1. This is a reference under Section 256(1) of the I.T. Act, 1961, referring for our answer the following question of law :
'Whether, on the facts and circumstances of the case, the unexplained investment and the unexplained possession of money to the extent of Rs. 20,000 could be subjected to tax in the hands of the assessee during the A.Y. 1973-74?'
2. The reference relates to the assessment year 1973-74. The relevant previous year of the assessee was from 19th October, 1971, to 5th November, 1972. The ITO made an addition of Rs. 20,000 as income from undisclosed sources and this addition was maintained by the Income-tax Appellate Tribunal. The addition was made on the ground that the assessee had resources at the commencement of the accounting year which he was unable to explain. The assessee in a statement riled along with the return for the year 1972-73 stated that he was possessed of Rs. 26,000 on 18th October, 1971. It was also found that the assessee made a deposit of Rs. 2,900 on 10th November, 1971, in a bank. It was further found that the assessee invested Rs. 14,000 on 2nd December, 1971, in the purchase of a truck. The finding, briefly stated, is that out of the amount of Rs. 26,000 the assessee was able to explain the source of Rs. 6,000 only, and he was unable to explain the source of Rs. 20,000 which he showed in his possession on 18th October, 1971. The investments of Rs. 2,900 and Rs. 14,000 were made out of this amount of Rs. 20,000 and it is this amount of Rs. 20,000 which has been added as the income for the assessment year 1973-74.
3. The argument of the learned counsel for the assessee is that having regard to the scheme of Sections 68, 69 and 69A in the new Act, the income should have been deemed to be the income of the financial year 1971-72 assessable in the assessment year 1972-73 and not in 1973-74. In our opinion, this argument must be accepted. Section 68 deals with any sum found credited in the hooks of an assessee maintained for any previous year. In such a case the income is deemed to be the income of that previous year. Section 68 in the instant case is not applicable because the amount added was outside the books of account of the assessee. Section 69 deals with unexplained investments and Section 69A deals with unexplained money, etc. In both these cases the income is deemed to be the income of previous financial year in which the assessee has made investments which are not recorded in the books of account or the assessee is found to be the owner of any money which is not recorded in the books of account. In the instant case, the provision which appears to be applicable is Section 69A, because unexplained money amounting to Rs. 20,000 was found in the possession of the assessee on 18th October, 1971, on the basis of a statement which he submitted along with the return for the year 1972-73. The investments were made out of this amount. Thus, the assessee was found to be the owner of the unexplained money in the financial year 1971-72. This income could be assessed only in the year 1972-73 and not in 1973-74.
4. The learned standing counsel for the Department submitted that the question referred by the Tribunal does not arise out of its order. The question was raised in the memo of appeal before the Tribunal. It was also mentioned in the application made under Section 256(1). In the statement of the case disposing of the application under Section 256(1), the Tribunal does not say that the question was not raised or argued before it. We, therefore, hold that the question was raised although it remained undecided in the order of the Tribunal. A question of law which is raised before the Tribunal and not decided by it can be said to arise out of the Tribunal's order: [see Kanga and Palkhivala's The Law of Income Tax, Vol. I, p. 1160]. The question was, therefore, properly referred by the Tribunal.
5. For the reasons given above, our answer to the question is that the unexplained possession of money to the extent of Rs. 20,000 could not be subjected to tax in the hands of the assessee during the assessment year 1973-74. There will be no order as to costs of this reference.