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1967 (4) TMI 14 - SC - Income TaxHaving found that the assessee was not able to explain satisfactorily the source of the credit of ₹ 1,37,000, whether the Tribunal had any material to come to the conclusion that the addition of ₹ 1,37,000 made by the Income-tax Officer as the income from undisclosed sources should be reduced to ₹ 50,000 only ? Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in reducing the addition of ₹ 1,37,000 to ₹ 50,000 as income from undisclosed sources? Held that - The High Court correctly answered the two questions in the negative by observing that the Tribunal s conclusion that out of the amount brought to tax by the Income-tax Officer only ₹ 50,000 represented income from undisclosed sources was based on no evidence. The judgment recorded by the Tribunal has not the merit of clarity or of consistency. The Tribunal commenced by disbelieving the explanation of the assessee relating to the source of the credit entry. After some inconclusive statements it proceeded to record that it was not unlikely that the assessee had some cash on hand from profits earned in the trade from jaggery, and from assets received on partition of the joint family of which the assessee was a member. In estimating ₹ 50,000 as the income from undisclosed sources, the Tribunal merely relied upon the offer made by counsel for the assessee. This was an unsatisfactory way of disposing of the appeal. The High Court has held, and we agree with the High Court, that the judgment of the Tribunal is based on no reasoning and is on that account speculative. Appeal dismissed.
Issues:
- Jurisdiction of Income-tax Officer to issue notice under section 34 of the Indian Income-tax Act - Assessment of income from undisclosed sources for the year 1950-51 - Tribunal's decision to reduce the addition of income from undisclosed sources from Rs. 1,37,000 to Rs. 50,000 - Fair trial of the case before the Tribunal and compliance with the High Court's judgment Jurisdiction of Income-tax Officer: The appellant, a trader in groundnuts, was taxed under the Mysore Income-tax Act for the assessment years ending in 1949-50. The Income-tax Officer issued a notice of reassessment under section 34 of the Indian Income-tax Act for bringing to tax the amount disclosed by the books of account of the assessee for the assessment year 1950-51. The High Court dismissed the petition challenging the notice, which was confirmed by the Supreme Court in appeal. Assessment of Income from Undisclosed Sources: The Income-tax Officer assessed Rs. 1,37,000 as income from undisclosed sources for the year 1950-51, rejecting the assessee's contention of having assets exceeding Rs. 1,55,000 from various sources. The Tribunal, however, reduced the addition to Rs. 50,000 based on the counsel's offer for assessment. The High Court disagreed with the Tribunal's decision, stating it lacked evidence and was based on speculation, surmises, and conjectures, emphasizing the need for judicial balance in such matters. Tribunal's Decision and Fair Trial: The Tribunal's decision to reduce the addition of income from undisclosed sources to Rs. 50,000 was criticized for lacking clarity, consistency, and reasoning. The Tribunal's reliance on the counsel's offer without proper evaluation of evidence was deemed unsatisfactory. The High Court emphasized the Tribunal's duty to decide based on facts and law, maintaining a judicial balance between the revenue and taxpayers. The case was remanded to the Tribunal for a fair trial, in compliance with the High Court's judgment, ensuring a proper hearing and consideration of evidence. Compliance with High Court's Judgment: The Supreme Court affirmed the High Court's judgment, directing the Tribunal to dispose of the case after a fair hearing, conformably with the High Court's opinion and on the merits of the dispute. The Tribunal was instructed to reconsider the matter, hear both parties, and decide based on evidence and law. The appeal was dismissed, with the appellant ordered to pay the costs of the Commissioner in the appeal. The importance of following a proper procedure in disposing of appeals in line with the High Court's directions was highlighted.
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