The Appellant filed a petition Under Section 66 1 of the Act for stating certain questions of law arising out of the order of the Appellant Tribunal The Tribunal referred some questions but did number refer the following question which, on the High Court being moved Under Section 66 2 , was directed to be referred Whether on the facts and in the circumstance of the case there was material before the Income tax Appellate Tribunal to hold that the sum of Rs.
It also acted as procuring agents for rice and paddy for certain areas for the Government of Bengal for the procurement of which it was paid companymission It was originally assessed on March 30, 1948 for the assessment year 1946 47 the companyresponding year of account being from September 27, 1944 to October 15, 1945.
On December 2, 1944 a letter of guarantee and a letter of companytinuity were signed by Raghunath Prasad Agarwal and Biswanath Gupta at the Calcutta branch of the Central Bank along with pronotes signed by the appellant firm for keeping these two deposits under lien of the Bank against overdraft facilities The overdraft account itself had been opened on or about November 24, 1944.
It companysisted of six partners whose names shares are given below Nandlal Bhuwalka /3/ 2 Girdharilal Bhuwalka /3/ 3 Shyamlal Bhuwalka /2/ 4 Bajranglal Bhuwalka /2/ 5 Rawatmull Company /3/ 6 Rameshwarlal Company /3/ The appellant carried on the business as dealers and companymission agents in jute and other companymodities.
On February 19, 1955 the Income tax Officer issued a numberice Under Section 34 of the Act stating that he had reason to believe that the appellants income for the year in question had been under assesssed and the appellant was called upon to file a return of income for that year.
5,00, 000/ which stood in the name of Raghunath Prasad was the companycealed income of the appellant 1 The procedure which was adopted for opening the deposit account and obtaining overdraft facilities was of a peculiar nature.
With that amount a fixed deposit account was opened in the name of Raghunath Prasad Agarwal with the Jamnagar branch of Central Bank on November 8, 1944.
The explanation of Raghunath Prasad in his personal assessement was accepted by the Income tax Officer but in the assessment of the appellant firm the income tax authorities declined to accept the explanation given by Raghunath Prasad.
The Income tax Officer, after investigation, was satisfied that these amounts deposited in the names of the sons of the two partners of the firm were secreted profits of the appellant firm itself On appeal the appfllateAssistantComm issioner held that the appellant had been able to explain the source of Rs.
5 Raghunath Prasad in his individual assessment for the assessment year 1947 48 had explained the source of Rs.
The amount of the deposit was number paid to the heirs of Raghunath Prasad but was adjusted the overdraft of the firm.
6,00,000/ in the name of Biswanath Bhuwalka representing the fixed deposits were the canceled income of the assessee firm lor the relevant previous year for the assessment for the year 1946 47.
About the other amount of Rs.
3 The office of the appellant was in the same premises in which the Bara Bazar branch of the Central Bank was situated and from where the two remittances aggregating Rs.
4 No companysideration had been received by either of the holders of these two deposits for the accommodation that was extended to the appellant.
After the return had been filed and after the Income tax Officer had examined the books of account etc.
Raghunath Prasad claimed that he had himself started the business in share brokerage and share dealings from February 17, 1944.
10,00,000/ were made for opening deposit accounts at Jamnagar.
Ltd , Jamnagar Branch and which stood in the names of Raghu nath Prasad Nopani alias Raghunath Prasad Agarwal and Bishwanath Bhuwalka alias Bishwanath Gupta who were respectively the sons of Rawatmull Agarwal and Bajranglal Agarwal partners of the appellant firm.
The cash so tendered was transferred to the Bombay Head Office of the Bank and a demand draft for Rs.
Biswanath also had claimed that the amount of fixed deposit was his own money and had given an explanation how he had acquired the sum of Rs.
By that time Raghunath Prasad had already deposited the amount of Rs.
Raghunath Prasad died on August 16, 1945.
The sum of Rs.
5,00,000/ was issued through the Bombay Head Office of the Bank to its Jamnagar branch.
