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1963 (8) TMI 56

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..... lanation. He took the view that having regard to the financial condition of the assessee, the accumulation or possession of so much gold as to yield ₹ 44,659 as sale proceeds was not possible. Having regard to the circumstances of the assessee, he came to the conclusion that the assessee had derived ₹ 40,000 as income from undisclosed sources. To this income, the Income-tax Officer added the income of the assessee from a registered firm, income from house property and income which the assessee earned from business in the material year, and then set off against this total income the business loss carried forward from the assessment year 1955-56. On this basis an assessment order was passed against the petitioner on 20th February, 1961. The petitioner then preferred an appeal before the Appellate Assistant Commissioner of Income-tax who, while affirming the decision of the Income-tax Officer that the cash credit discovered was income from undisclosed sources , reduced that income to ₹ 30,000. An appeal preferred by the petitioner against the decision of the Appellate Assistant Commissioner is still pending before the Income-tax Appellate Tribunal, Bombay. On 19t .....

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..... ₹ 30,000; and that when the entry of ₹ 44,659 appeared as cash credit in the account books, then the Income-tax Officer was bound to treat the credit, ultimately determined by the Appellate Assistant Commissioner as ₹ 30,000, as business receipts. Learned counsel relied on Lakhmichand Baijnath v. Commissioner of Income-tax [1959] 35 I.T.R. 416; [1959] Supp. 1. S.C.R. 415. It was said that the mistake which the Income-tax Officer rectified was not any mistake apparent from the record but was one which could at the most be discovered by investigation or a process of elucidation or argument, and that such a mistake could not be rectified under section 35 of the Act. Learned counsel referred us to Sidhramappa Andannappa Manvi v. Commissioner of Income-tax [1952] 21 I.T.R. 333 and K. Parameswaran Pillai v. Additional Income-tax Officer, Quilon [1955] 28 I.T.R. 885, for the proposition that the power of rectification under section 35 is limited to correcting only those mistakes which are apparent from the record and that the mistake must be patent on the record and not one which could be discovered by a process of elucidation, argument or debate. In our judgment, thi .....

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..... the carried forward loss is intended to be set off. It is, therefore, clear that the business loss of the year 1955-56 could be set off in the assessment for the year 1956-57 only against the profits and gains of any business if the business in which the loss was originally sustained was carried on by the assessee in that year. If, therefore, the unexplained income of ₹ 30,000 was not a business income, then the loss of the previous year, namely, the year 1955-56, could not be set off against that income. That the Income- tax Officer never treated the income of ₹ 40,000 which he originally determined and which was reduced in appeal to ₹ 30,000 as business income but treated as income from undisclosed sources is abundantly plain from the assessment order itself which was passed on 20th February, 1962. In that order, he observed: Taking into consideration all these facts, I give an allowance of ₹ 4,458 and make an addition of ₹ 40,000 as income from undisclosed sources. (Underlining Here printed in italics ours) Again, while giving the details of the income, the Income-tax Officer described ₹ 40,000 as income from undisclosed sources. No d .....

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..... by this court in Ratanchand Dipchand v. Commissioner of Income-tax [1960] 38 I.T.R. 188. The decision of the Supreme Court in Lakhmichand Baijnath v. Commissioner of Income-tax [1959] 35 I.T.R. 416; [1959] Supp. 1. S.C.R. 415, relied on by the petitioner, does not lay down that when a credit entry is found in the business accounts of the assessee, then the amount represented by the entry must always be taken as a receipt from business. What has been held in that case is that if the credits are found in the business accounts of the assessee and the explanation as to how the amounts came to be received is rejected by the income-tax authorities, then they are entitled to treat the credits as business receipts chargeable to tax. If the income-tax authorities are entitled to treat a credit entry as representing a receipt from business, that does not mean that they must do so in each and every case irrespective of the facts and circumstances of it. The other decision cited on behalf of the petitioner, namely, Mansfield and Sons v. Commissioner of Income-tax [1963] 48 I.T.R. 254, also does not lay down that where a credit entry is found in the business accounts of an assessee, then it mus .....

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