H S IMAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference arises under the IT Act, 1961 (hereinafter referred to as the Act). The Tribunal makes this reference at the instance of the assessee in connection with the asst. yr. 1974-75 and referred the following question of law for consideration of this Court :

(2.) For the asst. yr. 1974-75 the assessee had filed his return of income declaring income of Rs. 17,635 which was accepted under s. 143(1) of the IT Act, 1961. For the subsequent year 1975-76, when the ITO was scrutinising the balance sheet filed by the assessee, it was noticed that there was a balance of Rs. 26,805, outstanding due from Birla Bazar at the end of the accounting year relevant for the asst. yr. 1975-76. The ITO investigated into the matter and found that the aforesaid sum of Rs. 20,000 represented two items of loans given by the assessee to the Birla Bazar. The loans were given on 10-9-1973 (Rs. 5,000) and 22-10-1973 (Rs. 15,000). It was found that the loan transactions related to the previous year relevant for the asst. yr. 1974-75. The ITO noticed that the balance sheet consisting of assets and liabilities filed for the asst. yr. 1974-75 as on 24-10-1973 did not include the debt of Rs. 20,000 and the interest outstanding thereon. On the aforesaid facts the ITO, prima facie, came to the conclusion that there was an omission or failure on the part of the assessee to disclose fully and truly all the material facts relevant for the asst. yr. 1974-75. In that view, he initiated proceedings under s. 147(a) by issuing a notice under s. 148 of the Act.

(3.) During the course of reassessment proceedings for the asst. yr. 1974-75 the assessee was called upon to explain the origin and the source of the two items of loans given to Birla Bazar. Apparently, the assessee was not in a position to offer any explanation whatsoever. In those circumstances the ITO treated the aggregate of the two loans amounting to Rs. 20,000 as income from undisclosed sources liable to be assessed under s. 69A of the Act.