TMI Blog1959 (10) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to these questions. 2. The assessee, P. Abdul Khader, is a resident of Bangalore City. In the beginning of 1943, he obtained a contract from the Southern Command, Bangalore, for the supply of milk. In the month of March of the same year, he entered into another contract with the Sourthern Command for the supply of live goats, sheep, mutton and beef, for a period of six months from 1st April, 1943, to 30th September, 1943, at the Coramandal Centre in the Mysore State. In May, 1943, still another contract was entered into with the same authority for the supply of live goats, sheep, mutton and been for the period June 5, 1943, to September 30, 1943, at Madras, St. Thomas Mount, Jalarpet and Tiruvellore centres. The following table gives the rates at which the assessee agreed to supply the stuff: Per 100 Ib. of Madras Saint Thomas Mount. Tiruvellore. Jalarpet. Coramandal. (1) (2) (3) (4) (5) Rs. A. P. Rs. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. Rs. Gross profit in beef account 2,45,663 41,056 16.7 per cent. Gross profit in live-animals 9,09,648 88,592 9.7 per cent. Gross loss in meant 4,31,355 Loss 1,29,586 30.0 per cent. Gross profit in milk 2,590 184 (Loss.) Less establishment and other incidental expenses. 65,627 Net loss 65,281 For the supply of meant the assessee purchased mostly goats and sheep and supplied the meat after slaughtering the animals. The assessee maintained records to show the number of animals purchased, supplied and slaughtered but there was no record to show the weights of animals although the supplies were made in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) 10-3-1944 28,000 (iii) 24-3-1944 20,000 Total 63,000 (b) Md. Ibrahim (i) 14-7-1943 12,644 (ii) 15-7-1943 5,765 (iii) 20-7-1943 3,370 (iv) 20-7-1943 3,145 (v) 23-7-1943 7,670 (vi) 23-7-1943 2,235 Total 34,829 (c) Charcoal department account. (i) 7-9-1943 10,000 (ii) 10-9-1943 30,000 (iii) 13-3-1944 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credits mentioned in paragraph 4 above and held that several credits which totalled ₹ 1,97,828 were not genuine and that they represented a portion of the excess prices claimed to have been paid on account of animals purchased from the assessee's own employees. He, accordingly, added the sum of ₹ 2 lakhs to the book version. The income from animals and meat supply contract was computed at ₹ 1,50,912 arrived at as under: Loss returned Rs. Rs. 65,280 Less- (i) Inadmissible expenses 16,192 (ii) Inflation in purchases 2,00,000 2,16,192 Total. 1,50,912 6. The assessee preferred an appeal to the Appellate Assistant Commissioner, 'A' Range, Madras, and contended that he was new to this line of business, that the price paid for the animals depended upon the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted as the bulk of purchases were not proved and that there was no valid reason for the alleged heavy loss in the mutton supply contract, as the assessee was in an advantageous position of making his purchases in muffassal places. The Tribunal also found in the statement furnished by the assessee that out of a total supply of 8,41,002 lbs. of mutton he had purchased 1,44,307 lb. of mutton for ₹ 49,037 working out to an average of 5 annas 6 pies per lb. as against the contracted supply price of 8 annas per lb. This, in the opinion of the Tribunal, was a clear indication of the profitableness of the contract. It also came to the conclusion that Sara Bibi could not have possessed such large funds as urged by the assessee and finally it held that as the case was one where the proviso to section 13 of the Act applied, the income had to be determined on the basis of an estimate. Bearing in mind the slight increase in price and the profitable nature of the contract with the background of the rate of profit in the other two sections, namely, beef and live-animals, it estimated the gross profit in mutton contract at 10 per cent. which resulted in an addition of ₹ 1,72,000 aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits which were alleged to have been promised to her for financing him to the extent of ₹ 63,000 but curiously enough she was completely satisfied when the assessee gave her a reply that her money was safe and it would be returned with some compensation. The necessity for a lawyer's notice when she had that utmost confidence in her brother is rather baffling. His sister, who met with disappointment in married life, and who was without issues, was looked after by the assessee for well nigh a quarter of a century. But it is surprising that such a loved sister, in the late evening of her life, demanded of her brother her alleged investment of ₹ 63,000 and was satisfied when he said that her money was safe. Shortly afterwards, she breathed her last leaving no will, or instructions as to how her wealth should be disposed of. Under such circumstances, we are unable to give credence to the wealth ascribed to her. It may be that she had about ₹ 10,000 with which she was helping her near relatives or friends or obliging others in times of necessity. We, therefore, hold that all credits of ₹ 1.63 lakhs except a sum of ₹ 10,000 were unexplained. 3. From t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither the Income-tax Officer nor the Appellate Assistant Commissioner accepted the explanation. The Tribunal's finding is that there is no evidence that the assessee was in possession of ₹ 50,000 on March 7, 1944, to credit in his personal account in the books of account. 5. (iii) Credits in the brother's account. These are as under: Name. Date. Credit. Date. Debits. (1) (2) (3) (4) (5) Rs. A. Rs. A. Mohamed Ibrahim, brother of assessee. 