1976 (12) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notices issued under section 148 of the Income-tax Act, 1961.
2. Addition of income from undisclosed sources.
3. Jurisdiction of the Commissioner in accepting partial explanations from the assessee.

Issue-wise Detailed Analysis:

1. Validity of Notices Issued under Section 148 of the Income-tax Act, 1961:
The petitioner challenged the notices issued under section 148, arguing they were not in terms of section 147(1) and thus void ab initio. The court examined whether the Income-tax Officer (ITO) complied with sub-section (2) of section 148 and clause (a) of section 147 before issuing the notices. It was found that the ITO had recorded reasons before issuing the notices, as required by law. The court noted that the petitioner did not submit returns despite receiving the notices and failed to challenge the notices' competence at the earliest stage. The court also reviewed the records and found that the ITO had reasons to believe that income chargeable to tax had escaped assessment due to the petitioner's omission to file returns. Thus, the court concluded that the notices under section 148 were valid and the proceedings initiated were not void ab initio.

2. Addition of Income from Undisclosed Sources:
The petitioner contested the addition of Rs. 29,041.08 as income from undisclosed sources for the assessment year 1964-65, claiming the department failed to discharge its burden of proof. The court found that the petitioner had deposited this amount in M/s. Traders and Builders Corporation, where he was a partner. The petitioner provided explanations for the sources of this amount, which were not fully accepted by the taxing authorities. The court held that the burden was on the petitioner to prove the sources of the funds, which he failed to do satisfactorily. The court ruled that the addition of the amount as income from undisclosed sources was justified under section 69 of the Act, as the petitioner's explanations were not satisfactory.

3. Jurisdiction of the Commissioner in Accepting Partial Explanations:
The petitioner argued that the Commissioner had no jurisdiction to accept part of his explanation while rejecting the rest. The court found no substance in this argument, noting that the Additional Commissioner of Income-tax had considered the materials on record and granted some relief to the petitioner. The court held that the partial acceptance of the petitioner's explanation did not invalidate the Commissioner's order. Additionally, the court addressed the petitioner's contention regarding the assessment year of the deposits, clarifying that the deposits were correctly attributed to the assessment year 1964-65.

Conclusion:
The court found no merit in the petitions, rejecting them and discharging the rules without any order as to costs. The judgment confirmed the validity of the notices issued under section 148, upheld the addition of income from undisclosed sources, and validated the Commissioner's partial acceptance of the petitioner's explanations.