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TMI Blog1962 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ily" of V.A.M. Sankaralinga Nadar (now disrupted) which carried on business in arecanuts in India till April 12, 1950, in the following three vilasams, which are the names of its members: (i) V.A.M. Sankaralinga Nadar, Father. (ii) V.A.M.S. Muthumaniratna Nadar, Son. (iii) V.A.M.S. Nagarajan, Son 4. In the books of Nos. (1) and (ii) above, for the year ended April 12, 1950, the "previous year" for the assessment year 1950-51, there were credits totalling to ₹ 5,524 in the name of Muthumaniratna Nadar of Colombo. For the said assessment year, the assessee family returned the following incomes from the three vilasams: Rs. (i) V.A.M. Sankaralinga Nadar 3,204 (ii) V.A.M.S. Muthumaniratna Nadar 4,506 (iii) V.A.M.S. Nagarajan 14,782 Total 22,492 The Income-tax Officer completed the assessment under section 23(3) for the above year in which he considered the profits shown by the aforesaid three businesses only. He took no notice of the aforesaid credits. 5. The said family became disrupted on April 13, 1950, and each of the aforesaid three members took the respective business for himself and carried it on for the benefit of his own branch of the family. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e thing with the income-tax department, that the figures were incorrect was further confirmed by the fact that vouchers for the purchases of nuts in Colombo were not available, that the assessee also pleaded inability to produce the same, that the conclusion was that a good portion of the income was segregated by inflating the cost of nuts and that the huge difference in the rate of profit had not been explained at all. The Income-tax Officer further held that, in the subsequent year, it was found that the assessee was having transactions with others also, that, in the absence of vouchers and bills and accounts for the business in Ceylon, the income could only be estimated on the basis of local enquiries and, therefore, the Income-tax Officer estimated the income segregated from the books at ₹ 10,000 and added it to the income originally assessed. The Income- tax Officer's original order under section 23(3) is annexure "A" and his order under section 34 is annexure "B" and form part of the case. 6. The assessee preferred an appeal to the Appellate Assistant Commissioner challenging the legality of the reassessment and. contended, inter alia, that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een an inflation, that the estimate of ₹ 10,000 did not appear to be excessive and therefore dismissed the appeal. The order of the Tribunal is annexure "G" and forms part of the case. 10. The questions of law which we have been directed to refer are set out in paragraph 3 supra and they are accordingly referred to the High Court of Judicature at Madras. K. Srinivasan and D. S. Meenakshisundaram, for the assessee. S. Ranganathan, for the Commissioner. JUDGMENT The judgment of the court was delivered by JAGADISAN J.--Sankaralinga Nadar and his two sons, Muthumaniratnam and Nagarajan, together constituted members of a Hindu undivided family. The family was carrying on business by trading in arecanuts imported from Ceylon. The business was done under the three vilasams, (1) V.A.M. Sankaralinga Nadar, (2) V.A.M.S. Muthumaniratna Nadar, and (3) V.A.M.S. Nagarajan. The family became divided on April 13, 1940, and each of the three coparceners got the business in their respective names by allotment under the partition. In respect of the year of assessment 1950-51 relating to the previous year "ending with April 12, 1950" the business income of the family wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit balances said to be due by the family to Colombo Muthumaniratnam aggregating to ₹ 5,524 gave the clue to the Income-tax Officer that there might have been an omission to bring to tax all the income of the family in the relevant year and that the family might have escaped full and proper assessment of all its income. At the commencement of the proceedings initiated under section 34 of the Act, the Income-tax Officer had, in consequence of information in his possession, reason to believe that the family had escaped tax. Before dealing with the contentions urged on behalf of the assessee, we shall advert to the materials forming the basis of the order of reassessment resulting in the addition of ₹ 10,000 to the computation of income already arrived at in the regular proceedings of assessment. The account books of the family business in the names of Sankaralinga Nadar and Muthumaniratnam at Virudhunagar showed that the cost of arecanuts purchased from Colombo during the year was ₹ 11,740 and ₹ 24,131 respectively. The accounts further showed that, towards these purchases from Colombo, repayments had been made byway of drafts by three persons aggregating to & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. It is on these materials that the Income-tax Officer estimated the escaped income of the family for the relevant year at ₹ 10,000. As stated already this addition by way of estimate has been confirmed by the Appellate Assistant Commissioner and by the Appellate Tribunal. Mr. K. Srinivasan, learned counsel for the assessee, contends that section 34 of the Act was improperly invoked as the proper requisites to attract that provision are completely absent. This is a case in which the proper provision applicable and which has been applied is section 34(1)(b) which reads as follows: "Notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may....in cases falling under clause (b) at any time within four years of the end of that year, serve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdiction of the officer on the ground that he had no information upon which the could reasonably believe that any income had escaped assessment. While the complete absence of information might knock the bottom out of the jurisdiction of the officer, so long as there is some information in his possession upon which a belief of escapement of assessment could be said to be not unreasonably entertained, the jurisdiction is well founded. Such jurisdiction cannot be impugned merely on the ground that some other officer or some other Tribunal might not have, on the same information, entertained a reasonable belief of leakage of income, profits or gains. The "advisory" jurisdiction of this court, which is not a court of appeal under the Income-tax Act, is so narrow in its sphere that we cannot substitute our judgment for that of the officer, to test the reasonableness of the belief. We have ourselves perused the memorandum submitted by the Income-tax Officer to the Commissioner of Income-tax for approval of the initiation of proceedings under section 34 and it seems to us that at that time the Income-tax Officer was of the belief that the business in Colombo in the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings of the year 1951-52 relating to Muthumaniratnam gave sufficient information to the officer to engender the belief that the business income of the family, of the year 1950-51, had escaped assessment. In our opinion, section 34 of the Act was rightly invoked by the Income-tax Officer and the proceedings cannot be challenged as being in excess of his jurisdiction. The learned counsel for the assessee next contends that, in any event, the addition of ₹ 10,000 was not called for as the credits in favour of Colombo Muthumaniratnam which alone can, if at all, be held to be the suppressed income of the family totalled only ₹ 5,524. The finding arrived at by the Income-tax Officer and affirmed by both the appellate authorities is that the trading account in the name of Muthurnaniratnam in the family account books does not depict the true picture and that the entries therein are merely fictitious entries brought about to show an inflated value of alleged purchases. This is a finding of fact which we must accept and we must observe there are enough materials to support this finding. Necessarily and inevitably, the officer had to estimate the income of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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