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Suraj Mal Sharma Vs. Commissioner of Income-tax (ii) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Case No. 195 of 1975
Judge
Reported in[1980]123ITR529(Raj)
ActsIncome Tax Act, 1961 - Sections 256 and 256(2)
AppellantSuraj Mal Sharma
RespondentCommissioner of Income-tax (ii)
Appellant Advocate Damodar Prasad Sharma, Adv.
Respondent Advocate S.M. Mehta, Adv.
Excerpt:
- - the assessee as well as the ito, sawai madhopur, went in appeal to the tribunal against the aforesaid order passed by the aac and the tribunal by its order dated april 19, 1974, took the view that out of the investment alleged to have been made by the assessee during the relevant assessment year, investment to the extent of rs. 3 suggested by the assessee in order to bring out clearly the facts and circumstances of the case......out of the investment alleged to have been made by the assessee during the relevant assessment year, investment to the extent of rs. 17,000 was proved to have been made by the assessee during the period prior to the accounting year corresponding to the relevant assessment year, inasmuch as the assessee had constructed a pucca and a kucha building at the cost of rs. 15,000 some time in the year 1966 and he had also purchased an electric motor valued at rs. 2,000 on march 9, 1968. even after excluding the aforesaid sum of rs, 17,000 and the investments made from his earlier savings, the tribunal thought that a sum of rs. 24,000 still remained unexplained by the assessee and, as such the tribunal confirmed the estimate of rs. 25,000 as the income of the assessee during the relevant.....
Judgment:

Dwarka Prasad, J.

1. This is an application under Section 256(2) of the I,T. Act, 1961, presented in this court by the assessee, Surajmal Sharma, for directing the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as 'the Tribunal') to state the case and refer three questions arising out of the order of the Tribunal dated July 30, 1974, for the decision of this court.

2. The facts of the case, which have given rise to this application, may be briefly stated. The ITO, Sawai Madhopur, by his order dated August 31, 1971, assessed the income of the assessee, Shri Surajmal Sharma, for the assessment year 1969-70, at Rs. 40,000 on estimate basis. On an appeal by the assessee, the A AC, Kota, by his order dated July 31, 1973, determined the total income of the assessee at Rs. 25,000 giving him a relief of Rs. 15,000, In doing so, the AAC took into consideration the fact that a sum of Rs. 6,000, out of the investment of the assessee during the assessment year, was raised by borrowing and the same was repaid in the year 1972, and also the fact that the assessee had made some initial investment in the money-lending business from his earlier savings. The assessee as well as the ITO, Sawai Madhopur, went in appeal to the Tribunal against the aforesaid order passed by the AAC and the Tribunal by its order dated April 19, 1974, took the view that out of the investment alleged to have been made by the assessee during the relevant assessment year, investment to the extent of Rs. 17,000 was proved to have been made by the assessee during the period prior to the accounting year corresponding to the relevant assessment year, inasmuch as the assessee had constructed a pucca and a kucha building at the cost of Rs. 15,000 some time in the year 1966 and he had also purchased an electric motor valued at Rs. 2,000 on March 9, 1968. Even after excluding the aforesaid sum of Rs, 17,000 and the investments made from his earlier savings, the Tribunal thought that a sum of Rs. 24,000 still remained unexplained by the assessee and, as such the Tribunal confirmed the estimate of Rs. 25,000 as the income of the assessee during the relevant assessment year, as was made by the AAC.

3. The assessee, thereafter, submitted a rectification application before the Tribunal and by its order dated July 30, 1974, the Tribunal accepted that an arithmetical mistake was committed in the calculation made by it, in so far as after deducting a sum of Rs. 17,000, which were invested by the assessee in the construction of pucca and kucha buildings and in the purchase of the electric motor during the earlier years, out of the total investment of Rs. 50,000, the balance should have been Rs. 33,000 and not Rs. 37,000, and consequently the unexplained income of the assessee during the relevant assessment year should have been calculated as Rs. 20,000 and not Rs. 24,000. It was also held by the Tribunal that the amount of Rs. 6,000, which were invested by the essessee out of borrowings and were repaid in the year 1972, was deductible and further that some initial capital by way of past savings might also have been there, yet the Tribunal took the view that since the income of the assessee was assessed merely on an estimate basis and not by way of arithmetical calculation on the basis of proved facts, the evaluation of the estimate of the income of the assessee, even after correcting the mistakes pointed out by the assessee, should still be sustained.

