TMI Blog1962 (12) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... nt a shortage of 7,182 skins not accounted for. When called upon to explain this shortage the assessee submitted that the skins might have been lost during his absence from Ambur for about 40 days due to the scare of plague in that area. The Income-tax Officer did not accept this explanation. He also found that there was an inflation of purchase value of skins as entered in the account books. So, for the assessment year 1947-48, the following addition was made to the returned income of the assessee: 1. ₹ 1,000--Inflation of purchase 2. ₹ 27,500--Value of 7,182 skins not proved short ₹ 28,500 In respect of the year ended March 31, 1948, the previous year for the assessment year 1948-49, an addition of ₹ 23,730 was made by the Income-tax Officer on the ground that the gross profit shown by the assessee was deficient. Thus, there was an addition to the assessable income of the assessee in the two assessment years 1947-48 and 1948-49 of a total sum of ₹ 52,230. The assessments for the years 1949-50 and 1950-51 were made by the officer on March 29, 1950, and March 21, 1951, respectively. In the assessment of the latter year he included a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which remained unabsorbed out of the total of ₹ 52,230 after deducting the mortgage loan advanced and taken in the name of Murugesa Mudaliar. We are concerned in this reference only with these additions and it is not necessary to refer to the other portion of the order of the Appellate Assistant Commissioner dealing with matters which do not arise for our consideration here. The department preferred appeals to the Income-tax Appellate Tribunal. The Tribunal however reached the conclusion that the assessee had failed to disclose the sources for the mortgage loan and other advances and that the order of the appellate authority deleting the addition of ₹ 52,230 in all was erroneous and unsustainable. It is this order which has given rise to the present reference. The basis for the addition of ₹ 27,500 in the accounts of the assessee in the accounting year 1946-47 is quite clear from the order of the Appellate Assistant Commissioner in the appeal which came up before him out of the assessment for the year 1947-48. It is true that the assessee explained the shortage of skins by saying that they were lost and were therefore not available to him. If this explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself and his wife. Even the income according to the books in the prior years was sufficient for his household expenses. Therefore, I do not desire to reduce the intangible additions by any amount. I would set off the full amount of ₹ 40,000 and hold that the excess amount of ₹ 12,230 would still be available with the appellant for investment....The excess of ₹ 12,230 carried forward from the prior year will, however, be adjusted and the total income for the year under appeal will be reduced by this amount. The question in issue is quite simple and yet the Tribunal misdirected itself and went wrong. It is a hard fact that for the two years 1947- 48 and 1948-49 a total addition of ₹ 52,230 was made by the department in computing the assessable income. This was, therefore, treated as the real income of the assessee for the years in question. There was nothing notional or fictional about it. However convenient it might be to describe the addition as intangible as has been done by the department and the Tribunal, the fact is that it was found to have accrued to the assessee and was not merely supposed to have been earned by him. Once the addition is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ha Sastri J. observes thus at page 599: In the present case, it is somewhat difficult to say that there were no profits of the company out of which a dividend could have been paid. When the revenue authority levied a tax of ₹ 62,000 on the company, it proceeded on the basis that the books of the company which showed a total income of only ₹ 34,532 for all the four years of its existence were unreliable and that the bulk of the company's profits had been kept outside its books. Now those secret profits less the income-tax paid, therefore, would be available with the company for distribution as dividends. Once the secret profits had been assessed to tax, it would have been open to the company to bring those profits into the books and distribute them, or what remained after payment of tax, as dividends....Having assessed the company on a large sum as its undisclosed income, it cannot, at the same breath, say that these profits did not in fact exist because they did not appear from the company's books and could not, therefore, have been available for the payment of dividends. Among common men, such an attitude would be regarded as blowing hot and cold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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