Skip to content


A.C. Paul Vs. the Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 71 of 1961 (Refce. No. 16 of 1961)
Judge
Reported inAIR1964Mad530
ActsIncome Tax Act, 1922 - Sections 34(1)
AppellantA.C. Paul
RespondentThe Commissioner of Income-tax
Appellant AdvocateK. Narayanaswami, Adv.
Respondent AdvocateS. Ranganathan, Adv.
Excerpt:
.....as no materials were available, the officer had necessarily to estimate the income. it is clear that the officer failed to accept the version of the assessee that he was not carrying on any money lending business. the assessee failed to furnish the department with the necessary particulars to have the income of this business..........of the case there was material for holding that the sum of rs 5,000/ represented income from the money-lending business or from an undisclosed source of the assessee'2. the assessee has a hardware business at colombo. it is stated by the department that he has a money lending business in india. this however is denied by him for the year ending 31stmarch, 1956, the previous year relevant to the assessment year 1957-58, the income-tax officer, tuticorin, computed his income from foreign business at rs. 71,384/- in regard to the alleged money lending business in india, the assessee of course failed to produce any accounts and his contention was that no money lending business was done during the year in question several adjournments were granted by the income-tax officer to enable the.....
Judgment:

Jagadisan, J.

1. The question referred is 'Whether on the facts and in the circumstances of the case there was material for holding that the sum of Rs 5,000/ represented income from the money-lending business or from an undisclosed source of the assessee'

2. The assessee has a hardware business at Colombo. It is stated by the department that he has a money lending business in India. This however is denied by him For the year ending 31stMarch, 1956, the previous year relevant to the assessment year 1957-58, the Income-tax Officer, Tuticorin, computed his income from foreign business at Rs. 71,384/- In regard to the alleged money lending business in India, the assessee of course failed to produce any accounts and his contention was that no money lending business was done during the year in question Several adjournments were granted by the Income-tax Officer to enable the assessee to produce materials for assessing the income of the money lending business By letter dated 22-1-1957, he was called upon to produce certain documents and to give information regarding the income from the money lending As no materials were available, the officer had necessarily to estimate the income. It is clear that the officer failed to accept the version of the assessee that he was not carrying on any money lending business. The assessee had current account with the Bank of Madurai Ltd., Madurai His pass book with that bank showed the following credits:

27-7-1955 by cheque on Tuticorin Rs. 4,996-4-021-1-1956 by demand drafts realised Rs. 4,821 5-0----------------Total Rs 9.817-9-0

The assessee was called upon to explain these entries and he submitted that the first item related to his sister-in-law and the second item represented remittances from Colombo. No details for these remittances were furnished to the officer, though leveral opportunities were given to him. At the end the Income-tax Officer estimated the income of the money lending business at Rs. 13,000/

3. The assessee preferred an appeal to the Appellate Assistant Commissioner. He took the view that so far as the sum of Rs. 4,996-4-0 is concerned, it did not relate to the assessee He, however, observed that the credit of the sum of Rs. 4,821-5-0 alleged to consist of remittances from Colombo was not satisfactorily explained or accounted for On these facts he estimated the income of the assessee from money lending during the year of account at Rs. 5,000/. The estimate of Rs. 13,000/- made by the Officer was deleted and the estimate of Rs 5.000/ was substituted in its place The assessee therefore obtained a reduction, under this head, of a sum of Rs. 8,000/-. The assessee preferred an appeal to the Income tax Appellate Tribunal which confirmed the decision of the Appellate Assistant Commissioner.

4. The Income-tax Officer levied a penalty on the assessee under Section 28(1)(c) of the Act on the finding of the Appellate Assistant Commissioner that there was suppression of income to the extent of Rs. 5,000 He levied a penalty of Rs. 2,000. This order was appealed against by the assessee and the Appellate Assistant Commissioner remanded the matter for the purpose of verification from the banks concerned the origin of the particular drafts whether they orginated from Ceylon or from other places This related to the second item referred to above. Summons was issued to the bank of Madurai Ltd, and it was found that the assessee had on 24-2-1956 a sum of Rs. 4821-5-0 credited. This amount represented proceeds of realisation of bank drafts from London The Appellate Assistant Commissioner drew the inference that as the assessee found difficulty in getting exchange permit to release the funds from Ceylon to India he adopted the circuitous method of transferring the funds from Ceylon to London and thereafter from London to India Anyhow as there was proof that the sum of Rs. 4821-5-0 was the remittance amount which the assessee had obtained from his business income at Colombo the Appellate Assistant Commissioner cancelled the order levying penalty

5. The assessee tiled an application in this court Under Section 66(2) of the Act, praying for reference of the question, whether the addition of Rs. 5,000 by way of estimated income was proper or not He submitted to this court that the tribunal ignored the order of the Appellate Assistant Commissioner cancelling the penalty In the statement of the case which has now been submitted to us by the Tribunal as per our direction Under Section 66(2) it observes as follows

'We respectfully submit that a copy of the above order of the Appellate Assistant Commissioner is now found among the papers in the file. In the disposal of the appeal, it has been lost sight of. As the assessee had not drawn the attention of the Tribunal to this omission in its application Under Section 66(1), there was no further opportunity to the Tribunal to deal with it in rectification of its order'

6. In other words, the Tribunal now holds that this sum of Rs. 4,821-5-0 really represents the amount remitted from Ceylon to India via London As stated already the above question has been referred to us

7. The learned counsel for the assessee contends that in view of the finding that the sum if Rs. 4,821-5-0 did not represent suppressed income from his money lending business but was only remittance from Ceylon, the order of the Tribunal sustaining the order of the Appellate Assistant Commissioner directing addition cannot be sustained There is no doubt some force in the contention of the learned counsel but the real question is no) whether this sum of Rs. 4,821-5-0 represents a remittance from Ceylon but whether the Department was justified in estimating the assessee's income from money lending business at Rs. 5000 That the assessee had been carrying on money lending business for several years cannot now be disputed Year after year the assessee's income from that source has been estimated. The figures of this estimate are given in paragraph 2 of the statement of the ease and need not be reiterated here. It is also now found by the department that the assesses carried on money lending business even during the year in question.

It must be noted that the Income-tax Officer estimated the income at Rs. 13,000, though the total of the two items upon which suspicion was entertained as to whether they really related to the assessee's income or not is only about Rs. 9,817. Even assuming that the assessee has now satisfactorily established the source for the credit entries in the pass book with the Bank of Madurai Ltd, the assessee's income from the money lending business has still to be estimated. The only question before us is whether the estimate of Rs. 5000 made by the Department as income from the money lending business is supported by the materials on record. The assessee failed to furnish the Department with the necessary particulars to have the income of this business computed. An estimate is called for and the estimate of the Income-tax Officer was Rs. 13,000, inclusive of the two disputed items. We are unable to say that the estimate of Rs. 5,000 was in any way arbitrary or unsupported by the evidence on record.

8. The question is answered against the assessee. He will pay the costs of the department. Counsel's fee Rs. 250.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //