1968 (10) TMI 21 - HC - Income Tax

Seizure of gold by custom officer on 30 January 1958 - Income Tax Officer added the value of the gold seized as income from undisclosed sources in the assessment year 1959-60 - action of ITO is not justified - Income from undisclosed sources could be assessed to tax only in the assessment year relevant to the assessment year in which the gold was seized

Summary

Issues Involved:

1. Ownership of the gold seized.
2. Inclusion of the value of confiscated gold in the assessee's total income for the assessment year 1959-60.

Detailed Analysis:

1. Ownership of the Gold Seized:

The primary issue was whether the gold seized by the Customs authorities belonged to the assessee. The Income-tax Officer initially added Rs. 73,320 to the assessee's total income, representing the value of the gold seized on January 30, 1958. The Appellate Assistant Commissioner (AAC) deleted this addition, stating that the gold did not belong to the assessee. However, the Income-tax Appellate Tribunal (ITAT) reversed the AAC's finding, concluding that the gold was acquired by the assessee out of its income from undisclosed sources. The ITAT directed the addition of a reduced sum of Rs. 48,880, calculated at a lower rate than the market value.

2. Inclusion of the Value of Confiscated Gold in the Assessee's Total Income for the Assessment Year 1959-60:

The second issue was whether the value of the confiscated gold could be included in computing the assessee's total income for the assessment year 1959-60. The Tribunal's finding was that the gold was acquired from undisclosed income sources before January 30, 1958. According to Section 2(11) of the Indian Income-tax Act, 1922, the previous year for income from undisclosed sources is the relevant financial year, not the assessee's accounting year. The financial year relevant to the assessment year 1959-60 began on April 1, 1958, and ended on March 31, 1959. Since the gold was seized on January 30, 1958, it fell outside this financial year.

The court referenced Supreme Court elucidations, which stated that income from undisclosed sources should be assessed based on the ordinary financial year. Therefore, the inclusion of the value of the gold in the total income for the assessment year 1959-60 was incorrect, as it should have been included in the assessment year 1958-59.

Judgment Analysis:

The court held that the second question did arise from the Tribunal's order, as it was a new aspect of a question of law already before the Tribunal. The Tribunal had implicitly decided that the income from undisclosed sources was received before January 30, 1958, and thus could not be included in the income for the assessment year 1959-60. The court cited several Supreme Court decisions, including Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd., Bhanji Bhagawandas v. Commissioner of Income-tax, and Raja Sharda Narain Singh v. Commissioner of Income-tax, to support the view that a new aspect of a question of law can be referred to the High Court even if it was not explicitly argued before the Tribunal.

Conclusion:

The court concluded that the value of the confiscated gold could not be included in the computation of the total income of the assessee for the assessment year 1959-60. Consequently, the court did not find it necessary to answer the first question regarding the ownership of the gold. The judgment was in favor of the assessee, with no costs awarded.