TMI Blog1935 (9) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, or is this sum exempt from income tax under Section 14 of the Income tax Act? The case has now been stated by the Commissioner which is the subject of Miscellaneous Reference No. 456 of 1933. Allied with this Reference is another Miscellaneous Reference No. 457 of 1933 in which under similar circumstances the question that arises for determination is as follows:- (4) Whether on the facts found the assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars of his income and is, therefore, liable to penalty under Section 28 of the Income Tax Act? In order to answer the questions satisfactorily it will Be necessary to state a few facts. The Reference has arisen out of the assessment made in the year 1931-32. Under Section 3 of the Act the assessment shall be in respect of all income, profits and gains of the previous year. The previous year in the case of the present assessee, according to the system of accounts maintained by him, would be the year beginning from Kuar Sambat 1986 to Kuar Sambat 1987. The assesses is a Hindu Undivided family of Azamgarh which goes by the name of Messrs. Ratan Chand Lallu Mal of Azam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pus Badi 13 Sambat 1980 as interest 6,532 11 3 On Bhadon Badi 1 Sambat 1981 cheque on Benares Bank-the word interest not noted 8,000 0 0 On Bhadon Badi 13 Sambat 1981 corresponding to August 28,1924, cheque-the word interest not noted 78 14 6 44,611 9 9 In connection with the first three items the words as interest are noted definitely in the assessee's account books. These items were then transferred from the account of Mr. Khanna and the entries that were subsequently made in a separate account were to the effect that ₹ 40,150-7-3 were credited to the personal account of Rai Bahadur Makund Lal and ₹ 4,461-2-6 were credited to the Dharmada account. These entries were made on August 28, 1924 and this date corresponds with the last entry of ₹ 78-14-6 to which reference has already been made. By reason of the fact that the assessee did not show this sum as his income in the return furnished by him and the department also failed to scrutinise the account books carefully the whole of this income escaped assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhushan and from that account it was subsequently transferred to the account of Rai Bahadur Makund Lal. In the assessment year 1928-1929 which was for the income of the previous year 1926-27 corresponding to Kuar Sambat 1983-84 once again the assessee did not show any income from Mr. Maharaj Kishore Khanna. In the assessment year 1929-30 which related to The income of the previous year 1927-28 corresponding to Kuar Sambat 1984 to Kuar Sambat 1985 the assessee did not file any return but he produced certain accounts which, however, did not show any income received from Mr. Khanna and the assessment was made under Section 23(4) according to the best of the Income Tax Officer's judgment. In the assessment year 1930-31 which related to the income of the previous year 1928-29 corresponding to Kuar Sambat 1985 to Kuar Sambat 1986 the assessee did not show any income from Mr. Khanna and the Income-tax Officer assessed him on a certain income which was arrived at after making certain calculations. It is not of any great importance to find out whether any income was received by the assessee from Mr. Khanna after September 9, 1927 till we come to the assessment year 1931-32 which rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gun Sudi 11, 1986 and the other on August 11, 1930. It would therefore appear that if a sum of ₹ 2,00,000 representing the capital is deducted from the income received in the year 1929-30 all that the assessee received from Mr. Maharaj Kishore Khanna as interest amounted to about ₹ 3,000. The Income Tax Officer is of the opinion that with the exception of ₹ 16,139-8-0 the various sums that were received by the assessee from time to time during the period from November 16, 1923 to September 9, 1927 were not treated by him as interest and it comes with an ill grace from his mouth that these items are not assessable to income tax in the year in question because they were received prior to the previous year. Relying upon the Patna case of Raja Raghunandan Prasad Singh v. The Commissioner of Income-tax, Bihar and Orissa the Income Tax Officer arrived at the conclusion that the income by way of interest received from M.K. Khanna was assessable in the year in question even though it had been received prior to the previous year-excluding of course the amount that had already been taxed. The learned Assistant Commissioner says that the natural inference is that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed not repeat what we have already said in an earlier portion of our judgment that the entries in the books show that most of these sums that were entered as interest in the books of the assessee were shown in the account of Mr. Khanna and were subsequent- ly by means of cross entries or reverse entries transferred to the account of Rai Bahadur Makund Lal. This to our mind therefore is not a case where it can be said that the amounts were kept in suspense. The whole object of the entries was to evade the legitimate tax. The Income tax officer says that in the personal account of Maharaj Kishore Khanna several cross entries have been made and the real income from interest has been obscured. The learned Commissioner in his