COMMISSIONER OF INCOME TAX Vs. SAIT KHUBCHAND PERUMAL

JUDGEMENT

(1.) The following two questions are referred for the opinion of this court under section 256(1) of the Income-tax Act, 1961 :

(2.) The assessee is an individual carrying on money-lending business. The assessment year concerned is 1970-71. Assessment was made for this assessment year on 4/02/1971, on a total income of Rs. 71,400. In view of the material brought to light during the survey of the assessees premises some time in October, 1970, by the departmental authorities, the assessments were reopened for the assessment years 1967-68 to 1970-71 under section 147(a) of the Act. In the course of survey operations, the departmental authorities came across a number of bank pass books standing in the names of the wife and children of the assessee, including his married daughter. They disclosed several deposits made on different dates, in different years, in their names. During the reassessment proceedings, the Income-tax Officer called upon the assessee to state why the bank deposits in the accounts of his wife and children should not be treated as his income from undisclosed sources. The explanation offered by the assessee was that the said amounts represented gifts received by his wife and children from close relatives on various religious and other festive occasions. The Income-tax Officer rejected the said explanation and included the same in the income of the assessee. The income so added for the assessment year 1970-71 came to Rs. 29,298. An appeal preferred by the assessee against the said reassessment order failed. The income-tax Officer also initiated proceedings under section 271(1) (c) and referred the matter to the Inspecting Assistant Commissioner for further action. Notice was served by the Inspecting Assistant Commissioner upon the assessees fixing the date of hearing as 10/03/1978. On that date, the assessees authorised representative requested for an adjournment which was granted and the matter posted to 22/04/1978. On this date too, the authorised representative sent another adjournment application on the ground of some domestic reasons. The Inspecting Assistant Commissioner, however, refused to great any adjournment and proceeded to dispose of the matter ex parte, particularly because the proceedings were likely to get barred by limitation shortly. On merits, the Inspecting Assistant Commissioner held that the statements of the wife and children of the assessee recorded during the assessment proceedings by the Income-tax Officer do not merit acceptance. He first referred to the reasons for which the Income-tax Officer rejected the said statements and observed :

(3.) The order of the Inspecting Assistant Commissioner was challenged by the assessee by way of an appeal before the Income-tax Appellate Tribunal. The Tribunal referred to the relevant provisions of law and a decision of the Gujarat High Court and observed :