1962 (8) TMI 117 - HC - Income Tax

Summary

Issues Involved:
1. Assessability of the sum of Rs. 59,000 as income from undisclosed sources.
2. Rejection of the assessee's explanation regarding the borrowals.
3. Consideration of concealed income from preceding years.

Detailed Analysis:

Assessability of the Sum of Rs. 59,000 as Income from Undisclosed Sources
The primary issue in this case is whether the amount of Rs. 59,000 credited in the assessee's account books can be considered as income from undisclosed sources. The Tribunal and the Income-tax authorities inferred that the amount represented the assessee's own money and not genuine borrowals. They based this inference on the lack of satisfactory explanation and documentation provided by the assessee. The court noted that the Tribunal did not explicitly state that this amount was income of the relevant account year, but the circumstances suggested that the Tribunal held it to be so.

Rejection of the Assessee's Explanation Regarding the Borrowals
The assessee claimed that the borrowals were from his father and cousins, who had migrated to Pakistan. However, there were no documents to establish the genuineness of these borrowals, and the creditors' identities could not be verified. The Income-tax Officer found discrepancies between the wealth statement and the names of the lenders in the account books. The Appellate Assistant Commissioner and the Tribunal upheld the rejection of the assessee's explanation, citing the lack of supporting documents and the improbability of the new business generating such income.

Consideration of Concealed Income from Preceding Years
The court emphasized the importance of considering the concealed income from preceding years. The assessee had been found to have concealed nearly Rs. 2.5 lakhs in the preceding three years. The Tribunal acknowledged this but concluded that the liabilities shown in the wealth statement offset this concealed income. The court found this conclusion unsupported by material evidence and criticized the Tribunal for not investigating the amount available to the assessee after paying taxes on the concealed income. The court noted that the assessee could have had Rs. 59,000 from the concealed income of previous years, which was not adequately considered by the Tribunal.

Conclusion
The court concluded that the Tribunal ignored a material circumstance regarding the concealed income from preceding years. It held that the Tribunal did not apply its mind to relevant circumstances and that its finding could not be sustained. The question referred to the court was answered in the negative and in favor of the assessee. The assessee was entitled to his costs.