This is an application under section 66 (2) of the Indian Income-tax Act.
2. Facts material for purposes of this case are as follows. The assessee is an undivided Hindu family. It does business under two names, viz., Munnalal Pannalal and Pannalal Jamnaprasad. Under the former name business in clothe, speculation in gold and silver, and money-lending is conducted while under the latter name business in grain and kirana is conducted. The case relates to assessment year 1950-51 corresponding to accounting year ending Diwali, 1949. The assessee filed a return showing a total income of Rs. 23,059-7-6. To this the Income-tax Officer added Rs. 7,829 being the cash credit in the account of the karta of the family which, according to him, was not properly explained, and a sum of Rs. 6,360 which, according to him, could not be allowed as a bad debt.
3. An appeal was filed by the assessee against the order of the Income-tax Officer before the Appellate Assistant Commissioner of Income-tax as also before the Income-tax Appellate Tribunal, Bombay, but these appeals failed. The assessee then filed an application under section 66 (1) of the Indian Income-tax Act before the Income-tax Appellate Tribunal, Bombay, requesting it to state the case to this Court. The following questions of law were raised by the assessee by that application : "(i) Whether in the circumstances of the case there was sufficient evidence to come to the conclusion that Rs. 7,829 are income from undisclosed sources ?" (ii) Whether in the circumstances of the case there was sufficient evidence to come to the conclusion that the claim of Rs. 6,360 as bad debt was time-barred ?" 4. The Income-tax Appellate Tribunal held that no question of law arises in the case and dismissed the application. Hence this application.
5. The learned counsel for the applicant submits that questions of law that arise in this case are as follows : (1) Whether in the circumstances of the case there is evidence to come to the conclusion that Rs. 7,829 are income from undisclosed source ?" (2) Was the Income-tax Appellate Tribunal justified in holding that the assessee was liable to addition of Rs. 7,829 to the assessees total income only on the finding that the source of that amount was not disclosed, and without definitely coming to a finding that the said amount came from a source which was taxable under the Act Reliance is placed on R. S. P. S. Sial and Sons v. Commissioner of income-tax.
(3) Whether in the circumstances of the case there is no evidence to come to the conclusion that the claim of Rs. 6,360 had become irrecoverable during the assessment year preceding the year in question 6. It is urged that though the question raised before this Court were not raised in identical terms before the Income-tax Appellate Tribunal, this Court has ample powers to ask the Tribunal to state the case on the alleged question of law now raised before this court. Reliance is placed on Mohanlal Hiralal v. Commissioner of Income-tax Central Provinces and Berar, Nagpur, Seth Suwalal Chhogalal v. Commissioner of Income-tax, U. P. and C. P., Hukumchand v. Commissioner of Income-tax Punjab, and Madanlal Dharnidharka v. Commissioner of Income-tax, Bombay.
7. As regard the item of Rs. 7,829, it is urged on behalf of the assessee that Biharilal, father of Munnalal, had left him a sum of Rs. 50,000 to Rs. 60,000 in the year 1940, and money was being brought from that source to the business of the assessee from time to time Rs. 13,600 were brought into the business in the assessment year 1947-48, and this explanation given by the assessee was accepted by the Income-tax Department. In the assessment year 1949-50 a sum of Rs. 9,701 was also similarly brought from the same source. In that year the Income-tax Officer did not accept the explanation, but ultimately the Income-tax Appellate Tribunal accepted it. It is the case of the assessee that from the same source the assessee had brought Rs. 7,829 in the year in question. The Tribunal in its order has held that the explanation given by the assessee could not be accepted. The reasons on which that finding is based are : (b) There was no finding in any previous year that the said source amounted to Rs. 50,000.
(c) Allowing the claim of the assessee in the previous year, therefore had no binding effect in considering the question in the year in question.
(d) The assessee failed to produce the account books regarding the old money-lending business to satisfy the Tribunal that the said amount could be brought from the said source.
8. In our opinion, the aforesaid reasoning of the Tribunal and findings are based on material on record and give rise to no question of law.
True, non-maintenance of the home chest account in itself may not be a sufficient cause for rejecting the application, but it will been that in the present case the Tribunal has not rejected the explanation of the assessee on the sole ground. The explanation given by the assessee in the year in question is in the statement of Munnalal dated 27th March, 1951. According to that statement. The said amount of Rs. 7,829 was brought in his account from his past earnings in money-lending business which had been closed. He earned about Rs. 25,000 from his old money-lending business and it was kept with him and not brought in as capital to the business of the assessee. He was advancing money from this source from time to time. He further stated that he had still with him Rs. 10,000. It will be seen that this source amounted to Rs. 25,000.
