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TMI Blog1959 (10) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... , confine ourselves as far as possible to the facts relevant to these questions. 2. The assessee, P. Abdul Khader, is a resident of Bangalore City. In the beginning of 1943, he obtained a contract from the Southern Command, Bangalore, for the supply of milk. In the month of March of the same year, he entered into another contract with the Sourthern Command for the supply of live goats, sheep, mutton and beef, for a period of six months from 1st April, 1943, to 30th September, 1943, at the Coramandal Centre in the Mysore State. In May, 1943, still another contract was entered into with the same authority for the supply of live goats, sheep, mutton and been for the period June 5, 1943, to September 30, 1943, at Madras, St. Thomas Mount, Jalarpet and Tiruvellore centres. The following table gives the rates at which the assessee agreed to supply the stuff: Per 100 Ib. of Madras Saint Thomas Mount. Tiruvellore. Jalarpet. Coramandal. (1) (2) (3) (4) (5) Rs. A. P. Rs. A. P. Rs. A. P. Rs. A. P. Beef 25 0 0 25 0 0 12 12 0 11 14 0 Mutton 50 0 0 50 0 0 36 0 0 32 10 0 Live goats, sheep 38 0 0 36 0 0 30 0 0 22 0 0 The contract for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are given below: Number. Amount Average price. (1) (2) (3) (4) Rs. A. P. Rs. A. P. Cattle purchased from dealers 1,055 33,601 0 0 30 14 5 Cattle purchased through employees. 5,498 1,68,578 0 0 30 10 7 Goats and sheep purchased from dealers 21,993 2,43,778 0 0 11 1 4 Goats and sheep purchased through employees. 75,381 1,43,341 0 0 13 12 9 While in case of cattle which are used for supply of been there was practically no difference in prices between those purchased through dealers and employees, such difference in the case of goats and sheep was marked and worked up to 25 per cent. 4. The books of account produced by the assessee contained the following credits, which were the subject-matter of discussion and dispute in the assessment. Name of account. Date of credit. Amount. (1) (2) (3) Rs. (a) Sara Bibi (i) 27-7-1943 15,000 " (ii) 10-3-1944 28,000 " (iii) 24-3-1944 20,000 Total 63,000 (b) Md. Ibrahim (i) 14-7-1943 12,644 " (ii) 15-7-1943 5,765 " (iii) 20-7-1943 3,370 " (iv) 20-7-1943 3,145 " (v) 23-7-1943 7,670 " (vi) 23-7-1943 2,235 Total 34,829 (c) Charcoal dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presented a portion of the excess prices claimed to have been paid on account of animals purchased from the assessee's own employees. He, accordingly, added the sum of ₹ 2 lakhs to the book version. The income from animals and meat supply contract was computed at ₹ 1,50,912 arrived at as under: Loss returned Rs. Rs. 65,280 Less- (i) Inadmissible expenses 16,192 (ii) Inflation in purchases 2,00,000 2,16,192 Total. 1,50,912 6. The assessee preferred an appeal to the Appellate Assistant Commissioner, 'A' Range, Madras, and contended that he was new to this line of business, that the price paid for the animals depended upon the quality and a comparison of month-war purchases would show that in some months the average purchases through employees was lower than those purchased from dealers, that there was an increase in price of mutton during second half of the year after the contract was extended, that the offals and skin had to be disposed of at the butcheries at comparatively low prices and, therefore, he suffered heavy loss in the animal and mutton section. As regards the credits, his case was that they were genuine. He also filed certain affidavi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the opinion of the Tribunal, was a clear indication of the profitableness of the contract. It also came to the conclusion that Sara Bibi could not have possessed such large funds as urged by the assessee and finally it held that as the case was one where the proviso to section 13 of the Act applied, the income had to be determined on the basis of an estimate. Bearing in mind the slight increase in price and the profitable nature of the contract with the background of the rate of profit in the other two sections, namely, beef and live-animals, it estimated the gross profit in mutton contract at 10 per cent. which resulted in an addition of ₹ 1,72,000 against ₹ 2 lakhs made by the Income-tax Officer and one lakh sustained by the Appellate Assistant Commissioner. The resultant addition was more or less equal to the credits and, therefore, the Tribunal thought that they lost their prime importance. SUPPLEMENTARY STATEMENT OF CASE In accordance with the directions of their Lordships of the High Court of Judicature at Madras in R.C. No. 52 of 1954, dated 9th July, 1958, we hereby submit a further statement of the case under section 66(4). Their Lordships have directed the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will, or instructions as to how her wealth should be disposed of. Under such circumstances, we are unable to give credence to the wealth ascribed to her. It may be that she had about ₹ 10,000 with which she was helping her near relatives or friends or obliging others in times of necessity. We, therefore, hold that all credits of ₹ 1.63 lakhs except a sum of ₹ 10,000 were unexplained." 3. From the above facts, the Tribunal's finding is that neither the assessee nor his sister could have more than ₹ 10,000 which was unaccounted for in the books of account. The balance of ₹ 53,000 is, in the Tribunal's opinion, an unexplained sum of money which the assessee brought into the books on the dates mentioned above. 