14-7-1943 12,643 15 7-8-1943 5,000 0 15-7-1943 5,765 0 25-8-1943 28,828 15 20-7-1943 3,145 0 13-12-1943 1,000 0 20-7-1943 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on oath belies it. There was also no evidence regarding the sale of jewellery and gold. It is noteworthy that the credits in Ibrahim's name occurred within a short space of nine days between July 14, 1943, and July 23, 1943. The last deposit of ₹ 2,235 was on July 23, 1943, and the first withdrawal from this account was on August 7, 1943, of a sum of ₹ 5,000. The interval is too short. No explanation had been offered for such hasty action. The bulk of the sums, it would be evident from the dates given above, was withdrawn by 25th August, 1943. It was alleged that this was a deposit in the Bank of Mysore. The assessee did not produce any evidence regarding this. Again the sum was withdrawn from the Bank of Mysore on 7th and 10th September, 1943. Thus, between 7th August and 7th September, 1943, within a space of one month this large sum of ₹ 35,000 was withdrawn from Mohamed Ibrahim's account, went into the Bank of Mysore and again came back into the assessee's books in the charcoal account. No explanation has been offered for these hasty withdrawals and re-deposits. As regards this, the Tribunal's finding is that the assessee was unable to expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milk, live animals, beef and mutton to the army authorities, the assessee showed a net loss of ₹ 65,280. That was based on his plea that, while he made small profits over the supply of milk are a fairly reasonable profit over the supply of beef and live animals, he incurred a heavy loss to the extent of ₹ 1,29,586 over the contract for the supply of mutton. The Income-tax Officer decline to accepts the assessee's case, that he had suffered a loss over the supply of mutton under the contracts with the army authorities. The Income-tax Officer also found cash credits in the books of the assessee, which the assessee was not able to explain. The Income-tax Officer there upon rejected the book results and proceeded to assess the profits of the assessee. This he did by adding a round sum of ₹ 2,00,000 to income disclosed by the assessee. After deducting ₹ 65,280 and a further inadmissible sum of ₹ 16,192, the Income-tax Officer arrived at the net figure of ₹ 1,50,912. On appeal, the Assistant Commissioner took the view that there was no justification to add the sum of ₹ 2,00,000 to arrive at an estimate of the assessable income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to assess the assessable income of the assessee in the relevant year of account. It is only to that extent that we have to use the unexplained credits if the finding of the Tribunal prevails. It may be easier to dispose of the second of the questions in the light of the further statement of the case submitted by the Tribunal. It may not be necessary to set out the full details discussed both in the original statement of the case and in the subsequent statement of the case. In our opinion, there was material on record on which the Tribunal could rest its conclusion, that the credits in the name of Sara Bibi, in the name of the brother and in the name of the assessee himself correlated to the charcoal business, were not genuine loans borrowed from these courses but were only factious credit entries. The Tribunal, in or opinion, was justified in rejecting the assessee's explanation, which had not been proved. Considering the poor circumstances in which the family started, it was difficult to accept the assessee's plea, either that his sister had large moneys of her own, or that his brother Ibrahim had large moneys of his own which he could advance to the assessee. It sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had expended in all a sum of ₹ 65,627. The Tribunal agreed with the Department that the assessee had not suffered any loss over the contracts for the supply of mutton. But the Tribunal was of the view that the gross profits in that line of business could be estimated at the per cent. of the turnover. That the turnover was ₹ 4,31,355, was never in dispute. That was the figure furnished by the assessee himself. We have set out these details only to emphasise that what the Tribunal eventually had to estimate was the profits from the contract for the supply of mutton. We have already referred to the fact, that the book results in relation to the other items of contract were accepted by the Tribunal. We have also pointed out that unexplained cash credits could cover the income, and, in this case, the income from the known sources, the several lines of business. Those unexplained cash credit themselves would to a large extent justify the rejection of the book results. The there were also the features adverted to both by the Income-tax Officer and by the Assistant Commissioner in relation to the supply of mutton, which, in effect, the Tribunal accepted. To supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal could not be deemed to have gone wrong in taking the view that the unexplained credits should really be traceable to the profits that the assessee derived principally from the supply of mutton. Learned counsel for the assessee next urged that, while the unexplained cash credits amounted only to ₹ 1,53,000, the addition, the Tribunal sustained, would amount to a little over ₹ 1,72,000. That may not be the correct way of looking at things. ₹ 1,72,000 was arrived at after estimating the profits of the assessee from the contract for the supply of mutton at ten per cent. of the gross turnover. The turnover, as we said, was ₹ 4,31,355. Ten per cent. of that would amount to ₹ 43,135. That was the profit that he was held to have made and the claim of the assessee that he had incurred a loss of over ₹ 65,000 in all had to be rejected. In arriving at an addition of ₹ 1,72,000, it was only a question of arithmetical calculation, the basic features being the rejection of the assessee's claim that he had incurred a loss and the finding that on the contracts for the supply of mutton gross profits of ten per cent. of the turnover would be a reason ..... 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