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TMI Blog1968 (9) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership with others. The assessee started a business in India for the first time on August 17, 1950 (corresponding to 1-1-1126). That was a business in toddy in Kerala ; and the licence was taken in the name of Kannan Kunhi. For the assessment year 1951-52, the assessee was finally assessed by the Income-tax Officer by his order dated June 19, 1959, which is annexure A to this reference. The total income was determined at Rs. 1,40,356 as follows : Income from toddy business 47,703.00 Income from undisclosed sources 63,813.00 Share of profits in business of the Ceylon firm, of which Kannan Kunhi is a partnr 28,480.00 Income from property 360.00 ------------------ Total 1,40,356.00 ----------------- The assessee was not maintaining any accounts, before it started the toddy business, as according to the assessee it had only a small income from its agricultural properties. The books of account of the assessee relating to the toddy business started with a credit entry of Rs. 46,563 on August 17, 1950. It was also seen that the assessee purchased immovable properties on May 19, 1950, for Rs. 14,250 and on February 16, 1951, for Rs. 3,000. The income from undisclosed source is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference between the estimated profits and the book profits could not possibly have been advanced. It is seen from the appeal petition filed before the Tribunal that the assessee raised a ground that its explanation regarding the amount assessed as income from undisclosed sources should have been accepted. In paragraph 37 of its order, the Appellate Tribunal states as follows : " 37. In the assessment year 1951-52 the assessment of Rs. 60,813 remains to be considered. The books had been rejected only in so far as they did not help deducing the correct profit from the business but the fact of investment remains. The assessee had no proper and satisfactory explanation for the Source for these sums. We uphold the assessment of Rs. 60,813 as income from undisclosed sources. " It is clear from the above passage that the question of the acceptability of the assessee's explanation was considered and rejected by the Tribunal. It is also significant to note that the application made by the assessee before the Tribunal for referring the question in this reference for the decision of this court was rejected by the Tribunal, not on the ground that the said question did not arise out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at they were received by him in the course of his business, and that they formed part of the cash balance, which was Rs. 69,891-2-6 on January 12, 1946. The explanation was rejected both by the Income-tax officer and the Appellate Assistant Commissioner ; and the whole amount was treated as income from undisclosed sources. The Appellate Tribunal accepted the assessee's explanation to the extent of Rs. 31,000. The assessee took the matter to the High Court by a reference. The High Court held that there was sufficient material to justify the inference drawn by the Tribunal that Rs. 30,000 was the assessee's income from undisclosed sources. The assessee appealed to the Supreme Court. It examined the facts of the case, and held that as the whole sum of Rs. 61,000 representing the value of the high denomination notes was covered by the cash balances as per books of account of the assessee on the relevant dates, and as the books of account were found to be genuine, there was no justification not to accept the explanation of the assessee. The principle was stated as follows : " The court would be entitled to intervene if it appears that the fact-finding authority has acted without any e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar are partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been, it was clearly open to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature. The conclusion to which the Appellate Tribunal came appears to us to be amply warranted by the facts of the case. " The question raised by the assessee in the case before us is not whether the Income-tax Officer is entitled to draw the inference that the receipts are income of the year in which they were found with the assessee on his failure to explain their source, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs from agricultural property. This explanation did not receive any consideration by the Appellate Tribunal. All that it stated about the matter is contained in the one sentence appearing in paragraph 37 of its order ; and it reads : " The assessee had no proper and satisfactory explanation for the source of these amounts. " The Income-tax Officer dealt with this matter as follows : " Other sources.-Income from undisclosed source.-An amount of Rs. 46,563 has been brought into the books for the new toddy business. The assessee was asked to explain the nature and source of these funds. The explanation furnished is not at all satisfactory, and so I will treat this amount as income from undisclosed sources. Further it is seen that the assessee has purchased two items of properties during the account year as follows : On 19-5-1950 Rs. 14,250 On 16-2-1951 Rs. 3,000 ----------------- Rs. 17,250 In the absence of any evidence as to the source of funds for investment of these assets, I will treat this amount also as income from undisclosed sources. " All that the Appellate Assistant Commissioner said about this question is : " The appellant's explanation regarding their source ..... X X X X Extracts X X X X X X X X Extracts X X X X
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