1957 (3) TMI 64 - HC - Income Tax

Summary

Issues:
1. Whether the Excess Profits Tax Officer correctly concluded that the amount of Rs. 75,000 was income from business.

Detailed Analysis:
The case involved a question referred to the High Court regarding the Excess Profits Tax Officer's decision to treat Rs. 75,000 as income from business for the assessee. The issue arose during the assessment of income-tax and excess profits tax for the relevant periods. Initially, the Income-tax Officer estimated Rs. 75,000 as secreted income of the assessee from undisclosed sources, leading to a best judgment assessment. The Appellate Assistant Commissioner later excluded this amount, stating it had not accrued to the assessee. However, the Income-tax Appellate Tribunal reversed this decision, holding that the income had accrued to the assessee. In a subsequent assessment, the Income-tax Officer again included Rs. 75,000 as income from undisclosed sources based on previous year's assessment and lack of satisfactory account books. The Excess Profits Tax Officer then treated this amount as income from business, which was upheld by the Income-tax Appellate Tribunal. The main issue was whether there was justification for considering the Rs. 75,000 as income from business.

The High Court observed that the Excess Profits Tax Officer did not provide any reason in the assessment order for concluding that the Rs. 75,000 was income from business. The order merely mentioned that the profits in business for income-tax purposes included this amount. Similarly, the Income-tax Officer's decision lacked a clear finding that the amount was income from business. The Tribunal did not categorize it as business income but as income from undisclosed sources. The Court noted that in the preceding year, a similar amount was deemed taxable for income-tax but not for excess profits tax, indicating it was not considered income from business. Therefore, the finding that the amount was income from business in the current year was arbitrary and contradicted the previous year's assessment.

In conclusion, the High Court answered the question in the negative, stating that there was no justification for treating the Rs. 75,000 as income from business. The assessee was awarded costs amounting to Rs. 250. The reference was thus resolved in favor of the assessee.