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TMI Blog1960 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment year Date of order Total income Rs. 1945-46 10-8-1945 2,234 1916-47 10-12-1946 2,341 1947-48 31-7-1947 4,398 1948-49 29-10-1948 6,332 It appears that another Income-tax Officer, while scrutinising the account books for the assessment year 1949-50, had noticed in the ledger certain credit and debit entries in favour of the assessee's mother and his sister and the assessee's clerk had informed the officer that there were similar entries in the account books for earlier years. The officer naturally obtained copies of such entries and called the ladies to explain the sources for the amounts. The ladies explained these to be out of their past savings; but the officer was not satisfied by the aforesaid explanations. Accordingly, proceedings under section 34 of the Income-tax Act were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 have been validly initiated for all the three years, 1944-45, 1945-46 and 1947-48? 2.Whether the order passed by the Tribunal under section 35 of the Act on the application by the Department, annexure 'E' aforesaid, was competent and right in law? While doing so, the Tribunal refused to state certain other questions for each of the three assessment years 1944-45, 1945-46 and 1947-48 ; but on application to the High Court the Tribunal has been asked and has referred the following three questions: 1.Whether, on the facts and circumstances of the case, the Tribunal was right in law and had material to hold that the sum of ₹ 3,500 was undisclosed income of the assessee in the year of account? 2.Whether, on the facts and circumstances of the case, the Tribunal was right in law and had material to hold that the sum of ₹ 5,000 was undisclosed income? 3.Whether, on the facts and circumstances of the case, the Tribunal was right in law and had material to hold that the sum of ₹ 22,500 was undisclosed income of the assessee in the year of account? Each of the aforesaid questions covers the undisclosed incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Bombay High Court has stated earlier, for, Bhargava, J., has at page 329 observed: The Department produced no material at all to prove that, in fact, the Income-tax Officer had not fully scrutinised the account books, so that his attention had not been attracted to those entries. There was in this case, therefore, no material at all on the basis of which a finding of fact could be recorded that the Income-tax Officer, who made the original assessment on the 28th of November, 1955, had no knowledge at all of the receipt of the income from forests by the assessee at the time of making that assessment. The Department having failed to discharge the burden that lay on it, the Tribunal committed an error in holding that the proceedings were validly taken under section 34 of the Indian Income-tax Act. Further Bishan Narain, J., in Chiranji Lal Sons v. Commissioner of Income-tax [1959] 36 ITR 407 , has taken the same attitude and has at page 408 stated: Power under this section cannot be exercised on mere rumours or suspicions. It is argued on behalf of the firm that there is no material on the record on which the Income-tax Officer could be said to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 959] 36 ITR 386 decided that where money appearing in the assessee's account books and in favour of another is to be taxed, the rejection of the explanation by the assessee is not sufficient, and it does not provide any material for any inference that the money belongs to the assessee.. Two further cases have been relied on to support the same argument. The first is Vishnukantham Chetty v. Commissioner of Income-tax [1958] 34 ITR 678 where a Division Bench consisting of the learned Chief Justice and Rajagopalan, J., has held that the particular item of income should be shown as having accrued during the year to the assessee. In this connection Rajagopalan, J., has observed: There was no evidence either to support any possible finding, whether express or implied, that the amount in question was income that accrued to the assessee in the relevant year of assessment. The next is Commissioner of Income-tax v. Gokuldas Harivallabhdas [1958] 34 ITR 98, where Chagla, C. J., dealing with the power under section 28 of the Income-tax Act, has held that there was no evidence to prove that the offence had been committed and the penalty could not be imposed. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try in the assessee's name, there is no point in making a different rule for the entry in the name of a friend. There is much force, therefore, in keeping the rule wide and to interfere only where the inference in the circumstances of a case be perverse. We are fortified by the proposition in Lakhmichand Baijnath s case (supra) being stated in wide form and the restriction on its operation, where the item be in the name of the stranger, not having been followed in Mohideen Thamby Co. v. Commissioner of Income-tax [1959] 36 ITR 481 . There, Chandra Reddy, C.J., has held that in the absence of a satisfactory explanation it is open to the Department to infer that the money belongs to the assessee. Also the distinction had not been earlier acted upon by Subba Rao, J.: Vide Raghava Reddi v. Commissioner of Income-tax [1956] 29 ITR 942 . We, therefore, hold that after rejecting the explanation given by the assessee's relation, the Department could legally infer the items to be part of the assessee's income and taxable in the particular year. After all, the first is an inference from the facts and the jurisdiction of the fact-finding authority should not be circumscribed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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