9. The learned counsel for the applicant referred us to the statement made by Munnalal on 27th July, 1948, and urged that this source actually amounted to Rs. 50,000 to Rs. 60,000. The statement reads as follows : "I have advanced money in cash to the cloth shop. My father left me about Rs. 50,000 or Rs. 60,000 besides lands etc. I used to do money lending and grain-lending business. I have gold and silver ornaments. I am of the Hindu undivided family. All capital has not been entered in the books in the family business. I have kept with me for which no private accounts are kept after Samvat 1995-96 (i.e. 1940-41). My family is still joint. My family consists of myself and my four sons and their children. I have no brother. I had one brother who died issue less." (Underlining is by us) 10. Munnalal did not state that he had kept with him the entire amount of Rs. 50,000 or Rs. 60,000. On the same date statement of Munnalals son Pannalal was also recorded. This statement shows that when the money-lending business was closed, the debts to be realised were transferred to the business of the assessee but the profits, which were previously gained, were not brought to the shop; these profits amounted in Samvat 1995-96 i.e., 1940-41, Rs. 25,810-12-10. No order of the Income-tax Authorities holding that Munnalal had with him Rs. 50,000 to Rs. 60,000 from which he was bringing money from time to time has been shown to us. In fact, there is no finding recorded any where that Munnalal had with him an ascertained sum. The decision reported in Tejmal Bhojraj v. Commissioner of Income-tax, which is relied upon on behalf of the applicant, has no application to the facts of the instant case. On the other hand, in our opinion, on a true construction of the aforesaid statement, Munnalals case throughout has been that this source was in the neighbourhood of Rs. 25,000.
11. True, in the previous year the explanation of the assessee was accepted in respect of the amount of Rs. 13,600 in the assessment year 1947-48 and in respect of a sum of Rs. 9,701 in the assessment year 1949-50. But it will be seen that the total of these amounts was within the limit of the alleged source. It is thus clear that at the end of Diwali, 1949, the balance remaining with Munnalal could be near about Rs. 2,000 even on the assumption that his statements were true. It is difficult to follow how the amount of Rs. 7,829 was brought during the year in question from this source.
12. Further, admittedly, according to the applicant, there are account books of the old money-lending business which were checked by the Income-tax Officer and had been initialled by him. The Tribunal has observed that the applicant failed to produce these books. These are relevant documents. If the assessee wanted to establish that from that source the amount in question could be brought into the business of the assessee, these account books should have been produced to substantiate his claim. They would show what amount was invested in the old money-lending business, how much had been recovered by the year 1940-41, and what amount had remained outstanding. Admittedly, the amounts recovered up to the closure of that money-lending business is the source.
13. It us urged by the learned counsel for the applicant that the assessee was never asked to produce these books of account by the Tribunal and it was, therefore in error in observing adversely to the assessee. The assessee had not raised this question before the Tribunal. Had the assessee raised that question, the Tribunal would have stated what it had to state in that respect. We are not inclined to assume that the said adverse remarked in the order were made by the Tribunal without affording an opportunity to the assessee to produce those books of account.
14. In these circumstances, we are satisfied that the finding of the Tribunal that the explanation of the assessee cannot be accepted is founded on material on record. The finding of the Tribunal in its appellate order on this aspect of the case is thus only a finding of fact.
15. This brings us to the second question. Relying upon R. S. P. S.Sial and Sons v. Commissioner of Income-tax the learned counsel for the assessee submitted that the Department was not right in regarding the sum of Rs. 7,829 as income merely because his explanation as to the source of income was disbelieved. In his submission, the onus was on the Department and not on the assessee to show that the sum in question was taxable as income. But the cited decision cannot be regarded as an authority for the proposition that the onus in such cases is on the Department and not the assessee because in that case the question is yet to be answered. It does not follow that the question posed would necessarily be answered in favour of the assessee. Further, we may observe that on two earlier occasions the Division Bench answered. It does not follow that the question posed would necessarily be answered in favour of the assessee. Further, we may observe that on two earlier actions the Division Bench answered this question against the assessee.
The decisions are Hargovinddas Karsandas Thakkar v. Commissioner of Income-tax, M. P., and Sarafali v. Commissioner of Income-tax. These decisions lay down the proposition that where the assessee fails to prove positively the source and nature of the impugned amounts received by him during the accounting year the Income-tax Officer is entitled to draw the inference that the receipts are of an income nature and that it is not necessary for the Department to give positive evidence regarding the source from which the assessee made the disputed income.
