COMMISSIONER OF INCOME TAX Vs. TYARYAMAL BALCHAND

JUDGEMENT

(1.) THIS income-tax reference under Section 256(2) of the Income-tax Act has been sent by the Income-tax Appellate Tribunal, Rajasthan. THIS court, vide its order dated July 5, 1973, in D.B. Income-tax Case No, 84 of 1972, had directed the Tribunal to draw up the statement of case arising out of the Tribunal's order in Income-tax Appeal No. 2288 of 1969 in respect of the assessment year 1966-67 and refer the same to this court for its opinion.

(2.) THE assessee-respondent is a firm and derives its income from the sale of jewellery, curios, presentation articles, etc. While examining the account books of the assessee, the Income-tax Officer noted that there were deposits from various persons on different dates aggregating to Rs. 16,950. THEse deposits were paid off to the various parties before the close of accounting year itself, so that the balance of none of them was reflected in the balance-sheet. THE Income-tax Officer required the assessee under Section 143(3) to explain the nature and source of the deposits. After going through the explanation of the assessee given in writing and examining the accounts, the Income-tax Officer came to the conclusion that the said deposits "remained unexplained and will be treated as the assessee's income from undisclosed sources, which shall be added back". THE Income-tax Officer also made an addition of Rs. 18,117 to the trading results of the assessee. After making the aforesaid two additions and a few other routine additions, the total income of the assessee was determined to be Rs. 1,10,723. THE assessee went up in appeal to the Appellate Assistant Commissioner who gave the finding that the credits are temporary in the squared up accounts. This fact, in his opinion, indicated that the quality of the cash credits and that of the trading additions are not different. Further, Section 68 of the Act empowered the Income-tax Officer to consider as income any unexplained cash credits and in the present case, he was of the opinion that the unaccounted trading receipts were temporarily credited in the books, and therefore, he deleted the addition of Rs. 16,950, but sustained the addition of Rs. 18,117, THE Revenue felt aggrieved of the aforesaid order of the Appellate Assistant Commissioner and went up in appeal to the Tribunal. THE Tribunal confirmed the order of the Appellate Assistant Commissioner and observed that the amount of Rs. 16,950 has been rightly excluded from the total income of the assessee, as even during the present assessment, an addition of Rs. 18,117 has been made, which would sufficiently cover any unexplained income to the extent of Rs. 16,950. It has also been held that the amount of Rs. 16,950 represents the total of the cash credit and not the peak amount, of unexplained credit, which will be of a lesser amount. Moreover, substantial additions have been made even in the earlier years and taking all these factors into account, the decision of the Appellate Assistant Commissioner could not be characterised as unreasonable or perverse.

(3.) LEARNED counsel for the respondent has drawn our attention to the case of Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 (SC), in which their Lordships of the Supreme Court have held that "when an 'intangible' addition is made to the book profits during the assessment proceedings, it is on the basis that the amount represented by that addition constitutes the undisclosed income of the assessee. That income, although commonly described as 'intangible', is as much a part of his real income as that disclosed by his account books. It has the same concrete existence. It could be available to the assessee as book profits could be. The secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books....... It is a matter for consideration in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year."