KANCHANBAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under Section 256(1) of the I.T. Act, 1961, hereinafter called the Act, the Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following questions of law to this court for its opinion:

(2.) THE facts giving rise to this reference briefly are as follows : THE asses-see was assessed as an individual deriving income from money-lending business. THE relevant assessment years are 1956-57, 1957-58 and 1958-59. For each of these years, the assessee was originally assessed on 30th May, 1960. At the time of original assessment, the assessee had submitted a list of the parties from whom interest was received by the assessee. No books of account were maintained by the assessee. No enquiry was made at the time of original assessments regarding the source of investments made by the assessee. Subsequently, however, the ITO came to know that the assessee had been in possession of substantial quantity of gold which was sold by the assessee and that the amount of sale proceeds was invested in money-lending business. As the ITO had reasonable grounds to believe that income liable to tax had escaped assessment, he initiated proceedings for reassessment after obtaining the sanction of the CIT for each of the aforesaid three assessment years. THE assessee filed returns under protest challenging the legality of reassessment proceedings. THE assessee submitted that she had received ornaments from her father and father-in-law. THE ITO did not accept the version of the assessee, and the amount obtained by the assessee by sale of ornaments was added to the assessee's income as income from undisclosed sources. On appeal, the orders passed by the ITO were confirmed by the AAC of Income-tax. In second appeal, the Tribunal rejected the contention of the assessee that the reassessment proceedings were illegal. On merits, the Tribunal came to the con-clusion that the AAC was justified in affirming the orders passed by the ITO. On an application made in that behalf by the assessee, the Tribunal has referred the aforesaid questions of law to this court for its opinion.

(3.) NOW, in the instant case, the Tribunal has found that the assessee had produced before the ITO at the time of original assessments a list of persons to whom moneys had been advanced by the assessee and the amounts of interest received from them. It is true that the source of investments was not disclosed by the assessee. But it was not urged before us on behalf of the department that at the time of filing her returns for the relevant assessment years, the assessee was required to furnish information regarding the source of the capital invested in money-lending business. It is also not the case of the department that the ITO had at any stage required the assessee to furnish any information in connection with the source of the capital invested in money-lending business. Learned counsel for the department referred to the following observations of the Supreme Court in CIT v. Chidambaram Chettiar [1971] 80 ITR 467 at page 472 :