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Issues Involved
1. Justification of Tribunal's conclusion regarding the sum of Rs. 30,000 as income from undisclosed sources. 2. Liability of the assessee to pay excess profits tax and business profits tax on the sum of Rs. 30,000. Detailed Analysis 1. Justification of Tribunal's Conclusion Regarding the Sum of Rs. 30,000 as Income from Undisclosed Sources The primary issue revolves around whether the Tribunal was justified in concluding that Rs. 30,000 out of Rs. 61,000 encashed high denomination notes represented income from undisclosed sources. The Tribunal's decision is generally considered a question of fact, and the High Court typically does not interfere with such findings unless there is no evidence to support the Tribunal's conclusion, or the inference drawn is unreasonable, arbitrary, or capricious. The Tribunal relied on several circumstances to justify its inference. From December 20, 1945, to January 18, 1946, the assessee's receipts totaled about Rs. 1 lakh, with payments of about Rs. 40,000, leaving a surplus of Rs. 60,000. The Tribunal found it implausible that most payments above Rs. 1,000 were received in high denomination notes, thus concluding that the high denomination notes did not represent business receipts but were substituted for ordinary notes. The assessee attempted to prove the origin of the high denomination notes through affidavits. The Tribunal accepted some affidavits and rejected others, such as the affidavit of Nivetia due to discrepancies. Ultimately, the Tribunal accepted Rs. 28,500 as part of the business receipts and rejected the rest, leading to the conclusion that Rs. 30,000 was from undisclosed sources. The High Court found that the Tribunal's inference was reasonable and based on the circumstances presented. The authorities cited by the assessee, such as the Patna High Court case (Nilkantha Narayan Singh v. Commissioner of Income-tax), the Privy Council case (Commissioner of Income-tax v. Bombay Trust Corporation Ltd), and others, did not alter this conclusion as they applied well-known principles to different facts. 2. Liability of the Assessee to Pay Excess Profits Tax and Business Profits Tax on the Sum of Rs. 30,000 The second issue concerns whether the assessee is liable to pay excess profits tax and business profits tax on the Rs. 30,000 deemed as income from undisclosed sources. Mr. Kolah contended that unless this income is from a business, such taxes would not apply. The procedural history reveals that the assessee did not request the Tribunal to refer this second question under Section 66(1). Consequently, the Tribunal did not refuse to state a case on this question, and the High Court's jurisdiction under Section 66(2) is limited to instances where the Tribunal has refused to state a case. Therefore, the High Court concluded it had no jurisdiction to address the second question, as it was never properly before the Tribunal. Conclusion The High Court answered the first question in the affirmative, supporting the Tribunal's conclusion that Rs. 30,000 was income from undisclosed sources. The Court did not address the second question regarding excess profits tax and business profits tax liability due to jurisdictional limitations.
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