FIRM JITANRAM NIRMALRAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference made under Section 66 (2) of the Income tax Act by the Income-Tax Appellate Tribunal, Allahabad Bench, under the directions of this Court. The assessee is a firm called Jitanram Nirmalram. The firm was assessed to income-tax for the year 1945-46 on a total income of Rs. 3,12,831. THIS amount included three sums of cash-credits which appeared in the accounts of the partners. They are as follows: a sum of Rs. 1,46,126 given by the partner Ramchandram, a sum of Rs. 55,871 by the partner Laehminarain and a sum of Rs. 73,121 by he partner Vishnu Prasad. The Income tax Officer treated these cash amounts as secreted profits of the firm and assessed them as such. On appeal the Appellate Assistants Commissioner of Income-tax held that the sum of Rs. 2,75,178 may have been the sale proceeds of family ornaments as claimed by the assessee. The concluding part of his order is in the following terms:

(2.) THE second point is really involved in the first point. In order to understand the implication of the points formulated, it should be mentioned that the Tribunal at one place in their judgment when 'disposing of the appeal observed thus: As the examination of the accounts is the subject matter of remand order passed by the Appellate Assistant Commissioner, we do not wish to express any opinion on that point; but there appears to be certainly much force in the remarks of the Income-Tax Officer that even by an addition of the cash credits in question amounting to Rs. 2,75,178 the percentage of the net profits of the appellant does not go upto more than 5.3% and the gross profits to more than 6.3% It is contended on behalf of the assessee that the Tribunal having expressly observed that they wanted to give no opinion on the point of the examination of the accounts which was the subject-matter of the remand order passed by the Appellate Assistant Commissioner they have erred in law in disposing of the appeal. THE direction of the Assistant Commissioner was that the question of the cash credit should be re-examined after a scrutiny of the goods accounts and the books in general and so long as it had not been done, which was the real purport of the remand order with which the Tribunal did not propose to interfere, it is urged that the decision of the Tribunal on the question was not in accordance with law. In other words, the real point at issue between the parties is whether the judgment of the Tribunal in deciding about this question of the cash credit was in accordance with law in view of its observation that it did not propose to express any opinion on the subject-matter of the remand order passed by the Appellate Assistant Commissioner. THEre is no doubt that prima facie there is force in this contention of the assessee. But a closer examination of the question makes it clear that the Tribunal did expressly hold that the explanation of the assessee in regard to these cash credit figures was false and that they were secreted profits of the business and therefore liable to be assessed as the income of the firm. This finding they have arrived at after a full consideration of all the materials bearing on the point. THE examination of the books of account as directed by the Appellate Assistant Commissioner would not, in my opinion, advance the matter very far because even taking the best view in favour of the aasessee all that it might come to is that the accounts are genuine. Even then it was open to the Tribunal to come to a finding that these are secreted profits which could not be sufficiently explained by the examination of the accounts, specially when the explanation of the assessee otherwise has been found to be false. In my opinion no useful purpose would be served directing that the decision of the Appellate Tribunal should be set aside and that the matter should be reheard by the Tribunal on this question because the Tribunal having considered the material bearing on this point would not be expected to come to a different finding. In my opinion, therefore, although there is some anomaly created by the observation made by the tribunal in regard to the remand order passed by the Appellate Assistant Commissioner yet in view of their definite and categorical finding that this amount of Rs. 2,75,178 was not cash credit as claimed by the assessee but secreted profits, the anomaly is not such as to vitiate the decision of the Tribunal. THE reasons which have been given by the Tribunal for coming to that finding appear to me otherwise sound. An appeal to the Tribunal did lie as against any order passed by the Appellate Assistant Commissioner and it was within the competence of the Tribunal to pass such orders as they thought fit on the appeal which came up for consideration before them. THErefore it was entirely within the jurisdiction of the Tribunal to decide this question as to whether the sum of Rs. 2,75,178 was secreted profits of the business assessable during the period or it was cash credit as claimed by the assessee. For these reasons I hold that the finding of the Tribunal on the point is not erroneous and the Tribunal was justified in coming to such a finding. THE points, therefore, formulated for our decision have to be answered in the affirmative. THE department is entitled to its costs of this reference. Hearing fee Rs. 250.