1968 (9) TMI 31 - HC - Income Tax

Credit entries found in account boooks - income from undisclosed sources - held that there was no substantial reasons to right the assessee s explanation and draw the inference that the amounts found with him constitute income

Summary

Issues Involved:
1. Validity of the addition of Rs. 60,813 as income from undisclosed sources.
2. Consideration of the assessee's explanation regarding the source of funds.
3. Whether the High Court can examine the correctness of the Tribunal's findings.

Detailed Analysis:

1. Validity of the Addition of Rs. 60,813 as Income from Undisclosed Sources:
The primary issue was whether the addition of Rs. 60,813 as the income of the assessee-family from undisclosed sources during the previous year ended March 31, 1951, was valid and justified in law. The assessee, a Hindu undivided family, had various sources of income, including a toddy business and agricultural properties. The Income-tax Officer had determined the total income at Rs. 1,40,356, which included Rs. 63,813 from undisclosed sources. The Appellate Assistant Commissioner later reduced this amount to Rs. 60,813. The Tribunal upheld this finding, rejecting the assessee's explanation for the source of these funds.

2. Consideration of the Assessee's Explanation Regarding the Source of Funds:
The assessee contended that the amount in question came from past remittances from Ceylon and savings from agricultural property. However, this explanation was rejected by the Income-tax Officer, the Appellate Assistant Commissioner, and the Tribunal. The Tribunal stated, "The assessee had no proper and satisfactory explanation for the source of these amounts." The High Court noted that the Tribunal and the subordinate authorities did not provide substantial reasons for rejecting the assessee's explanation, which was not on the face of it improbable.

3. Whether the High Court Can Examine the Correctness of the Tribunal's Findings:
The High Court examined whether it had the jurisdiction to review the findings of the Tribunal. The revenue's counsel argued that the Tribunal's findings on the acceptability of the assessee's explanation were pure questions of fact, not subject to High Court review. However, the High Court referred to the Supreme Court's decisions in Govindarajulu Mudaliar v. Commissioner of Income-tax and Mehta Parikh & Co. v. Commissioner of Income-tax. The High Court concluded that it could intervene if the fact-finding authority acted without any evidence or upon an unreasonable view of the facts.

Conclusion:
The High Court found that neither the Tribunal nor the subordinate authorities had adequately considered the assessee's explanation regarding the source of the funds. The High Court emphasized that the question of whether receipts constitute income depends largely on the facts and circumstances of each case. Given that the assessee had no known sources of income in India other than agricultural properties and the toddy business, the Tribunal's finding that Rs. 60,813 was income from undisclosed sources was not justified.

In the result, the High Court answered the question in the negative and in favor of the assessee, stating that the addition of Rs. 60,813 as income from undisclosed sources was not valid or justified. The parties were ordered to bear their own costs, and a copy of the judgment was to be forwarded to the Income-tax Appellate Tribunal as required by section 66(5) of the Act.