JAGANMOHAN REDDY C.J. - We had directed the Income-tax Appellate Tribunal to state a case on the following question namely 'whether, on the facts and in the circumstances of the case, the Tribunal had any material for holding that the sum of Rs. 8,050 was an undisclosed profit and assessable as such in the year of account ?' The facts necessary for the determination of this question may be stated as follows :
The assessee is the proprietaries of the Eurasian Exports and Imports, Gudur, and Ramana Vilas Mica Mines, Degapudi. The assessment is for the year 1951-52, for which the accounting year ended on July 31, 1950. In the return field by her, she showed a loss of Rs. 7,273 and after making certain adjustments the registered accountant of the assessee admitted a loss of Rs. 9,591. The Income-tax Officer noticed that a sum of Rs. 8,250 was brought in cash by the assessee in her personal account on various dates from August 17, 1949, to January 21, 1950, and as such he added Rs. 8,050 but we are not in a position to say how he added Rs. 8,050 when he actually noticed a sum of Rs. 8,250. Be that as it may, he did not allow the loss and in fact reduced the net loss. An appeal to the Appellate Assistant Commissioner met with no success nor was the appeal to the Appellate Tribunal any better.
The learned advocate for the petitioner characterized the order of all the three authorities as laconic. The Income-tax Officer gave no reason at all and the Appellate Assistant Commissioner also gave no reason except to say that, as there was no proof in support of the statement of the assessee, the Income-tax Officer was right in including this amount in the income of the assessee. The Appellate Tribunal gave an entirely different reason and ultimately held that in the absence of proof, the treatment meted out to the sum of Rs. 8,050 as unexplained credit is correct and must stand.
The simple question that has to be determined in this reference is whether there was any material from which the income-tax authorities could come to the conclusion that the sum of Rs. 8,050 was an undisclosed income. The explanation of the assessee is contained in the letter dated February 24, 1952, addressed by the auditor to the Income-tax Officer. This letter along with a copy of the account is annexure 'A'. In the letter, it is stated that while enclosing a true copy of the capital accounts of the assessee for the period from August 1, 1943, to July 31, 1950, he has to says that the cash on hand with her on July 31, 1948, is Rs. 66,340-12-0 and all advances to the business during the assessment years 1950-51 and 1951-52 were made out of the sum of Rs. 66,340-12-0 and out of the drawing made in the respective assessment years, namely, 1950-51 and 1951-52, and that the cash on hand on July 31, 1950, was Rs. 56,470-13-11. This letter clearly indicates that the assessee had on July 31, 1950, Rs. 56,470-13-11 in cash and in fact she was having cash on hand during the relevant assessment years. The capital account for the period from August 1, 1948, to July 31, 1949, also showed drawings from the Eruasian Exports. On January 31, 1949, a sum of Rs. 1,800, on February 28, 1949, a sum of Rs. 3,000 and on July 31, 1949, a cash of Rs. 4,630-1-2 making a total of Rs. 9,430-1-2 in cash was drawn, between the period from January 31, 1949, to July 31, 1949, and this amount must have been in her hands. Since the Income-tax Officer has given no reasons at all for adding the said sum of Rs. 8,050 we are not in a position to say what impelled him to do so. The Appellate Assistant Commissioner says that there is no proof in support of the statement of the assessee that she had cash in her hands at the relevant time or that the credits in question were brought from the cash lying with her. But in fact the accounts furnished by the assessee disclose clearly that she had cash in hand at the time, a fact which had been admitted by the Tribunal in its order. While so admitting, the Tribunal says that out of Rs. 61,968 brought forward in the capital account it could be seen from the accounts that on August 1, 1949, two substantial sums of Rs. 20,108 and Rs. 37,816 were given to two persons, one of whom is Punnaiah Naidu while the other persons name has not been mentioned. Evidently, when the Tribunal asked the accountant of the assessee, he said that Punnaiah Naidu was a great mica dealer and that for the goods purchased from him from time to time adjustment were made against this amount. But when the Tribunal looked into the books for the preceding year, particularly the folio of Punnaiah Naidu, it was found that except for a payment of Rs. 6,000 by him, there were no dealings at all and so also for the next preceding year there were no dealings. In view of this, the Tribunal concluded that the assessees version that the money was being kept with this person for being adjusted from time to time is wrong. Further, the Tribunal has stated in its order that :
'The assessee has, therefore, neither proved that there was necessity for the money as large funds were available with the firm nor has she proved that there was home chest account from which moneys could be taken and advanced to this firm. In the absence of such proof the treatment meted out to the sum of Rs. 8,050 as unexplained credit and, therefore, undisclosed profit is correct and must stand.'
The Tribunal has failed to consider the accounts submitted by the auditor along with his letter dated February 24, 1952, nor did it consider the capital account for the period from August 1, 1948, to July 31, 1949, which discloses that a sum of Rs. 9,430-1-2 was withdrawn from the firm immediately before the period when small amounts of cash were being credited back to the account. The assessee was entitled to have his evidence considered and an inference drawn therefrom especially when the account books are not rejected or disbelieved. The income-tax department cannot, in the felicitous language of Hidayatulla J. in Sreelekha Banerjee v. Commissioner of Income-tax, by merely rejecting unreasonable a good explanation 'convert good proof into no proof'. In this view, we cannot but hold that there was no material for the Tribunal to come to the conclusion that the sum of Rs. 8,050 was an undisclosed profit and assessable as such in her account.
We, therefore, answer the reference in the negative with costs in favour of the assessee. Advocates fee Rs. 250.