Commissioner of Income Tax vs Ram Achal Ram Sewak

V.G. Oak, C.J.—These are three connected applications u/s 256(2) of the Income Tax Act, 1961. Messrs. Ram Achal Ram Sewak, Akbarpur, are the assessees. The Income Tax Officer, Faizabad, noticed that the assessees had made deposits in a number of banks from the year 1959-60 to the year 1965-66. These deposits were treated by the Income Tax Officer as the assessees'' income from undisclosed source. Assessment was made accordingly. The decision was upheld in appeal by the Appellate Assistant Commissioner. The assessees filed a number of appeals against the various assessment orders. The connected appeals were disposed of by the Income Tax Appellate Tribunal, Allahabad, by a consolidated judgment, dated April 13, 1967. The appeals were allowed with respect to assessment years 1959-60 and 1961-62. It was held that the deposits appearing for the two assessment years could be explained by the additional income assessed during the previous years. The appeal was partly allowed as regards the assessment year 1962-63. The Commissioner of Income Tax, U.P., maintained that no such set-off was permissible in law. He applied for a reference to the court. The application was dismissed by the Tribunal. The Commissioner of Income Tax, U.P., has, therefore, filed the present applications u/s 256(2) of the Act.

The short question raised in the present applications is whether the deposits made by the assessees in various banks from year to year could be set off against the extra profit added during previous years. In S. Kuppuswami Mudaliar Vs. Commissioner of Income Tax, Madras, , it was held by the Madras High Court that, where the Income Tax authorities made an addition to the income of the assessee over and above the income as disclosed by the assessee, on an estimate basis, the amount so added must be treated as the real income of the assessee. It is not open to the authorities to take the view that the addition was only for purposes of taxation, and that it should not be regarded as the true income of the assessee.

In paragraph 2 of the judgment of the Appellate Assistant Commissioner there is a table indicating the addition of extra profit and bank deposits for the whole period from 1953-54 to 1965-66, The total of the extra profit added for the period of 13 years exceeded the total of the bank deposits. The Tribunal made deductions on account of certain marriage expenses and domestic expenses. After making allowance for those expenses, the Tribunal concluded that the sum of Rs. 48,856 was available to the assessee for making deposits in the banks. This approach of the Tribunal does not disclose any error of law. The Tribunal was, therefore, justified in allowing the appeals as indicated in its judgment. The appellate decision of the Tribunal does not raise any question of law.

The three connected applications are, therefore, dismissed.