Law: Income Tax Act, 1922

Section:

Income-tax-----Income from undisclosed sources---Finding that undisclosed income belonged to assessee and not to a third person as claimed---Finding based on evidence---Assessment of income was justified---Indian Income Tax Act, 1961. The assessee was a registered firm carrying on moneylending business. In the return, the income of the assessee was shown as Rs.24,770 and Rs.13,170 for the assessment years 1985-86 and 1986-87. A search was conducted under section 132 of the Income Tax Act, 1961, at the business premises of the assessee. Certain number of pawned ornaments which were not recorded in the books of account and valued at Rs.74,793 inclusive of the interest deemed as accrued for the assessment year 1985-86 and at Rs.40,842 for the assessment year 1986-87, were found and seized from the assessees possession. The assessee explained that the said ornaments belonged to U, one of the partners of the assessee-firm, who was carrying on his individual and separate business of moneylending for 10 years under a moneylenders licence issued to him by the State Government under the Madhya Pradesh Professional Tax Act. The Income-tax Officer rejected the explanation. The Income-tax Officer, therefore, concluded that the ornaments belonged to the assessee. Accordingly, he made an addition of Rs.74,783 for the assessment year 1985-86 and of Rs.40,842 for the assessment year 1986-87 to the total income of the assessee as its income from undisclosed sources. On appeal, the Appellate Assistant Commissioner confirmed the addition. On second appeal before the Tribunal it was urged that the affidavit of U had been wrongly rejected without cross-examining him. The Tribunal after going through the contents of the affidavit and the statement recorded on oath, held that it did not inspire confidence. The Tribunal accordingly upheld the order of the Appellate Assistant Commissioner. On a reference: Held, that as per the findings recorded by the three authorities, i.e., Pro the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal, the assessee failed to show that U was an individual person, who was also doing the moneylending business and, therefore, the…

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