The deposits were made in the same manner and in similar circumstances and the overdraft facilities were obtained by the appellant on the basis of both the fixed deposits.
His capital account on September 26, 1944 merely showed a balance of Rs.
The appellant filed an appeal before the Income tax Appellate Tribunal which upheld the order of the Appellate Assistant Commissioner.
5,07,500/ .
The Tribunal had drawn the first inference It was number possible, therefore, for the High Court number to accept the companyclusion of the Tribunal.
5,00,000/ kept as fixed deposit with the Jamnagar branch of the Central Bank and had asserted that the said amount belonged to him.
He thus reduced the addition made by the Income tax Officer by Rs.
It was, however, detected during investigation that the overdraft was against the companylateral security of the said two deposits.
By the said order the Income tax Officer, interalia, added the of sum Rs.
The onus lay on the department to show that the aforesaid deposits in the names of Raghunath Prasad and Biswanath belonged to the appellant.
2 At first the assessees overdraft facility was stated to be a clean overdraft without any security.
The other deposit in the name of Biswanath Gupta followed a similar companyrse though the dates were different.
His fixed deposit matured on Dec. 19, 1945.
10 lakhs upon the security of these two fixed deposits receipts from the Calcutta branch of the Central Bank of India.
What had happened was that on November 22, 1944 an amount of Rs.
5,00,000/ in the account of Raghunath Prasad.
5,00,000/ was companycerned which stood in the name of Raghunath Prasad the High Court came to the companytrary companyclusion and the question was accordingly answered We are companycerned in the present appeal only with this part of the question referred to the High Court which has been answered against the assessee.
he made reassessment by an order dated February 20, 1956.
50.000/ in cash was tendered to the Bara Bazar branch of the Central Bank of India, Calcutta.
Now the High Court referred to the following facts which had been proved or established for arriving at the companyclusion that the deposit of Rs.
50,000/ only out of the fixed deposit of Rs.
4,50,000/ out of the deposit in the name of Biswanath the High Court did number find that the materials on the record were sufficient for holding that the money belonged to the appellant.
4,50,000/ out of the deposit in the name of Biswanath Gupta belonged to the appellant.
The High Court came to the companyclusion that the materials on the record were number sufficient for holding that the amount of Rs.
4,50,000/ cut of the sum of Rs.
5,00,000/ standing in the name of Raghunath Prasad Company and sum of Rs.
The appellant is a partnership firm duly registered under the Indian Partnership Act, 1982.
5,00,000/ each in the Central Bank of India.
In the individual assessments also of both these persons their explanation had been accepted by the respective income tax authorities about the source of the funds from they made the deposits.
The High Court approached the matter thus.
J That the money belonged to the appellant otherwise it companyld number have been adjusted against its loan 2 that the money belonged to Raghunath Prasad and it was adjusted against the dues of the appellant because it was given as security by Raghunath Prasad.
7500/ which was received on account of interest was also paid to the appellant under a stamped receipt on December 19, 1945.
In case of the deposit in the name of Raghunath Prasad there were additional facts which went against the case of the appellant.
5,00,000/ in the manner mentioned before on November 2, 1944.
5,00,000/ in the name of Bishwanath Gupta.
But later on during the period ending October 15, 1946 his capital account was credited with an amount of Rs.
The appellant had obtained an overdraft facility to the extent of Rs.
This amount represented two deposits of Rs.
10,00,000/ to the income of the appellant as undisclosed income.
50,000/ only.
But so far as the other deposit of Rs.
The sole argument that has been addressed on behalf of the appellant is that there was hardly any justification for the High Court making a distinction between the two deposits, namely, the one in the name of Biswanath and the other in the name of Raghunath.
5,00,000/ .
It was further established that the deposit account in the name of Raghunath Prasad was adjusted against the overdraft account of the appellant.
The amount due to the Bank was liquidated but the appellants account books showed a credit of Rs.
563/. The next assessment for 1946 47 for the period September 27, 1944 to October 15, 1945 showed that his capital account had a balance of only Rs.
