Commissioner of Income Tax vs Smt. Kaushalya Rani Bhuari

Sen, J.—The following two questions of law have been referred to this Court by the Tribunal u/s 256(2) of the income tax Act, 1961 (''the Act'') :

"1. Whether, on the facts and in the circumstances of the case, there was any evidence before the Tribunal to hold that the sum of Rs. 95,000 representing the aggregate of the opening balance in the accounts of various creditors represented the assessee''s own money and that the said money was available to the assessee to be reintroduced in the business in the names of other persons?

If the answer to question No. 1 is in the negative, whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the unexplained cash credits made during the year could not be assessed as the income of the assessee?"

The assessment year involved in this reference is the assessment year 1963-64, for which the accounting period is ended on 31-3-1963.

The ITO found that there were loans aggregating to Rs. 1,10,000 in the books of the assessee in the names of five parties. The ITO made enquiries about these loans and he did not accept the genuineness of these entries for Rs. 1,10,000 and added the said sum of Rs. 1,10,000 as income from other sources. Before the AAC, it was argued on behalf of the assessee that an opening balance of hundi loans totalling Rs. 95,000 was shown in the beginning of the year and at no stage the peak credit had exceeded that amount. It was argued that even if it was presumed that the hundi loans shown were not genuine, that should be taxed only in the year when this amount first appeared and not for the instant assessment year. The AAC found force in the argument and held that no fresh credit had appeared in this year and he deleted the sum of Rs. 1,10,000 from the assessment. He further observed that the ITO should have verified whether any action was possible in the year when the loans were originally introduced.

The revenue went in appeal before the Tribunal. It was contended that there was no clear agreement on the part of the assessee to be assessed on the basis of peak credit and in view of that the AAC was wrong in acting upon the submissions of the assessee. It was also contended that the interest on these loans had been impliedly disallowed by the ITO and there was no challenge to this position before the AAC. On behalf of the assessee, it was submitted that the assessee stood by the commitment to be assessed on the basis of peak credit but that this was due to the paucity of evidence in the possession of the assessee to prove the genuineness of the hundi loans in question. It was explained that non-filing of any appeal against the disallowance of interest was due to some disapprehension on the part of the assessee.

Before the Tribunal, on behalf of the assessee, it was pointed out that the assessee had no intention to wriggle out of her commitment to be assessed on the peak basis, but she hastened to add that this commitment flowed entirely from the paucity of evidence in the assessee''s possession and the inability of the assessee to prove the genuineness of the hundi loans in question. On behalf of the assessee it was further argued that the appeal was not filed by the assessee against the AAC''s order in respect of the interest addition through some misapprehension.

After hearing the parties, the Tribunal held that, in view of the clear and unequivocal statement of the assessee was agreeable to be assessed on the peak basis, the AAC was right in deleting the addition made in that year.

Mr. Moitra, appearing for the revenue has stated that the said sum of Rs. 95,000 had been accepted by the assessee as his own money but she has been unable to satisfy from the findings of the AAC or the Tribunal that this money belonged to the assessee.

In that view of the matter and in the facts of this case, question No. 1 docs not arise from the findings of the Tribunal. We decline to answer question No. 1. As question No. 1 has not been answered, question No. 2 need not be answered. The reference is disposed of as above.

Banerjee, J.

I agree.