COMMISSIONER OF INCOME TAX Vs. DALURAM PANNALAL MODI

JUDGEMENT

(1.) AS directed by this court in M.C.C. No. 305 of 1970, the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion:

(2.) THE material facts giving rise to this reference briefly are as follows : THE assessee is an individual and carries on business in kirana and sugar under the name and style of M/s. Daluram Pannalal. THE assessment year in question is 1958-59 for which the accounting year ended on 23rd October, 1957, During the assessment proceedings, the ITO came to know that the assessee imported sugar in the name of M/s. Gajanand Satyanarayan and the same was sold without being recorded in the account books maintained by the assessee. As the assessee had not furnished any details of those transactions, the ITO estimated the assessee's suppressed transaction at Rs. 8,20,000 and the income therefrom was assessed at Rs. 82,000. THE ITO also held that the assessee had failed to satisfactorily explain the cash credits amounting to Rs. 15,300 appearing in the books of account of M/s. Daluram Pannalal. THE ITO, therefore, held that the sum of Rs. 15,300 was the assessee's income from undisclosed sources and the assesses was assessed accordingly. THE assessee preferred an appeal before the AAC, who reduced the turnover of the business carried on in the name of Gajanand Satyanarayan, to Rs. 5,00,000 and the profits therefrom to Rs. 50,000, but so far as the addition of Rs. 15,300 made by the ITO as income from undisclosed sources was concerned, the AAC maintained, the same. THE assessee preferred second appeal before the Tribunal. THE Tribunal estimated the profit from the business carried on by the assessee in the name and style of M/s. Gajanand Satyanarayan at Rs. 40,000. Dealing with the question of addition of Rs. 15,300 in respect of the cash credits, it was urged before the Tribunal that the cash credits were covered by intangible additions made to the income of the assessee. THE Tribunal upheld this contention and directed the deletion of the addition of Rs. 15,300 as income from undisclosed sources. THE Commissioner made an application for making a reference, but that application was rejected. THE Commissioner then preferred an application under Section 256(2) of the I.T. Act, 1961, to this court. That application was allowed and, as directed by this court, the Tribunal has stated the case and referred the aforesaid question of law to this court for its opinion.