4. (ii) Personal account of the assessee on 7th March, 1944, ₹ 50,000: The assessee appeared before the Income-tax Officer on 19th February, 1945, and made a statement on oath. According to that statement, the assessee's father was a toddy contractor in Punganoor, Chittoor district, and he died 32 years before the relevant account year. Before his death he is said to have given ₹ 10,000 to each of his eight sons and som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Date. Amount. Rs. 7-9-1943 10,000 10-9-1943 30,000 10-3-1944 10,000 50,000 It would be convenient to take these two together. The sums of money credited in the brother's account was alleged to have been withdrawn as noted above. The sums withdrawn together with another sum of ₹ 16,000 was alleged to have been deposited with the Bank of Mysore. The deposit in the Bank of Mysore was again withdrawn and cash was credited to the charcoal account on the dates noted above. Therefore the credits in Mohamed Ibrahim's account merged with the credits in the charcoal account. Mr. Ibrahim, in his affidavit, dated December 18, 1944, mentioned that he had an annual income of ₹ 2,000 or ₹ 2,500 from agriculture, that by March, 1943, he was able to save ₹ 10,000, that he was having jewels worth about ₹ 8,000 and that out of the savings and sale of jewellery he advanced a sum of ₹ 35,000 to the assessee. His affidavit is marked as annexure 'D' and forms part of the case. He also appeared before the Income-tax Officer on February 19, 1943, when he made a statement that he owned one acre of wet land and 10 acres of dry land, that his in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Bank of Mysore in the name of the brother or himself by producing evidence from the bank. In the absence of such evidence, the Tribunal does not accept that there was evidence to come to the conclusion that the assessee was possessed of ₹ 50,000 which was ultimately credited the charcoal account. The brother allegedly kept this money for the sake of profits and it is not denied that the brother was never given any profits in the assessee's profits. 6. We are, therefore, of opinion that these credits are all bogus. V. Sethuraman, for the assessee. C. S. Rama Rao Sahib, for the Commissioner. JUDGMENT The judgment of the court was delivered by RAJAGOPALAN, J.--These proceedings are in relation to the assessment year 1944-45. The assessee's "previous year" ended on 31st March, 1944. The assessee was then a resident of Bangalore, outside what was then British India, which constituted the taxable territories. The assessee carried on several lines of business: (1) automobile spare parts, (2) supply of butter and milk to the military authorities at Bangalore, and (3) supply of live animals, beef and mutton under contracts with military authorities not on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermination of this court: "1. Whether on the facts and in the circumstances of this case, there is any material to justify the rejection of the accounts of the assessee by the Appellate Tribunal. 2. Whether there was any evidence to justify the finding of the Tribunal that the amount of ₹ 63,000 standing in the name of the sister was not a genuine credit and where the Tribunal should not have recorded a finding regarding the other three items of credits in the names of the assessee and his brother and also in the charcoal account." The Tribunal submitted a case and, when the case came on for hearing, this court by its order dated 9th July, 1958, directed the Tribunal to submit a further statement of the case, virtually to answer the second question. Even the second question, by itself, referred to the omission of the Tribunal to record separate findings with reference to the credits other than those in the name of Sara Bibi. The further statement of the case has since been submitted, and the Tribunal recorded separate findings with regard to each head of credit, adhering to its original conclusion that all of them were bogus credits. Though the unexplained cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second question only helps us to answer the first question. The first question in form raises only the validity of the rejection of the accounts of the assessee by the appellate Tribunal. If there were unexplained cash credits, that, by itself, would certainly be a relevant factor to justify a rejection of the book results. It is not necessary in every such case that only the unexplained credits should be taken into account as income, either from disclosed or undisclosed sources; after the rejection of the accounts the Department and the d Tribunal are left free to proceed with the exercise of the further statutory right of estimating the income, provided, of course, the estimate is on a reasonable and rational basis. The departmental authorities accepted the assessee's figures of his gross income from his contracts (1) for the supply of beef, (2) for the supply of live animals and (3) for the supply of milk. The gross profits for the supply of beef came to ₹ 41,056; the gross profit for the supply of live animals amounted to ₹ 88,592 and that for the supply of milk amounted to ₹ 184. The Department also accepted the assessee's figure that he had expended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal could ultimately rest its conclusion, that the purchase price of animals to be slaughtered, so that the mutton could be supplied by the assessee, was inflated. It may not be necessary for us now to fix with any degree of precision the quantum of such inflation. The first question that had to be determined was, whether there was justification for the rejection of the book results and for the application of the proviso to section 13 of the Act. We have said enough to indicate that the Department, as well as the Tribunal, had material on which to reject the book results. Though in express terms the reasonableness of the estimate ultimately made by the Tribunal is not the subject of the first question, that does arise for consideration. As we pointed out, the Tribunal ultimately estimated the profits from the contract for the supply of mutton at ten per cent. of the gross turnover. This the learned counsel for the assessee challenged and he submitted that the Tribunal had no real basis in the material on record for this estimate. The learned counsel pointed out that in the proceedings before the Assistant Commissioner the Department's representative himself conceded that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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