TMI Blog1976 (7) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable and that the assessee had no objection to the estimate of gross profit as in the preceding year. This resulted in an addition to Rs. 15,500 to the disclosed trading results. There were also some hundi transactions during the previous year and the assessee filed a peak credit statement showing a peak credit of Rs. 31,000. By his letter dated September 2, 1966, the assessee's representative admitted that a sum of Rs. 31,000 said to be hundi loans was not capable of verification and, therefore, may be treated as having been admitted under section "F" of the return of income. It was also claimed on behalf of the assessee that a sum of Rs. 8,500 out of the total amount of Rs. 31,000 pertained to the previous year and that it should be deducted. It was further claimed that the said sum of Rs. 31,000 should be set off against the intangible additions of the earlier years. The Income-tax Officer declined to comply with this request of the assessee. He held that the assessee had not linked the intangible additions of the past years with the appearance of the credits and unless the assessee proved that the hundi credits were introduced out of profits made in the trading account outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against this Rs. 53,359 and it was this case which was accepted by the Tribunal. We may immediately explain the facts of this case and whether it has got a bearing on the decision of this court in S. Kuppuswami Mudaliar v. Commissioner of Income-tax [1964] 51 ITR 757 (Mad). As we pointed out already, admittedly in the books of the assessee there were the peak credits of Rs. 31,000 and they were said to be the result of hundi transactions with various persons. It was admitted by the assessee himself that he could not satisfactorily explain the persons with reference to whom the credits were entered and it is only on that ground he requested the Income-tax Officer to treat the said amount as having been included in Section "F" of the return. Section "F" of the return, as it then was, relevant for the assessment year in question, provided for these particulars: _________________________________________________________________________ Sources of income Particulars Amount of items Rs. _________________________________________________________________________ Section F 1. In this section should be shown 2. any amount which is not included in 3. sections A, B and C and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1949-50. The officer also came to know that the assessee's wife and married daughter had advanced sums of Rs. 15,000 and Rs. 10,000, respectively, as and for their share capital in the firm of S. Kuppuswami Mudaliar and Co. on February 10, 1950, which came within the "previous year" for the assessment year 1950-51. With this information in his possession, the Income-tax Officer initiated proceedings under section 34 of the Act and issued appropriate notices to the assessee for reopening the assessment of the years 1949-50 and 1950-51. The contention of the assessee was that the mortgage loan and other investments made in the name of his wife and daughter came out of Rs. 52,230 which had been found to have been earned by the assessee by the Income-tax Officer himself in the assessment proceedings relating to the years 1947-48 and 1948-49. However, the Income-tax Officer rejected this contention, because he was of the opinion that the assessee could not have got these amounts from the additions made, which additions, according to him, were "intangible additions". The assessee filed appeals before the Appellate Assistant Commissioner and the said officer found that the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt for other purposes it may well be that the mortgage loan and other advances were made from an unexplained or undisclosed source. But that it is not so in the present case. The Tribunal's conception of 'intangible additions' is somewhat queer and we confess our inability to appreciate it. The Tribunal observes in its order: 'Intangible additions, as the name itself suggests, are purely matters of estimate which may err on the wrong side for the department. For want of proper evidence, additions on account of deficiency of gross profit or other defects may be made but this would not mean putting in possession of the assessee their equivalent in hard cash available for expenditure or investment. It may be said that having suffered a harsh assessment in a particular year, the assessee's case should be considered sympathetically in the subsequent year when an investment of the nature we are discussing is brought to light.' Additions are no doubt made very often on estimate basis. But it can never be said, or at any rate the department cannot contend, that the amount of the addition is not the real income but something which the assessee may not have earned. It is wholly illogica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim that these unexplained credits must be taken to have come out of the additions made in the earlier years. Even if it was open to him to put forward such a case, it was for him to prove positively that though the credits stood in the names of third parties, still it was his money which was brought into account in the names of third parties and the money itself came from the additions made to his assessments in the previous years. Incidentally, this will involve his explaining why he brought his own money into the accounts in the names of third parties. The assessee in the present case has not proved any such thing. It is exactly this position which the Income-tax Officer in his order pointed out while making the additions. The Tribunal without considering any of these facts proceeded as if the decision of this court in S. Kuppuswami Mudaliar v. Commissioner of Income-tax [1964] 51 ITR 757 (Mad) laid down a universal proposition of law that whenever an assessee failed to explain the credits found in his books of account, it was open to him to claim a set-off of those credits as against the additions made to his income in the previous years' assessments. As we pointed out already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference of Rs. 20,004.35 as income from undisclosed sources. The case of the assessee both before the Income-tax Officer and the Appellate Assistant Commissioner was that the real capital in the branch at Yamuna Nagar was only Rs. 31,459.10 and it was mistakenly shown in the partition deed as Rs. 51,463.45. This case was rejected by the Income-tax Officer as well as the Appellate Assistant Commissioner. When the assessee filed further appeal before the Income-tax Appellate Tribunal, the Tribunal held that the assessee's explanation that there had been a mistake in the partition deed in stating the amount of capital contributed by the Yamuna Nagar branch as Rs. 51,463.45 instead of Rs. 31,459.10 was an after-thought and that the discrepancy of Rs. 20,004.35 between the two figures had to be explained. Once the Tribunal came to that conclusion, the assessee raised a new contention before the Tribunal, that is, the difference between the capital at the Yamuna Nagar branch as per its books and the capital transferred to the head office at the time of the partial partition represented the intangible additions made to the assessee's income not only in the present assessment year but a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of fact by way of explaining as to where the sum of Rs. 20,004.35 came from. For this purpose, no knowledge of the legal position on the part of the assessee was necessary and if the sum of Rs. 20,004.35 came from the additions made to the previous years, he was the only person who could have knowledge of the same and nothing could have been easier for him than to have stated so at the earliest possible opportunity. As a matter of fact, before the Income-tax Officer as well as the Appellate Assistant Commissioner, the assessee took an entirely different stand, namely, that the figure mentioned in the partition deed was a mistake, thereby implying that the sum of Rs. 20,004.35 was not there at all. To allow such a person to go back on his stand and urge for the first time before the Tribunal that the said sum of Rs. 20,004.35 was there and came from the additions made to his income during the previous assessment years will be neither equity nor justice. Apart from this, we are unable to share the view of the learned judges that the entire thing was a pure question of law and there was no question of investigation on facts, because even if the assessee could be allowed to raise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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