1958 (9) TMI 3 - SC - Income Tax

Whether a receipt is to be treated as income or not? Held that - In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of ₹ 80,000 and the other being receipt of ₹ 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been, it was clearly open to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature. The conclusion to which the Appellate Tribunal came appears to us to be amply warranted by the facts of the case. There is no ground for interfering with that finding, and these appeals are accordingly dismissed with costs.

Summary

Issues:
- Determination of concealed income for assessment years 1945-46, 1946-47, and 1947-48.
- Rejection of explanations provided by the appellant regarding the source of income.
- Application of legal principles in determining undisclosed income.
- Appeal process and jurisdiction of the Supreme Court.

Analysis:
The judgment pertains to appeals against the decision of the Income-tax Appellate Tribunal regarding the assessment years 1945-46, 1946-47, and 1947-48. The appellant, engaged in the arrack business, was found to have certain amounts credited in the account books of a firm, which the Income-tax Officer deemed as income chargeable to tax. The appellant's explanations, including a claim of inheritance and partnership profits, were rejected by the authorities. The Tribunal, after detailed examination, concluded that the appellant failed to substantiate the source of the amounts, leading to the classification of the sums as concealed income.

The appellant contended that the burden of proof regarding the nature and source of income should lie with the Department. However, the court held that in cases where the assessee fails to satisfactorily prove the source of cash receipts, the Income-tax Officer is entitled to infer that the receipts are assessable income. The Tribunal's decision to treat the amounts as concealed income was deemed justified based on the facts presented. The court dismissed the appeals, upholding the Tribunal's findings and emphasizing the importance of factual analysis in determining the taxability of income.

Regarding the appeal process, it was noted that the appellant had previously sought reference to the High Court under the Income-tax Act, which was dismissed. The appellant's subsequent appeal to the Supreme Court was considered in light of the finality of the High Court's decision. The court clarified that grounds raised in the High Court reference could not be revisited in the Supreme Court appeal. Despite potential jurisdictional issues, the court proceeded to decide the appeal on its merits, ultimately dismissing it.

In conclusion, the judgment underscores the significance of substantiating income sources and the authority of tax authorities to infer assessable income in the absence of compelling evidence. The legal principles applied in determining undisclosed income were upheld, and the appeal process was navigated considering the prior judicial decisions and the finality of the High Court's ruling.