M. S. MENON C.J. - This is a reference by the Income-tax Appellate Tribunal, Madras Bench, under section 66(2) of the Indian Income-tax Act, 1922. The assessment year with which we are concerned is 1954-55 and the accounting period, the Malayalam year 1128 (August 17, 1952, to August 16, 1953).
The peak credit - on January 6, 1953 - in the anamath account of the assessee was Rs. 13,865. The Income-tax Officer rejected his explanation regarding the entries in that account and assessed the said sum as his income from other sources. The Appellate Assistant Commissioner agreed with the Income-tax Officer and confirmed the conclusion. The Appellate Tribunal treated the amount not as income from other sources but as income from the assessees business itself.
The first and the second questions referred to us relate to the sum of Rs. 13,865 and read as follows :
'(1) Whether the Tribunal was justified in law in coming to the conclusion that the sum of Rs. 13,865 being the peak credit in the anamath account on January 6, 1953, represents the undisclosed business income ?
(2) If the sum of Rs. 13,865 referred to above is held to be income from other sources, whether the said sum, is taxable for the assessment year 1954-55 ?'
It is common ground that if the amount is treated as income from other sources it will not be taxable in the assessment year 1954-55. The second question, therefore, has to be answered in the negative and against the department.
The assessee was assessed in respect of income not merely from his business but from other sources as well. The answer to the first question will naturally depend on the intimacy of the connection between he anamath account and the business of the assessee.
The anamath account was an account kept in the business of the assessee. Paragraph 3 of the statement of the case says :
'In the books of the aforesaid business for the year 1128 M.E. the previous year for assessment year 1954-55, there is an account called anamath account copy whereof is annexed hereunto an annexure A and forms part of the case',
and paragraph 22 thereof :
'Both the parties agree that all the facts relevant to the various questions directed to have been correctly set out in this statement up to and inclusive of paragraph 19, supra, and that no material fact has been omitted therein.
In view of these two statements we must hold that the anamath account is intimately connected with the business of the assessee and is one of the accounts kept by him in the business.
It follows that in the absence of other evidence we should come to the conclusion that the entries in the anamath account relate to the business of the assessee and that the peak credit of Rs. 13,865 in that account should be added to his income from his business as has been done by the Appellate Tribunal, in its order dated October 28,1957. As stated by the Supreme Court in Lakhmichand Baijnath V. Commissioner of Income-tax :
'When an amount is credited in business books, it is not an unreasonable inference to draw that it is a receipt from business.'
The third and the fifth questions referred by the Appellate Tribunal read as follows :
'(3) Whether in view of the acceptance by the department in the past years that A. Ramakrishna & Bros. was a separate business of the wife of the assessee, the department is entitled to come to a different conclusion for the year assessment that the said business belongs to the assessee in the absence of new materials and change in the circumstances ?
(5) Whether, on the facts and in the circumstances of the case, the inference that the business A. Ramakrishna & Bros. is carried on by the wife of the assessee as the benamidar of the assessee is justified in law ?'
The assessment in each year is a separate proceeding under the Indian Income-tax Act, 1922, and the view adopted by the department in any particular year cannot possibly bind it in respect of a year subsequent thereto. New materials may produce a change of approach; the old materials themselves, on a more careful or intelligent analysis; may effect the same result. We entertain no doubt that the third question referred has to be answered in the affirmative and against the assessee.
All the three authorities - the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal - have unanimously come to the conclusion that A. Ramakrishna & Bros. belongs to the assessee and that his wife who figures as its nominal proprietor is really a benamidar for him. This is essentially a conclusion on a question of fact. And we have neither the power nor the inclination to come to a different conclusion. As stated by the Supreme Court in Sree Meenakshi Mills Ltd., v. Commissioner of Income-tax :
'An inference from the facts of a case that a transaction is a benami transaction does not involve the application of any principles of law to the facts established in the evidence, and is a pure question of fact which cannot be made the subject of reference under section 66 of the Income-tax Act.'
In the view we take, question No. 5 has also to be answered in the affirmative and against the assessee.
The 4th question referred reads as follows :
'If the department is entitled to come to the conclusion that the business, A. Ramakrishna & Bros., belongs to the assessee, whether it is not incumbent on the department to allow set-off of all past losses in the said business against the amount as in the current assessment year ?'
If the business is that of the assessee, and his wife is only a benamidar, this question has certainly to be answered in the affirmative and against the department. According to the assessee the losses available for a set-off amount to Rs. 11,888. The Appellate Tribunal,
however, does not accept the figure as correct. It says in paragraph 21 of the statement of the case :
'Regarding question No. 4, it is respectfully pointed out that the loss of Rs. 11,888 is the book loss which is the manner the assessment has proceeded has not yet been scrutinised and suitably adjusted and finally computed.'
In these circumstances we can only direct that the figure should be scrutinised, and the correct amount ascertained and allowed to be set off.
The reference is answered as follows :
Question No. 1 : In the affirmative and against the assessee.
Question No. 2 : In the negative and against the department.
Question No. 3 : In the affirmative and against the assessee.
Question No. 4 : In the affirmative and against the department.
Question No. 5 : In the affirmative and against the assessee.
We make no order as to costs. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Appellate Tribunal as required by sub-section (5) of section 66 of the Indian Income-tax Act, 1922.
Questions Nos. 21,3,4 & 5 answered in the affirmative and question No. in the negative.