1. M/s. Himmatram Laxminarain (hereinafter called "the assessee") carried on business in gur and shakkar and also had income from commission agency. For the assessment year 1970-71, in the return filed, the assessee declared income of Rs. 6,660 and the total sales shown therein were of Rs. 33,148. During the assessment proceedings, the Income-tax Officer discovered that the assessee had been doing business outside the books of account and in that secret business, the assessee had invested an amount of Rs. 73,075. The explanation furnished by the assessee was not accepted and under Section 69 of the Income-tax Act, 1961 (hereinafter called "the Act"), the sum of Rs. 73,075 was added as income from undisclosed sources. On the assessee's appeal, the Appellate Assistant Commissioner affirmed the estimated sales and the assessee's further appeal before the Tribunal also remained unsuccessful. The Tribunal has referred the following question for the opinion of this court:
"Whether, on the recorded facts, the Tribunal has been right in law in sustaining the addition of Rs. 73,075 under Section 69 of the Income-tax Act, 1961 ?"
2. On a reading of the question referred to us, we have to opine whether, on the recorded facts, the Tribunal was right in making an addition of Rs. 73,075 under Section 69 of the Act. The recorded facts in terms of the order of the Tribunal are as follows :
"So far as the addition under Section 69 of the Income-tax Act is concerned, the assessee has submitted at the outset that even if an addition under Section 69 had to be sustained in terms of the Income-tax Officer's and the Appellate Assistant Commissioner's orders, such addition would come to Rs. 73,075 only and that the figure of Rs. 78,075 contains a calculation error. This aspect was not controverted from the side of the Department.
In connection with the said addition, the assessee did not deny before us that it did indulge in business activities outside the books of account and that during the accounting year under consideration, purchases of gur and shakkar worth Rs. 63,028 had been made from the Muzaffarnagar party in the assessee's own name (actually payment of Rs. 63,553 was made in that connection) and purchases of gur and shakkar worth Rs. 9,472 had been made by the assessee from the Mazaffarnagar party in the fictitious name of M/s. Mangat Ram Jai Parkash... In other words, from the material on record, it is difficult to hold that the assessee made payments to the Muzaffarnagar party out of the sale proceeds collected by it (in respect of the goods in question) from its customers and that the assessee did not make payments to the Muzaffarnagar party from its own disclosed sources ...The argument of the assessee that in view of the special course of dealings with the Muzaffarnagar party, no investment can be said to have been made by the assessee from its own resources is, therefore, not accepted."
3. A reading of the aforesaid quotation clearly shows that a definite finding was recorded after rejecting the argument raised on behalf of the assessee that the payments to Muzaffarnagar party were made by the assessee from its own sources. On that finding and in view of the fact that the sales were conducted secretly and were not entered in the books of account, Section 69 of the Act is clearly attracted, which provides that such investments, if not found recorded in the books of account, the value of the investments may be deemed to be the income of the assessee of such financial year.
4. The learned counsel appearing on behalf of the assessee had mainly argued that there was no material to justify the finding that the assessee had invested Rs. 73,075 in secret sale transactions. According to the learned counsel, the circulating capital was not more than Rs. 7,000 although the total secret sale transactions were found to be to the tune of Rs. 73,075. This is a separate point and for that matter, the assessee should have applied for a reference under Section 256(1) and in case the Tribunal had refused to refer, a mandamus should have been sought.
5. We have only to answer the question referred to us wherein this point does not arise. Hence, on the facts found, the Tribunal was right in sustaining the addition of Rs. 73,075 under Section 69 of the Act.
6. For the reasons recorded above, we answer the question referred to this court in the affirmative, i.e., in favour of the Revenue and against the assessee. However, the parties are left to bear their own costs.
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