1966 (10) TMI 24 - HC - Income Tax

ITO made a reassessment to the best of his judgment u/s 23(4) of the IT Act 1922 estimating the income of the assessee from the undisclosed business - tribunal is not justified in holding that ITO has made addition without any basis and arbitrarily

Summary

Issues Involved:
1. Justification of the Income-tax Appellate Tribunal's addition of Rs. 1,00,000 to the appellant's income.
2. Whether any part of the income of Hanuman & Co. should be added to the appellant's income.

Detailed Analysis:

1. Justification of the Income-tax Appellate Tribunal's addition of Rs. 1,00,000 to the appellant's income:

The Tribunal had previously held that the Income-tax Officer (ITO) made an addition of Rs. 4,60,000 to the appellant's income arbitrarily and without any basis. However, it reduced this amount to Rs. 1,00,000. The High Court found this reduction to Rs. 1,00,000 arbitrary and without any material basis. The High Court emphasized that the ITO's assessment of Rs. 4,60,000 was supported by facts, figures, and evidence, while the Tribunal's figure of Rs. 1,00,000 was a mere caprice and whimsical figure. The High Court stated, "There is not an iota of evidence in support of such a figure as Rs. 1 lakh which the Tribunal estimated. It is an absolute and utter fancy, a mere caprice and whimsical figure."

2. Whether any part of the income of Hanuman & Co. should be added to the appellant's income:

The High Court upheld that the appellant was indeed the proprietor of Hanuman & Co. and had concealed income from this business. The ITO's investigations, including bank records and transactions with other businesses, revealed that the appellant had significant speculative dealings and profits which were not disclosed. The High Court noted that the ITO rightly disbelieved the appellant's plea of not having the account books of Hanuman & Co. and found the appellant's explanation of lapse of memory to be unacceptable. The High Court concluded, "The Appellate Tribunal was certainly justified in coming to the conclusion that a part of the income of Hanuman and Co. should be added to the income of the appellant."

Conclusion:

The High Court answered the questions as follows:

1. The addition of Rs. 1,00,000 by the Tribunal was arbitrary, fanciful, and not supported by any material. The correct and appropriate sum to be added was Rs. 4,60,000, as determined by the ITO and confirmed by the Appellate Assistant Commissioner.
2. The Appellate Tribunal was justified in adding part of the income of Hanuman & Co. to the appellant's income. However, the sum of Rs. 1,00,000 was arbitrary, and the proper addition should have been Rs. 4,60,000.

The High Court emphasized that its jurisdiction under section 66 of the Income-tax Act is to decide questions of law arising from the facts of the case and that it is not limited by the findings of the Tribunal if those findings are not supported by evidence. The High Court restored the assessment of Rs. 4,60,000 made by the ITO and confirmed by the Appellate Assistant Commissioner, setting aside the Tribunal's reduction to Rs. 1,00,000.