COMMISSIONER OF INCOME TAX Vs. JESKARAN BHUVALKA

JUDGEMENT

(1.) THE assessee is a member of the family of Bhuwalkas hailing from Ratnaghar in the former State of Bikaner, now in Rajasthan. As a young man of 19 or 20 years, he came to Guntur in 1941 in the wake of his father who had already come there to participate in the management of Bhajarang Jute Mills Ltd., Guntur. To start with, he learnt some work and after some time he also joined the jute mill as an employee. For the first time, he was assessed to income-tax for the assessment year 191-1-45, For that year, the items of income were few and limited, his salary being Rs. 3,345 and the interest accrued to him being Rs. 103. From October 28, 1943, however, he started his own independent business in gunnys, groundnut oil, etc. For the assessment year 1945,46, ho filed a return of income on July 19, 1945, consisting of salary of Rs. 3,737 and showing loss from business of Rs. 2,831. On March 26, 1946, however, he filed returns for the earlier assessment years 1941-42 to 1944-45 and a revised return for the assessment year 1945-46, adding varying amounts as income by way of interest accrued outside the Indian Union. THE assessments of these years were completed on the following dates ; for the assessment years 1943-44, 1944-45 and 1945-46 on March 27, 1946, for 1942-43 on March 30, 1946, and for 1946-47 on January 12, 1947. THEse assessments included the different amounts of income by way of interest accrued outside the Indian Union, as shown by the assessee. For the next year, viz 1947-48, the assessment was made on March 28, 1949, and the assessment order was signed by the Income-tax Officer on March 31, 1949. THE accounting year for this assessment was the Diwali year which ended on October 21, 1946. Along with this return, Various statements were also filed by the assessee of which one was a copy of the assessee's capital account which showed a credit entry of Rs. 3,06,000 received by way of draft on the Imperial Bank of India, Jaipur Branch, on April 8, 1946. This amount was credited to the assessee's account in the Guntur Branch of the Central Bank. In this return, the assessee disclosed an income of Rs. 57,040 as interest accrued outside the Indian Union but brought into the Indian Union. In addition to this income, he also showed other items by way of salary, profits and interest. But, the Income-tax Officer, on a consideration of the matter, was not prepared to accept this return. Besides making certain additions to the other items of income, he added a further sum of Rs. 14,168 to the foreign income brought into the Indian Union, thus making it a total of Rs. 71,208 instead of the sum of Rs. 57,040 as returned by the assessee. He further deducted, from out of this amount, a sum of Rs. 651 as income assessed in British India but not taken into account by mistake by the assessee. THE Income-tax Officer thus completed the assessment for the year 1947-48 on a total income of Rs. 79,351. As stated earlier, this was completed by the order dated March 31, 1949.

(2.) FOR more than 6 1/2 years, this assessment was left unchallenged by the department. But, in November, 1955, the Income-tax Officer, Guntur, began to entertain some doubts about the receipt of Rs. 3,06,000 by the assessee on April 8, 1946. He, therefore, examined the assessee on November 14, 1955, and November 15, 1955, and his father on December 3, 1955. According to their explanation, the nucleus of the money originally belonged to the mother of the assessee, who died when he was only two or three years old. It represented her stridhana assets of cash and jewellery. The father, who married again, converted the jewellery also into cash and kept the amount separate, by lending it to some persons in Ratnaghar. Gradually, it grew into larger proportions. After some time, the account was handed over to the assessee by his father. By 1944, it became Rs. 3,00,000, after deducting certain amounts which had been withdrawn by the assessee. That amount was deposited in a bank in Jaipur in December, 1944. In April, 1946, that amount and the interest that accrued thereon, the total of which came to Rs. 3,06,000, was brought into the Indian Union. This explanation did not satisfy the Income-tax Officer. He, therefore initiated proceedings under Section 34(1)(a) of the Income-tax Act, 1922 (hereinafter called "the Act"), with the prior approval of the Commissioner of Income-tax with notice dated March 26, 1956, which was served on the assessee on March 28, 1956. In the assessment that was finally made in pursuance of the above notice on February 28, 1957, the Income-tax Officer included Rs. 3,06,000 (in the place of Rs. 70,557 originally assessed), as income under other sources "Income outside British India" remitted into British India, and Rs. 25,000 as income not disclosed. That sum of Rs. 25,000 represented a cash credit in the name of one Bishundas Ramgopal, which the Income-tax Officer discovered during the assessment proceedings in the accounts of the assessee and which according to him was a fictitious borrowed.

(3.) THE crucial point that has to be answered in this case is the one that is posed by the first question. If the proceedings started under Section 34(1)(a) of the Act were bad in law and the Appellate Tribunal was justified in holding them to be so, the reopening of the assessment and the consequential reassessment of the assessee would be unsustainable. In that case, questions Nos. 2 and 3 need not be answered. In fact, question No. 2, itself, is specifically couched in a manner that it is unnecessary to answer it, if the answer to the first question is in the affirmative. THE third question also is in the same position. Both the learned counsel for the assessee as well as the revenue also agreed that questions Nos. 2 and 3 need be answered only in the event of the first question being answered in the negative and that they need not be dealt with in case the /answer to the first question is in the affirmative.