Patna High Court
Jitan Ram Nirmal Ram vs Commissioner Of Income-Tax, Bihar And ... on 1 March, 1951
Equivalent citations: [1951]19ITR500(PATNA)
JUDGMENT
SARJOO PROSAD, J. - This is a reference made under section 66(2) of the Income-tax Act by the Income-tax Appellate Tribunal, Allahabad Bench, under the direction of this Court. The assessee is a firm called Jitanram Nirmalram. The firm was assessed to income-tax for the year 1945-46 on a total income of Rs. 3,12,331. This amount included three sums of cash credits which appeared in the accounts of the partners. They are as follows : a sum of Rs. 1,46,126 given by the partner Ramchandraram, a sum of Rs. 55,871 by the partner Lachminarain, and a sum of Rs. 73,121 by the partner Bishnu Prasad. The Income-tax Officer treated these cash amounts as secreted profits of the firm and assessed them as such. On appeal the Appellate Assistant Commissioner of Income-tax held that the sum of Rs. 2,75,178 may have been the sale proceeds of family ornament as claimed by the assessee. The concluding part of his order is in the following terms :-
"As the Income-tax Officer has not mentioned the defects in the goods accounts and has not properly scrutinized them and even though the additions made by the Income-tax Officer cannot be maintained, the case should go back to the Income-tax Officer for re-examination of the goods accounts and the books in general. Hence this portion of the order of the Income-tax Officer will be set aside. The cash credit addition must go and the Income-tax Officer will re-examine the position by reference to the account books in the light of the fact and figures mentioned in paragraphs 27 to 29 above."
It may be stated here that paragraphs 27 to 29 of his order relate to the consideration of the point whether the profits shown by the assessee were prima facie ridiculously low and this point again the Appellate Assistant Commissioner was considering in connection with the argument of the Income-tax Officer rejecting the contention of the assessee in regard to the cash credit amount. Against the order of the Appellate Assistant Commissioner there was an appeal to the Tribunal under section 33(2) of the Income-tax Act mainly on the ground that the Appellate Assistant Commissioner was wrong in holding that the cash credits of Rs. 2,75,178 did not represent secreted income as held by the Income-tax Officer. The Appellate Tribunal set aside the finding of the Appellate Assistant Commissioner in regard to the said amount claimed as cash credit by the assessee and allowed the appeal of the department. The Tribunal held as follows :-
"Taking into account all the facts and circumstances of the case and disbelieving the story of the receipt of the ornaments through the partition by the members of the family, we hold that the cash credits in question remain unexplained and the assessees explanation about them is false. We further hold that they are secreted profits of the business and are liable to be income of the firm. We, therefore, reverse the findings of the Appellate Assistant Commissioner on this point and affirm the findings of the Income-tax Officer in this respect".
It is on these facts that a reference was called for on two points formulated by this Court. They are :-
"(1) Whether the Appellate Tribunal was justified in law and in the circumstances of this case in deciding the appeal without setting aside the order of remand passed by the Assistant Commissioner of Income-tax by which directed the Income-tax to examine the goods accounts.
(2) Whether the Appellate Tribunal was justified in giving finding as to whether Rs. 2,75,178 represented secreted profits from business assessable in 1945-46 before the completion of the examination of the accounts as directed by the remand order of the Assistant Commissioner of Income-tax".
The second points is really involved in the first point. In order to understand the implication of the points formulated it should be mentioned that the Tribunal at one place in their judgment when disposing of the appeal observed thus : "As the examination of the accounts is the subject matter of remand order passed by the Appellate Commissioner we do not wish to express any opinion on that point; but there appears to be certainly much force in the remarks of the Income-tax Officer that even by an addition of the cash credits in question amounting to Rs. 2,75,178, the percentage of the net profits of the appellate does not go up to more than 5.3% and the gross profits to more than 6.3%". It is contended on behalf of the assessee that the Tribunal having expressly observed that they wanted to give no opinion on the point of the examination of the accounts which was the subject-matter of the remand order passed by the Appellate Assistant Commissioner they have erred in law in disposing of the appeal. The direction of the Assistant Commissioner was that the question of the cash credit should be re-examined after a scrutiny of the goods accounts and the books in general and so long as it had not been done, which was the real purport of the remand order with which the Tribunal did not propose to interfere, it is urged the decision of the Tribunal on the question was not in accordance with law. In other words, the real point at issue between the parties is whether the judgment of the Tribunal in deciding about this question of the cash credit was in accordance with law in view of its observation that it did not propose to express any opinion on the subject-matter of the remand order passed by the Appellate Assistant Commissioner. There is no doubt that prima facie there is force in this contention of the assessee. But a clear examination of the question makes it clear that the Tribunal did expressly hold that the explanation of the assessee in regard to these cash credit figures was false and that they were secreted profits of the business and therefore liable to be assessed as the income of the firm. This finding they have arrived at after a full consideration of all the materials bearing on the point. The examination of the books of accounts as directed by the Appellate Assistant Commissioner would not, in my opinion, advance the matter very far because even taking the best view in favour of the assessee all that it might come to is that the accounts are genuine. Even then it was open to the Tribunal to come to a finding that these are secreted profits which could not be sufficiently explained of the assessee otherwise of the accounts, specially when the explanation of the assessee otherwise has been found to the false. In my opinion no useful purpose would be served in directing that the decision of the Appellate Tribunal should be set aside and that the matter should be reheard by the Tribunal on this question because the Tribunal having considered the materials bearing on this point would not be expected to come to a different finding. In my opinion, therefore, although there is some anomaly created by the observation made by the Tribunal in regard to the remand order passed by the Appellate Assistant Commissioner yet in view of their definite and categorical finding that this amount of Rs. 2,75,178 was not cash credit as claimed by the assessee but secreted profits, the anomaly is not such as to vital the decision of the Tribunal. The reasons which have been given by the Tribunal for coming to that finding appear to me otherwise sound. An appeal to the Tribunal did lie as against any order passed by the Appellate Assistant Commissioner and it was within the competence of the Tribunal to pass such orders as they thought fit on the appeal which came up for consideration before them. Therefore it was entirely within the jurisdiction of the Tribunal to decide this question as to whether the sum of Rs. 2,75,178 was secreted profits of the business assessable during the period or it was cash credit as claimed by the assessee. For these reasons I hold that the finding of the Tribunal on the point is not erroneous and the Tribunal was justified in coming to such finding. The points therefore formulated for our decision have to be answered in the affirmative. The department is entitled to its costs of this reference. Hearing fee Rs. 250.
RAMASWAMI, J. - I agree.
Reference answered accordingly.