Durga Kamal Rice Mills vs Commissioner of Income Tax

D.K. Seth, J.—This reference has no merit and ought not to have been made. It is settled principle that the closing balance of the accounting year shall be the opening balance of the next year. On the facts available, the decisions of the Income Tax Officer, Commissioner of Income Tax (Appeals) and the Appellate Tribunal are justified and legal and call for no interference.

On a survey u/s 133A on January 12, 1988, in the premises of the firm at Saktigarh, a duplicate set of ledger for the accounting year ending with 31st Chaitra 1393 B. S. corresponding to April 14, 1987, being the relevant assessment year 1987-88 was found. A profit and loss account and a balance-sheet drawn up on the basis of the duplicate ledger were also found. In the said account, the capital balance on the first day of the accounting year ended on April 14, 1987, was higher than the closing balance in the capital account as on April 14, 1986, by an amount of Rs. 2,00,024. This was sought to be explained by the assessee, a partnership firm, to be an amount received upon sale of agricultural produce of the partners kept in the premises having been mixed up. The assessee failed to produce the duplicate ledger book for the earlier years on the ground that those were lost. The assessee could not prove sale of agricultural produce as claimed.

The other defence was that a revised return filed by one of the partners of the assessee was accepted u/s 143(1) of the Income Tax Act, 1961. But this return was filed in March, 1989. Whereas the assessment of the assessee was completed on March 28, 1989.

Learned counsel for the applicant submits that the alleged income was reflected in the books of account for the next year 1987-88 and as such if Section 68 of the Act is applied, in that event, the income can be treated to be the income of the next year not of the previous year, which is concerned in this case.

This contention seems to be of no consequence as rightly contended by Mr. Mullick. It was the opening balance of the next year. The opening balance of the next year is the closing balance of the previous year. In the previous year this was not reflected in the books of account. The assessee was asked to produce the books of account for the previous year. The assessee pleaded that those were lost. In the circumstances, it was open to the Assessing Officer to treat the opening balance of the next year as the closing balance of the previous year not reflected in the books of account. Therefore, he could have treated the amount as unexplained money u/s 69A of the Act.

Learned counsel for the applicant contended that if such a stand is taken by the Assessing Officer it is for the Assessing Officer to prove that the assessee was the owner of the money. There is no iota of evidence that this money belongs to the assessee.

This contention cannot be accepted, inasmuch as Section 69A of the Act postulates giving an opportunity to the assessee to explain. The explanation was offered. But, in the opinion of the Assessing Officer, it was not satisfactory. It is open to the Assessing Officer to treat the same as an income of the assessee for the previous year.

Learned counsel for the applicant further contended that the partners of the assessee had submitted revised return. The same has been accepted u/s 143(1) of the Income Tax Act. Therefore, the same amount cannot be taxed twice; once at the hands of the assessee and again at the hands of the partners of the assessee. In support of this contention, he relied upon the decision in the case of Additional Commissioner of Income Tax Vs. Precision Metal Works and others, .

In the said decision, it was held (headnote) : "(i) that the income could either be the income of the firm or it could be the income of the individual partners. It could not be the income of both. Once having accepted the amount as the income of the partners themselves, it could not be added to the income of the firm. The assessment of the partners had resulted in the sum being charged to tax in their hands and it did not make any difference whether the sum was taxed in the hands of the partners, or in the hands of the firm. Therefore, the action of the Commissioner in setting aside the assessment order was not justified as the assessment order was not prejudicial to the interests of the Revenue."

But in the facts and circumstances of this case, the said decision will not help us in this case unless it is shown that the acceptance of the return of the partners of the assessee preceded the completion of the assessment of the assessee. From the order of the Tribunal at pages 33-34 of the paper book, it appears that the revised return was filed by the partners in March, 1989. Whereas the assessment of the previous year was completed on March 28, 1989. No material is produced to show that the acceptance u/s 143(1) of the revised return had preceded the completion of the assessment of March 28, 1989. In the absence of any material, the question of double taxation does not arise.

He had also relied on a decision in the case of Jalan Timbers Vs. Commissioner of Income Tax, , to contend that if the identity of the assessee is proved the onus is discharged. According to him, the partners have claimed the said amount. As such the identity having been proved and the money having been claimed by the partners the onus is discharged. The onus then shifted on the Department to prove that the amount belongs to the assessee. From the order of the learned Tribunal at pages 35-36 of the paper book, it appears the assessee did not take this stand even in its letter dated March 6, 1989, before the Income Tax Officer that the assessee is not liable to explain the difference. It was for the first time such a stand was taken before the Tribunal. But then it is a finding of fact. Filing of the revised return by the partners immediately preceding the completion of the assessment has not been accepted as a reasonable explanation as enumerated u/s 69A in respect of the previous year. As such in this case even if shown at the hands of the partners, the same has not been believed to explain the amount at the hands of the assessee u/s 69A of the Act. Therefore, this decision also does not help learned counsel for the applicant.

In these circumstances, this reference fails.

All parties are to act on a signed xerox copy of this dictated order on the usual undertaking.