was originally returned by him. The ITO on 24th March, 1954, completed the assessment by adding to his income two sums, namely, (1) Rs. 2,75,000 as profits on the sale of land; and (2) Rs. 12,000 as income from undisclosed sources. The assessee thereupon carried the matter to appeal before the AAC contending, firstly, that the land belongs to his wife and his brother's wife and he has no concern with it; secondly, that it was a capital investment and at any rate the profit being of a casual and non-recurring nature arising from an adventure not in the nature of trade it is exempt from tax by reason of S. 4(3)(vii). Lastly, it was contended that even if it was a taxable income, it should have been assessed for the year 1949-50 and not for 1950-51. As regards the second item which was added to his income, it was contended that the source of the amount of Rs. 12,000 had been properly explained and so it could not be brought to tax as income from undisclosed source.

(3.) THE assessee then required the Tribunal to refer to this Court questions of law arising from its order and which according to him were four in number; but the Tribunal referred only one question, which is the subject-matter of R.C. No. 9/1961. This Court on the application of the assessee directed the Tribunal to state the case and refer for decision another question. That question forms the subject-matter of R.C. No. 24/1963. Thus, the above two questions are before us for decision.