statement says in the personal account of Mr. Khanna several cross entries had been made with a view to obscure the real income from interest. If, therefore, after a little investigation, the Revenue authorities at the present moment are in a position to know the real object of entries it is their own fault if they could not detect this object at an earlier stage. It is nobody's case that the various account books which have enabled the authorities to come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are in perfect agreement with this view and further we are bound by this view inasmuch as it was confirmed by their Lordships of the Privy Council. But in the present case unless it can be argued that it is open to a money lender to treat every income which he receives from his debtor by way of interest as an item in suspense till the final account is closed the procedure adopted by the department cannot be countenanced nor do we think that it would be in the interest of the department to allow money lenders to treat all income received from their debtors in suspense till the account is finally closed either by payments made out of Court or when the transaction has been made the subject of a suit and money realised in execution of a decree. In the case of Commissioner of Taxes v. The Meblourne Trust Ltd., Lord Dunedin observes: As regards the question of when a profit is earned their Lordships' view is that a profit can be said to be earned when it is dealt with as a profit. In ordinary cases this synchronizes with the realisation of the sums which swell the assets of the person or company, and which entering the account go to bring out the balance which is deemed profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the entries in the interest, for that year. It was pointed out that owing to the system on which the interest register was kept the assessee was in each year assessed not on the total of the sums actually received by him as interest during the preceding year but on such sums as the assessee chose during that previous year to allocate to interest and carry to his interest register out of payments received by him in that and former years. In this case it is obvious that the assessee cannot complain if he is treated as not having received any payment of interest in years in which he made no appropriations to interest out of sums received by him in these years and neither disclosed such receipts to the Revenue authorities nor made any return of any part of them as income. The Income Tax Officer says that it comes with ill grace from the assessee's mouth that the sum of ₹ 52,611 was not assessable to income-tax in the year in question because it had been received prior to the previous year, but this statement is not quite correct inasmuch as the mere fact that a certain income has not suffered tax because of a device adopted by the assessee would not enable the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 1921 between Raja Sir Moti Chand, Babu Shiva Prasad Gupta, Babu Karakh Chand, Rai Bahadur Makund Lal and other members of the bigger family. The assessee had no separate entity before 1921. He had no business and no income of his own, but after that time he has been doing money-lending business, is in enjoyment of income from dividends and interest on securities and has a 9 annas share in a Gorakhpur firm. From the year 1925 he has been regularly assessed to income tax. The contention of the assessee that the separation of the family should be deemed to have come into existence on November 30, 1925 when certain arbitrators who had been appointed by the members of the family to effect a partition delivered their award or when the award was made a rule of Court on February 26, 1926 cannot be upheld inasmuch as all the circumstances point to the fact that the disruption of the family took place at an earlier date, namely, 1921 when the parties not only declared their intention to separate but started separate business of their own. As a matter of fact in the case of Shiva Prasad Gupta v. The Commissioner of Income Tax, United Provinces, it was held that Mr. Shiva Prasad Gupta, anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes of page 9 of our printed record was submitted to the assessee. The opinion of the Commissioner on the various questions as given in pages 9 to 11 was not supplied and it is said that that too is a part of the draft case and should have been supplied to the assessee. We are of the opinion that there is no force in this contention inasmuch as a reference to Section 66 of the Indian Income-tax Act clearly shows that the opinion of the Commissioner is something different from the statement of the case. In sub-Clause (1) it is provided that the Commissioner shall draw up a statement of the case and refer it with his own opinion thereon to the High Court and a similar provision exists in Sub-clause (2). This makes it quite clear that the opinion of the Commissioner is different from the statement of the case, and there was a complete compliance by the Commissioner with Rule 7. A copy of our judgment under the seal of the Court and the signature of the Registrar will be sent to the Commissioner of Income-tax. We tax the fee of the counsel for the department at ₹ 200, and he is given a month's time to file the necessary certificate. We award no costs to the assessee agains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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