MANILAL RAGHAVJI KOTHARI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961. The Income-tax Appellate Tribunal, Patna, has referred the following questions for the opinion of this court:

(2.) THE facts leading to this reference are that the assessee, Manilal Raghavji Kothari, was assessed in the capacity of the karta of a Hindu undivided family for the assessment year 1953-54 on a total income of Rs. 24,343. It may be stated that the accounts of the assessee-firm were maintained from Diwali to Diwali. In November 1953, there was a partial partition in the Hindu undivided family consisting of Manilal Raghavji Kothari and his two sons, Shashikant Kothari and Kantilal Kothari. THE family business was partitioned in equal shares among three of them. THE assessments in subsequent years were done in the status of an individual. On December 16, 1966, the premises of Manilal Raghavji Kothari were raided by the officers of the Income-tax Department. THE documents seized during the raid showed that the assessee was maintaining duplicate set of account books. According to the seized books, the opening balance for the assessment year 1954-55 was Rs. 4,51,648. THE original return had shown the opening balance as only Rs. 3,48,841 and the same was the closing balance for the assessment year 1953-54. THEre was thus an apparent discrepancy of Rs. 1,02,807. THE Income-tax Officer proceeding on the basis of the opening balance of 1954-55, as revealed by the seized books, formed the opinion that there was an apparent discrepancy on the footing that the closing balance of 1953-54 should be the same as the opening balance of 1954-55. THE assessment for the year 1953-54 was reopened under Section 147(a) of the Income-tax Act after obtaining the approval of the Central Board of Direct Taxes. Notice was issued to the assessee on January 4, 1969, under Section 148 of the Income-tax Act. In response to this notice, the assessee filed a return dated January 31, 1969. In this return, no figure of income was mentioned and only a remark "as per original return " was made, THE assessee contended that upon the showing of the Department itself, the discrepancy has been revealed in the accounts for the year 1954-55 and, therefore, the proceeding under Section 147 of the Income-tax Act for the year 1953-54 was illegal and without jurisdiction. He endeavoured to explain the discrepancy by contending that Rs, 93,090 was intangible additions which had accrued to him between the assessment years 1945-46 and 1952-53. -Further, a sum of Rs. 10,681 represented the agricultural income during the assessment years 1951-52 and 1952-51 THE assessee thus attempted to explain the discrepancy of Rs. 1,02,807 by intangible additions and agricultural income.

(3.) THE submission on behalf of the assessee is untenable for yet another reason. From the documents seized, it was apparent that the assessee was maintaining duplicate set of accounts. THE seized accounts showed discrepancy between the returned figures and the figures shown in the seized books. Conceding for the time being that the wrong or false figures occurred in the account for the year commencing Diwali 1952, yet it will fall within the assessment year 1953-54. That must be so because the wrong or false figures were found in the accounts of 1953-54, accounting year commencing from October 18, 1952. That was Diwali day, when the assessee opened his books of account. THE law on the subject is succinctly put in Kanga and Palkhivala's THE Law and Practice Income Tax, Seventh Edition, Volume I, at page 610. Instead of referring to the various authorities, it would be sufficient to quote from it itself, which is as follows :