INDIAN NATIONAL TANNERY Vs. RE

JUDGEMENT

(1.) This a reference under Section 66(2) of the Income-tax Act (XI of 1922) by the Commissioner of Income-tax, Central and United Provinces.

(2.) The assessee is a firm known as the Indian National Tannery of Cawnpore. For the assessment year 1936-37 the firm returned an income of Rs. 28,722. The books of account belonging to the firm were examined and they disclosed that since the previous year there had been an increase in the firms capital to the extent of Rs. 1,08,771, which represented money due respectively to eight traders who had supplied bark to the firm. The books showed this sum of Rs. 1,08,771 had been transferred partly to the reserve fund and partly to the personal accounts of the three partners, Mohammad Hamza, Mohammad Nazir and Mohammad Bashir, as follows :-

(3.) In the following assessment year, i.e., 1937-38, the Income-tax Officer found that the sums of money which had been credited in the accounts of the three partners had been withdrawn and that the accounts of the eight traders in bark had been adjusted and closed. Upon these facts he arrived at the conclusion that the sum of Rs. 1,08,771 has escaped income and accordingly, after observing what he considered to be the necessary formalities, he re-assessed the firm under Section 34 for the year 1936-37 upon the total income of Rs. 1,41,112.