DAMODAR HANSRAJ Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The assessment year involved in this reference is assessment year 1959-60. The previous year relevant to the assessment 1959-60 ended on the 11th November, 1958, while that, for the assessment year 1960-61 had ended on the 1st November, 1959. In making the assessment for the assessment year 1960-61, the ITO had noticed credits in the names of several parties aggregating to Rs. 65,000 between the period 11th November, 1958, and 5th March, 1959. The assessee failed to explain the genuineness of the credits to the satisfaction of the ITO. As the credits fell, according to the ITO, within the previous year relevant to the assessment year 1960-61, the ITO treated the credits of Rs. 65,000 as the income of the assessee from undisclosed sources in the assessment year 1960-61. In appeal, the AAC did not accept the assessee's contention that the credits were genuine loans from the creditors. He took the peak of the credits at Rs. 55,000. He held that those credits could be taken into consideration only in the assessment year 1959-60 as the sum fell within the financial year 1958-59. The AAC came to this conclusion on the ground that Section 68 of the I.T. Act, 1961, was not applicable and the income from undisclosed sources could be considered with reference to the financial year. The AAC deleted the addition of Rs. 65,000 in the assessment year 1960-61.

(2.) In view of the decision of the AAC, the ITO reopened the assessment for the assessment year 1959-60. He did not make any fresh enquiry, but relying on the findings of the previous ITO and the AAC for the assessment year 1960-61, treated the credits as the income of the assessee from undisclosed sources and made an addition of Rs. 55,000 being the peak of the credits.

(3.) The assessee again appealed to the AAC. The assessee raised two contentions, firstly, that the reopening of the assessment was bad as under Section 68 read with Section 297(2)(d)(ii) of the I.T. Act, 1961, cash credits could be considered only in the accounting year relevant to the assessment year 1960-61 and no income had escaped assessment for the assessment year 1959-60. Secondly, it was urged that credits were genuine loans. The first contention did not find favour with the AAC. He, however, accepted the second contention on the ground that the ITO proceeded on the basis of non-satisfaction of the genuineness of the credits for different years, that the credits were taken by cheques in six out of eight cases, that the interest to all of them was paid by cheques, all the creditors supported the assessee and that they were income-tax assessees. The AAC, therefore, deleted the addition of Rs. 55,000.