BHARATI PVT LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The following question under Section 256(2) of the Income-tax Act, 1961, is involved in this reference:

(2.) The assessee is a private limited company. The assessment year involved is 1962-63 for which the accounting period ended on the 31st March, 1962. In the course of the assessment proceedings, the Income-tax Officer found that the assessee had shown Rs. 20,000 as loan in its books, taken from two parties, namely, Lakshmichand Paramanand and Lachman-das Lunidram. The assessee produced the alleged confirmatory letters from those parties before the Income-tax Officer in support of those two loans. The assessee's case was that Rs. 15,000 was advanced by Lakshmichand Paramanand and Rs. 5,000 was advanced by Lachmandas Lunidram. The Income-tax Officer served notices under Section 131 of the Income-tax Act on the alleged creditors but those notices came back unserved. The Income-tax Officer was not satisfied with the genuineness of those loans and accordingly he treated them as the assessee's income from undisclosed sources.

(3.) The appeal filed by the assessee was dismissed by the Appellate Assistant Commissioner before whom the assessee could not even establish the identity of those parties. On the facts found by the Income-tax Officer and in those circumstances, the Appellate Assistant Commissioner observed that it could not be held that the alleged loans were genuine.