In fact, the burden of establishing in such case that a disputed item is not the assessees income lies on the assessee and not on the Department. Reference was made to two decisions from other courts to the same effect : G. M. Madappa v. Commissioner of Income-tax Madras and Mahabir Prasad v. Income-tax Officer.
16. In R. S. P. S. Sial and Sons v. Commissioner of Income-tax (supra) the Court made no reference to the earlier decisions of the Division Bench already answering the question raised adversely to the assessee.
Even if the decision relied upon be regarded as an authority in support of the assessee the court is not bound to follow it because it was given per incuriam : Yound v. Bristol Aeroplane Co. Ltd. "Perincuriam" means "without the Courts attention having been drawn to the relevant authorities" : Concise Law Dictionary by Osborn, Fourth Edition. To the same effect re the observations of Mudholkar, J. sitting in the Full Bench in Kanglu Baula v. Chief Executive Officer, Janpad Sabha Durg.
17. Further, we are not persuaded to depart from the view taken in the two earlier Division Bench decisions, supported as they are by the decisions already referred to therein as well as a recent decision of the Patna High Court in S. N. Ganguly v. Commissioner of Income-tax, Bihar and Orissa. The source from which the impugned amount was brought into the assessees account was specially within the knowledge of the assessee and the burden of proving that source is normally on him, and there is nothing wrong in drawing an adverse inference when the explanation given by him are shown to be false. The question is, therefore, purely a question of fact and the Tribunal rightly refused to state the case with respect to it.
18. As regards the third question, the assessee claims a deduction of the amount of Rs. 6,360 on the ground that this debt due from Doongarsi Pragji and company became bad during the accounting year in question.
The Tribunal did not accept the claim. the last recovery was made on 14th February 1947. No suit was filed for recovery of the balance. The assessee relied upon a demand made by him in a post card addressed be him to the new firm under with Doongarsi Pragji and Company was continuing the business. The letter was received back with an endorsement "refused" bearing the date 14th August 1948. In rejecting this letter the Tribunal observed that the debt had to the knowledge of the assessee become bad at the end of Samvat 2004 latest. The conclusion that the debt did not become bad in the accounting year in question is not vitiated by the remark that it had become barred by time in Samvat 2004. The debt is not shown to be beyond limitation during the account period : Shyam Chambers, Ltd., Lyallapur v.Commissioner of Income-tax Punjab. It may, however be observed that limitation itself may not conclude the question : Shesahaymal v.Commissioner of Income-tax.
19. Lord Russell of Killowen in delivering the judgment of the Judicial Committee of the Privy Council in Commissioner of Income-tax C. P. and Berar v. Sir S. M. Chitnavis held that the assessee cannot choose at his option to decide that a particular debt has become irrecoverable at a particular time. For the purpose of computing yearly profits and gains, each year is a separate self-contained period of time in regard to which profits earned or losses sustained have to be ascertained.
Whether a debt are questions of fact. The burden of proving that a debt has become bad lies on the assessee : L. Bani Mal Dalal v. Commissioner of Income-tax. Not only is the assessee to prove that the debt or loan has been written off but he should also satisfy the Income-tax Officer that it became irrecoverable in the year of account : Raja Bahadur Mukundlal Bansilal v. Commissioner of Income-tax Bombay City. The letter relied upon by the assessee leads to no such inference as contended by him.
20. It is urged by the assessee that if the debt was not treated as a bad debt in the year of account or earlier, he might be debarred from climbing deduction in any subsequent year because of the remark of the Tribunal. It is well settled that the principle of re judicate is not applicable to income-tax cases. Each year is a separate unit that falls for scrutiny. The finding that the debt in question did not become a bad debt relates to the accounting period under consideration only.
21. As already observed by us, there is no evidence in the case that the debt had become barred during the year in question. In our opinion, therefore, no question of law arises on this point also.
22. In the view we have taken of the case it is not necessary for us to decide whether in dealing with an application under section 66(2) of the Indian Income-tax Act it is open to this Court to ask the Tribunal to state the case in respect of grounds other than those canvassed by the assessee before the Tribunal. Opinion on this question is divided.
In the facts and circumstances of his case it is not necessary to go into this question.
23. For reasons stated above, this application is dismissed with costs.
Counsels fee Rs. 75