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TMI Blog1960 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... : Assessment year Date of order Total income Rs. 1945-46 10-8-1945 2,234 1916-47 10-12-1946 2,341 1947-48 31-7-1947 4,398 1948-49 29-10-1948 6,332 It appears that another Income-tax Officer, while scrutinising the account books for the assessment year 1949-50, had noticed in the ledger certain credit and debit entries in favour of the assessee's mother and his sister and the assessee's clerk had informed the officer that there were similar entries in the account books for earlier years. The officer naturally obtained copies of such entries and called the ladies to explain the sources for the amounts. The ladies explained these to be out of their past savings; but the officer was not satisfied by the aforesaid explanations. Accordingly, proceedings under section 34 of the Income-tax Act were started as regards the five assessment years, for which the assessee had not been taxed; and in response to the notices, the returns filed earlier by the assessee were again adopted. The Taxing Officer thereafter found that income had escaped assessment. He has rested his decision on the relevant entries in the account books being in different ink, as well as on the expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1945-46 and 1947-48 ; but on application to the High Court the Tribunal has been asked and has referred the following three questions: "1.Whether, on the facts and circumstances of the case, the Tribunal was right in law and had material to hold that the sum of ₹ 3,500 was undisclosed income of the assessee in the year of account? 2.Whether, on the facts and circumstances of the case, the Tribunal was right in law and had material to hold that the sum of ₹ 5,000 was undisclosed income? 3.Whether, on the facts and circumstances of the case, the Tribunal was right in law and had material to hold that the sum of ₹ 22,500 was undisclosed income of the assessee in the year of account?" Each of the aforesaid questions covers the undisclosed income for each of the three assessment years of 1944-45, 1946-47 and 1947-48, the amounts mentioned in each being the addition the taxing authorities had held to be the concealed income for the relevant year. It will be seen that there are no questions for the assessment years 1946-47 and 1948-49, mainly due to the appeals for these years having been completely allowed and after the subsequent corrections by the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, who made the original assessment on the 28th of November, 1955, had no knowledge at all of the receipt of the income from forests by the assessee at the time of making that assessment. The Department having failed to discharge the burden that lay on it, the Tribunal committed an error in holding that the proceedings were validly taken under section 34 of the Indian Income-tax Act." Further Bishan Narain, J., in Chiranji Lal & Sons v. Commissioner of Income-tax [1959] 36 ITR 407 , has taken the same attitude and has at page 408 stated: "Power under this section cannot be exercised on mere rumours or suspicions. It is argued on behalf of the firm that there is no material on the record on which the Income-tax Officer could be said to have had reason to believe that certain profits had escaped assessment. This is a question of law on which the case should be stated by the Income-tax Appellate Tribunal." Though there appears to be some conflict in judicial opinions on the point, we think the cases relied on by the assessee's counsel have taken the correct view, for it is but fair that the grounds enabling the exercise of the power must be established by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a Division Bench consisting of the learned Chief Justice and Rajagopalan, J., has held that the particular item of income should be shown as having accrued during the year to the assessee. In this connection Rajagopalan, J., has observed: "There was no evidence either to support any possible finding, whether express or implied, that the amount in question was income that accrued to the assessee in the relevant year of assessment." The next is Commissioner of Income-tax v. Gokuldas Harivallabhdas [1958] 34 ITR 98, where Chagla, C. J., dealing with the power under section 28 of the Income-tax Act, has held that there was no evidence to prove that the offence had been committed and the penalty could not be imposed. The learned Chief Justice has further observed that the proceedings under section 28(1)(c) being in the nature of penal proceedings, the duty to prove that the assessee was guilty of the offence was upon the Department. The list of cases in a formidable array of decisions in favour of the assessee and his position would have been unassailable had there not been two pronouncements by the Supreme Court. In Govindarajulu Mudaliar v. Commissioner of Income-tax [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t having been followed in Mohideen Thamby & Co. v. Commissioner of Income-tax [1959] 36 ITR 481 . There, Chandra Reddy, C.J., has held that in the absence of a satisfactory explanation it is open to the Department to infer that the money belongs to the assessee. Also the distinction had not been earlier acted upon by Subba Rao, J.: Vide Raghava Reddi v. Commissioner of Income-tax [1956] 29 ITR 942 . We, therefore, hold that after rejecting the explanation given by the assessee's relation, the Department could legally infer the items to be part of the assessee's income and taxable in the particular year. After all, the first is an inference from the facts and the jurisdiction of the fact-finding authority should not be circumscribed by stating that such an inference can be drawn only where the entry be in the assessee's name. In these circumstances we feel that the income-tax authorities have not erred in law. We further think that after the explanation by the mother and sister in the case about the particular items being theirs were not accepted, the only other inference would be that the items form part of the assessee's income, for it is nobody's case that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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