4. The assessee filed an application before the Tribunal for making a reference to this court and requested that three questions arising out of the order of the Tribunal dated July 30, 1974, may be referred to this court. The Tribunal by its order dated February 11, 1975, held that all the three questions sought to be raised by the assessee are pure questions of fact and pertain to the arithmetical accuracy or otherwise of the figures mentioned in the order of the Tribunal, and refused to refer the said questions for the opinion of this court. Thereafter the assessee has filed an application inthis court under Section 256(2) of the I.T. Act and has desired that the Tribunal be directed to refer the following three questions to this court:

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in reading in its order dated July 30, 1974, on the assessee's application dated May, 17, 1974, filed under section 254(2) of the Income-tax Act, as giving assessee's own working of unexplained amount of Rs. 27,000 and in using it as a basis for justifying the AAC's estimate of total income of Rs. 25,000, when the said working was, merely corrective of the arithmetically erroneous working of Rs. 37,000 (before deducting the diverted money-lending savings of Rs, 13,000) as contained in the Tribunal's order dated April 19, 1974 ?

(2) Whether, on the facts and in the circumstances of the case, the direction of the Tribunal in its' order dated July 30, 1974, to the effect that at page 9 of the Tribunal's appellate order dated April 19, 1974, the figure of Rs. 24,000 be reduced to Rs. 20,000 is correct and complete and whether the Tribunal ought to have on evidence available on record directed that the figure of Rs. 24,000 be reduced to Rs. 14,000 (instead of Rs. 20,000 as done by the Tribunal) ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in declining to reduce the estimate of total income of Rs. 25,000 commensurate with the reduction already given at Rs. 4,000 and further allowable at Rs. 6,000 in the amount of unexplained figure of Rs. 24,000 as per question No. 2 above?'

5. We have heard learned counsel for the assessee and the learned counsel representing the department. We are of the view that questions Nos. 1 and 2 above are pure questions of fact and we agree with the Tribunal that they only relate to the arithmetical calculations made by the AAC and the Tribunal. However, so far as the third question is concerned, we are of the view that it is one of law and arises out of the order of the Tribunal dated July 30, 1974. The Tribunal has held that, (i) the total investment of the assessee may be taken to be Rs. 50,000 ; (ii) a sum of Rs. 17,000, in respect of the cost of construction of the pucca and the kucha buildings and the purchase of the electric motor by the assessee during the years 1966 and 1968, respectively, could not be taken into consideration as an investment made by the assessee during the accounting year relevant to the assessment year 1969-70, and was deductible from the total investment Of Rs. 50,000; (iii) thereafter, Rs. 33,000 remained as unexplained income of the assessee; (iv) Rs. 6,000, which the assessee had invested out of his borrowings repaid in the year 1972, could not be included in the estimated income of the assessee during the relevant assessment year; and (v) that some initial capital by way of past savings might also be there. The assessee had claimed a sum of Rs. 13,000 by way of past savings, but a perusal of the order of the AAC shows that he was inclined to allow a sum of Rs. 9,000 only as initial investment of the assessee in money-lending business by way of past savings and the Tribunal does not appear to have taken a different view in this matter. On the other hand, in its order dated April 19, 1974, the Tribunal even appears to be prepared to assume that the entire amount of Rs. 13,000 claimed by the assessee as capital investment made by him in the money-lending business out of past savings be taken to be proved and in the order passed by the Tribunal on July 30, 1974, relating to rectification, it merely observed that 'the Appellate Assistant Commissioner did not accept the amount of Rs. 13,000 as past savings of the assessee nor the Tribunal did so '.But the Tribunal did not indicate that it had taken a different view about the past savings from the one taken by the AAC. After considering all the aforesaid circumstances, the Tribunal should have arrived at some conclusion regarding the estimated total income of the assessee during the accounting year relatable to the assessment year 1969-70. We are, therefore, inclined to hold that the following substantial question of law arises out of the order of the Tribunal dated July 30, 1974 :

' Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in maintaining the estimate of the income of the assessee during the relevant assessment year 1969-70, at Rs, 25,000, even after reducing a sum of Rs. 4,000 on account of mistake in arithmetical calculation, as specified in para. 2 of the order of the Tribunal, dated July 30, 1974, and after allowing deduction of a sum of Rs. 6,000 in respect of borrowings repaid in the year 1972, and after considering that some initial capital was invested by the assessee in the money lending business by way of past savings '

6. We have refrained question No. 3 suggested by the assessee in order to bring out clearly the facts and circumstances of the case.

7. We, therefore, allow this application and call upon the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, to state the case and refer the above question of law arising out of its order to this court for adjudication.


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