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Cit, Calcutta v. Padamchand Ramgopal .
Factual and Procedural Background
These appeals by certificate arose from a decision of the High Court of Calcutta on five references made by the Income Tax Appellate Tribunal, Bench “B”, Calcutta under Section 66(2) of the Indian Income Tax Act, 1922. The High Court answered the reference in favour of the assessee.
The assessee was a Hindu Undivided Family carrying on business including moneylending. In support of the income returned, the assessee produced account books. The Income Tax Officer rejected the accounts as unreliable and made best judgment assessments by adding amounts to the returned income for five assessment years: 1953-54, 1954-55, 1955-56, 1956-57, and 1957-58. The Income Tax Officer gave no reasons in his order for not relying on the accounts.
On appeal, the Appellate Assistant Commissioner, referring to the Income Tax Officer’s investigation notes, found two issues confined to the accounting year relevant to Assessment Year 1953-54: (i) one item of interest received was not brought to account; and (ii) another entry relating to receipt of income was not correct. No mistakes were found for the other years. Despite this, the Income Tax Officer and the Appellate Assistant Commissioner added, for each year, half of the gross receipts shown under the head “interest” as escaped income. The Tribunal did not re-examine the facts and adopted the Appellate Assistant Commissioner’s findings. The question referred to the High Court was whether, on the facts admitted or found by the Tribunal, it was justified in holding that the Income Tax Officer had rightly made specified additions for each of the five years.
Legal Issues Presented
- Whether, on the facts admitted or found by the Appellate Tribunal, it was justified in holding that the Income Tax Officer had rightly added the amounts of alleged escaped income for Assessment Years 1953-54 to 1957-58 (Rs 18,050; Rs 21,536; Rs 18,321; Rs 17,951; and Rs 20,547, respectively).
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court agreed with the High Court that, on the facts found by the Tribunal, the Tribunal was not justified in upholding the additions as being in accordance with law. The additions were characterized as arbitrary.
The Court noted that no reasons were given for rejecting the accounts relating to Assessment Years 1954-55, 1955-56, 1956-57, and 1957-58, and that the two mistakes noticed for Assessment Year 1953-54 were insignificant and afforded no basis to reject accounts for other years.
The Court further found the method used to determine escaped income—adding half of the gross receipts under the head “interest” for each year—to be highly capricious.
Holding and Implications
DISMISSED: The appeals failed and were dismissed. The respondent was ex parte, and no order as to costs was made.
The direct effect was to leave intact the High Court’s answers in favour of the assessee, with the impugned additions being treated as not justified on the facts found. The opinion does not indicate any broader implications or the laying down of new precedent.
K.S Hegde, J.— These appeals by certificate arise from the decision given by the High Court of Calcutta in five references made by the Income Tax Appellate Tribunal, Bench “B”, Calcutta under Section 66(2) of the Indian Income Tax Act, 1922. The High Court has answered the questions referred to it in favour of the assessee. In support of the return made by him, the assessee, a Hindu Undivided Family carrying on business in various items including moneylending produced his account books. The Income Tax Officer rejected those accounts as unreliable and assessed the assessee on the basis of best judgment by adding to the income returned by him various sums ranging from Rs 17,951 for Assessment Year 1956-57, to Rs 21,536 for Assessment Year 1954-55. The five assessment years with which we are concerned in this case are 1953-54, 1954-55, 1955-56, 1956-57 and 1957-58. The Income Tax Officer in his order did not give any reason for not relying on the accounts submitted. On appeal, the Appellate Assistant Commissioner after going through the notes prepared by the Income Tax Officer found that in his investigation, the Income Tax Officer had found that one of the items of interest received by the assessee during the accounting year relating to Assessment Year 1953-54 had not been brought to account and another entry relating to the receipt of income during that year was not correct. Neither the Appellate Assistant Commissioner nor the Income Tax Officer found any mistake in the accounts relating to other accounting years. The two mistakes noticed by the Appellate Assistant Commissioner are insignificant mistakes. Further they afforded no basis for rejecting the accounts for the other years. Both the Income Tax Officer as well as the Appellate Assistant Commissioner arbitrarily added to the total income returned half the amount of gross receipts shown by the assessee under the head “interest” during each year as escaped income. The Tribunal did not examine the facts of the case afresh. It just adopted the findings of the Appellate Assistant Commissioner. The question referred to the High Court was whether upon the facts admitted or found by the Appellate Tribunal, it was justified in holding that the Income Tax Officer had rightly added an income of Rs 18,050 in Assessment Year 1953-54, Rs 21,536 in Assessment Year 1954-55 Rs 18,321 in Assessment Year 1955-56 and Rs 17,951 in Assessment Year 1956-57 and Rs 20,547 in Assessment Year 1957-58.
2. We are in agreement with the High Court that on the facts found by the tribunal, it was not justified in holding that the additions made by the Income Tax Officer were in accordance with law. Those additions were arbitrarily made. No reasons were given to reject the accounts relating to Assessment Years 1954-55. 1955-56, 1956-57 and 1957-58. Further the method adopted for determining the escaped income appears to be highly capricious.
3. In the result these appeals fail and the same are dismissed. Respondent was ex parte. No costs.
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