CHOKSHI AND CO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference arises out of reassessment of the income of Messrs. Chokshi & Co., the assessee, for the assessment year 1960-61. The relevant previous year for the said assessment year was Gujarati Dewali 2015, that is, the period from the 11th November, 1958, to the 30th October, 1959.

(2.) The facts found and/or admitted in these proceedings are shortly as follows: In the course of the assessment of the assessee for the subsequent assessment year 1961-62, the ITO noticed certain cash credits in the assessee's books of account, appearing in the names of different parties. The dates of the said credits fell within the financial year corresponding to the assessment year 1960-61. The ITO noticed that no ledger accounts were maintained in respect of such transactions and the entries in the cash book had been squared up in the cash book itself. Accordingly, the ITO initiated proceedings under Section 147(a) of the Act for the assessment year 1960-61.

(3.) In the said proceedings, on examination of the creditors, it was found that the alleged source of their funds in most of the cases were sale proceeds of ornaments belonging to their wives or mothers, which were alleged to have been sold for the purpose of advancing money to the assessee. Ultimately, the said money could not be accounted for and was found to have been spent or lost. No evidence could be produced in support of the sale of the ornaments to the assessee. Accordingly, the ITO held that the transactions were bogus. An amount of Rs. 35,700 representing the peak credit was added to the income of the assessee for the said assessment year 1960-61.