TMI Blog1962 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade himself to circumvent the rules of the Government department by furnishing wrong declaration, there was no reason why he should not do the same 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been invoicing the arecanuts to the assessee in India, it was clear that there had been 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 relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he family business, standing in the name of Sankaralinga Nadar an amount of ₹ 3,666 was shown as credit balance outstanding and due to Colombo Muthumaniratnam. Similarly a credit balance for a sum of ₹ 1,858 in favour of the said Colombo Muthumaniratnam also stood in the business account of the family standing in the name of Muthumaniratnam. These credit 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven was very much lower than that debited in the purchase account. The veracity and the business integrity of the assessee were not beyond criticism and the Income-tax Officer reached the conclusion that the accounts of the business in the names of Sankaralinga Nadar and Muthumaniratnam showed an inflated value of purchase of arecanuts from Colombo Muthumaniratnam. 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 ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earthing an escapement of tax. Whether the officer had reason to believe, in consequence of information in his possession, may not be a justiciable issue in a proceeding of this court under section 66 of the Act and to that extent it may really be a matter of subjective satisfaction of the officer concerned, but it is open to the assessee to assail 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 offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue care and caution, can well be within the ambit of section 34(1)(b) provided the requirements of that section are satisfied. We are unable to agree with the contention of the learned counsel for the assessee that, in the instant case, the officer acted merely on a change of opinion and not in the genuine belief of income having escaped. The 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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