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Issues Involved:
1. Whether the sum of Rs. 16,200 credited in the account of Mahesh Chandra Agrawal was liable to tax as profits of the assessee. 2. Whether the sum of Rs. 13,700 credited in the account of Channalal Agrawal was liable to tax as profits of the assessee. Issue-wise Detailed Analysis: 1. Sum of Rs. 16,200 Credited in the Account of Mahesh Chandra Agrawal: The Tribunal found that the sum of Rs. 16,200 was credited in the account of Mahesh Chandra Agrawal, the minor son of one of the partners, Pooranchand, during the relevant previous year. The credits were made on various dates between 18th April 1944 and 7th September 1944 through Pooranchand himself. There was a similar account in the previous year with transfers from Pooranchand's account. The assessee did not claim the money belonged to Mahesh Chandra but admitted that Pooranchand was operating the account. The explanation provided was that the deposits were made from earlier withdrawals from the same account, but this was rejected by the Tribunal due to lack of evidence connecting the withdrawals to the deposits. The Tribunal inferred that these deposits represented income from undisclosed sources. The Tribunal's inference was based on the facts that the money was brought into the accounts by Pooranchand, a partner entitled to handle the partnership's funds, and no clear assertion was made that the money belonged to Mahesh Chandra or Pooranchand personally. The Tribunal found that the explanation of deposits from earlier withdrawals was unsupported by any evidence, such as separate accounts or affidavits. The inference drawn was deemed reasonable and based on relevant considerations. The court held that there was material to warrant the finding that the sum of Rs. 16,200 represented the revenue income of the assessee from undisclosed sources. The court emphasized that it was not competent to examine the correctness of the Tribunal's inference, as it was a reasonable one based on the facts found. The court distinguished this case from a Bombay High Court decision where the facts were different, notably that the money was brought from a place with no connection to the firm. 2. Sum of Rs. 13,700 Credited in the Account of Channalal Agrawal: The sum of Rs. 13,700 was entered in an account in the name of Channalal Agrawal, the father of Pooranchand, a partner. The assessee claimed Channalal had an independent business. The Tribunal did not accept the explanation that the amount was a loan from Channalal, but mere rejection of the explanation did not provide material for finding that the sum represented the income of the assessee firm. There was no finding that the money came from someone who could naturally possess the firm's funds, such as a partner. The accounts showed the money as belonging to Channalal, a third person with no interest in the firm. The court noted that for the receipt to be taxed as the firm's income, it must first be shown that the money belonged to the firm. The burden of proving this lay on the Department, especially when the accounts indicated the money belonged to someone else. The Tribunal's rejection of the loan explanation did not suffice to infer that the money was the firm's income. The court cited precedents where merely rejecting an explanation did not automatically lead to the conclusion that the money belonged to the assessee. The court concluded that there was no material to warrant the finding that the sum of Rs. 13,700 belonged to the assessee firm. The court distinguished this case from a Supreme Court decision where the ownership of the amounts was not in question, and the issue was whether the amounts were taxable revenue receipts. Conclusion: The court answered that there was material to warrant the finding that the sum of Rs. 16,200 was profits of the assessee liable to tax, but there was no material to warrant the finding that the sum of Rs. 13,700 was profits of the assessee liable to tax. The parties were directed to bear their own costs of the reference.
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